The BCC’s reserve line rose while commodity prices fell, and cover is still only 2.35 months.

By Kanisa Magazine · June 2022

Congo’s foreign-exchange reserves reached US$3.93 billion on 24 June 2022, up from US$2.75 billion at the end of December, even as the copper price that pays for much of that build fell 17 per cent in a quarter. The Banque Centrale du Congo’s weekly digest shows the cushion rising while the commodity tide ebbed, which is the opposite of what a pure price story would predict.

The explanation sits in timing and in policy. Reserves jumped US$834 million in May alone, from US$2.94 billion on 29 April to US$3.77 billion on 31 May, before the copper decline fully bit. The country was banking dollars at high prices and, through the IMF, receiving fresh balance-of-payments support at the same time.

A month that did the work of a quarter

May’s US$834 million jump was the single largest step in the reserve build this year.

The BCC’s reserve series shows a flat first quarter: US$2.72 billion at the end of January, US$2.83 billion in February, US$2.74 billion in March. Then April and May delivered US$1.03 billion. Two forces coincided. Copper, quoted on the London Metal Exchange at US$10,390 a tonne on 31 March, was still above US$9,500 on 31 May, and cobalt cathode in London was quoted at US$39.81 a pound in the BCC’s table, up from US$30.15 at the end of December.

On top of market inflows came official money. The IMF Executive Board’s 29 June decision released about US$203 million, lifting total disbursements under the programme to about US$653 million. In the week to 22 June the reserve line moved from US$3.74 billion to US$3.92 billion, a rise of roughly US$180 million in a few days.

The dollar side of the commodity cycle

Copper at US$8,575 and Brent at US$113 pull the external account in opposite directions.

By 24 June copper had settled at US$8,575, zinc at US$3,675 and gold at US$1,826 an ounce, all below their March levels. The BCC’s own table lists LME cobalt in the low US$70,000s a tonne, down from US$81,840 at the end of March. Meanwhile Brent stood at US$112.90 against US$78.36 on 31 December, having touched US$121.63 on 10 June.

Congo exports copper and imports fuel, so the two moves hit the same ledger from opposite sides. Every dollar lost on copper per tonne is partly offset only if volumes rise. Production data in the same digest show them rising: copper output of 884,610 tonnes and cobalt of 52,037 tonnes for the first quarter of 2022. The quantity effect is cushioning the price effect, for now.

What cover really means

At 2.35 months of imports, the buffer is thinner than the dollar total suggests.

The BCC puts reserve cover at 2.35 months of imports on 24 June, below the three months that the IMF and most central banks treat as a minimum. A US$3.9 billion cushion sounds comfortable until it is divided by a monthly import bill that includes fuel at today’s prices. Pump prices tell the downstream story: Radio Okapi reported in April that a fuel shortage and the war in Ukraine had pushed Kinshasa bread prices sharply higher, a reminder that the import bill reaches households fast.

The reserve rise also has a ceiling. Part of the dollar flow comes from rules that force exporters to repatriate proceeds, and from the IMF’s disbursements, which are loans, not income. Neither grows when copper falls.

What this means for a business planning H2

Treat the reserve build as protection against a shock, not as proof that the external position has been fixed.

For an importer, the signal is reassuring on availability of dollars and cautionary on price. The buffer lowers the risk of a currency scramble in the next quarter, but it does not lower the cost of fuel, wheat or fertiliser. Build dollar-priced contracts with fuel-linked clauses.

For an exporter or a mining-services supplier, the digest points to volume as the hedge. Copper at US$8,575 is still high by 2020 standards, and output is rising. The counter-indicator to watch is the weekly reserve line: if it stops rising while copper keeps falling, the cushion is thinning, and the next BCC digest will show it first.