Reserves topped US$5 billion on budget support while cobalt receipts per tonne were cut in half.

By Kanisa Magazine · July 2023

Congo’s external account in July 2023 was held up by a loan, not by the metals. The BCC’s reserves reached US$5.1 billion on 14 July, covering 2.75 months of imports, but cobalt had lost roughly half its price since the turn of the year and copper had gone nowhere. The cushion came largely from donor money booked in the government’s foreign-currency account, and the market was spending it within days.

The numbers are in the BCC statistical digest of 26 July. Separating price, volume, import and financing effects shows why a strong reserve figure and a nervous exchange market can sit side by side.

Price: cobalt halved, copper flat

The two metals that define Congo’s export bill moved in opposite directions of consequence.

London cobalt cathode traded at US$25.38 a pound, about US$56,000 a tonne, on 30 December 2022. By 30 June it was US$13.06, about US$28,800 a tonne, and it recovered only to US$14.29 in mid-July. Copper on the London Metal Exchange went from US$8,379 a tonne at the end of 2022 to US$8,327.50 at the end of June and US$8,421.65 on 21 July, a change of under 1 per cent. Brent crude eased from US$86 to US$80.50, and coltan slipped from US$114 to US$99.21 a pound. Congo exports only a modest 8.4 million barrels of crude a year, so oil matters more to the import bill than to receipts.

For Congo, a flat copper price means export receipts now depend on tonnes, not on windfalls. A halved cobalt price is harsher: the same 115,371 tonnes the BCC reports for 2022 would be worth about US$6.5 billion at the January price and about US$3.3 billion at the late-June price. That is an illustration of the arithmetic, not a forecast, but it shows the size of the swing.

Volume: copper tonnage keeps rising

Output growth is the cushion that price cannot give.

The BCC’s provisional table puts 2022 copper output at 2,394,630 tonnes, against 1,802,897 in 2021, a rise of about 33 per cent, and cobalt at 115,371 tonnes against 93,144, up about 24 per cent. Volume growth of that size explains why export receipts held up as cobalt weakened. It also explains why the mining sector can post strong numbers while the rest of the economy feels little, a theme the BCC data return to in every digest.

Financing: the US$500 million that padded the stock

Budget support, not trade, lifted reserves above US$5 billion.

DeskEco’s 20 July account of BCC data shows the Government’s foreign-currency budget at a surplus of US$466.82 million on 13 July, from US$763.73 million of receipts, including US$500 million of World Bank budget support, against US$296.92 million of spending. The World Bank had approved a US$900 million package on 29 March, pairing governance reform support with a girls’ learning project, and the budget-support element is the likely origin of the July inflow. Reserves rose from US$4,532.5 million at the end of June to US$5,094.7 million on 13 July.

Imports: demand outran the central bank’s sales

Banks asked for far more dollars than the BCC chose to sell.

The same DeskEco report says commercial banks’ foreign-currency needs stood at US$335.3 million, while the BCC sold US$50 million on 13 July. Reserves fell to US$4,840.8 million by 21 July as sales continued. That gap between demand and supply, not any shortage of reserves, is the transmission from the external account to the exchange rate. Put plainly, the central bank chose to sell about one-seventh of what banks asked for, and the parallel market priced the remainder.

So what for exporters, importers and lenders

Treat reserves as a policy tool and price your own cover accordingly.

An importer should assume the BCC will ration dollars in proportion to its reserve target, not to bank requests, and should line up supply from a dollar-earning counterparty where possible. An exporter of copper or cobalt in this market holds the scarce asset, and its bank will compete to convert its proceeds. A lender to the mining supply chain should model cobalt at the lower price and copper volumes as the real growth driver.

The test for the rest of 2023 is simple: reserves above US$5 billion are comfortable only if the next tranche of external financing arrives before the next burst of import demand.