Import cover shortened to 2.29 months as the central bank tightened and the franc eased.

By Kanisa Magazine · March 2023

The Banque Centrale du Congo counted US$4,236.74 million of international reserves on 24 March 2023, down from US$4,382.90 million on the last day of 2022. That is US$146 million gone in twelve weeks, and import cover has shortened from 2.63 months to 2.29 months, in a quarter when copper traded between US$8,400 and US$9,100 a tonne.

The squeeze sits in the external account, not in the mines. The BCC’s weekly statistical digest of 29 March shows a country producing more copper than ever and still watching its dollar buffer thin. The explanation lies in what the reserve line counts, where commodity prices actually moved, and what the central bank spent steadying the franc.

What the reserve line really measures

The BCC strips out dollars held by residents, so a mining boom does not flow straight into the headline.

The digest defines reserves as gross reserves minus the account of Residents in Foreign Currency. Dollars that Congolese firms and households keep in local banks belong to them, so they do not count. The remainder is split into reserves already committed to known payments, reserves held against payments of unknown date, and reserves that are genuinely free. Cover in months divides the total by the forecast monthly import bill for the following year, and the BCC rounds the March figure to nine weeks.

A mine can therefore ship record tonnage and leave the headline unmoved, if the proceeds stay in dollar accounts at commercial banks or are spent on imported inputs before they reach the central bank’s own position.

Copper held, cobalt broke

The two metals that define Congolese exports diverged sharply, and the export basket is lopsided.

The BCC’s price table shows LME copper at US$8,379 a tonne at the end of December and US$8,883.50 on 24 March, a gain of 6 per cent after a January peak of US$9,087. Cobalt went the other way. The London cathode quote in the same table fell from US$56,026 a tonne to US$34,172 by 3 March, a drop of 39 per cent, and the LME 99.3 per cent quotation slid from US$51,515 to US$33,765. Gold rose from US$1,825 to US$1,992 an ounce, while Brent eased from US$86.00 to US$75.65 a barrel.

Output kept climbing. The digest records 2022 production of 2,359,824 tonnes of copper, 111,309 tonnes of cobalt, 32,337 kilograms of gold and 8.43 million barrels of crude. Volume was not the problem. The price of cobalt and the timing of retained proceeds were.

Where the dollars went

Reserves are the residual between what exports earn and what imports, debt service and defence of the franc consume.

The official franc moved far less than the parallel one. The indicative rate went from CDF 2,016.57 to CDF 2,032.26 per dollar between 30 December and 24 March. In its 22 March decision to lift the policy rate from 8.25 to 9 per cent, the monetary policy committee cited persistent internal and external risks and reported that, at 17 March, the franc had lost 1.0 per cent against December on the interbank market but 7.2 per cent on the parallel market.

That gap is the pressure. When the official rate sits near CDF 2,030 while street dealers quote far higher, importers prefer the cheaper official dollar and the central bank ends up rationing it. In December the IMF Executive Board approved a disbursement of about US$203 million to reinforce reserves. The first quarter’s US$146 million drift equals roughly 70 per cent of that sum, and it comes only six months after the programme’s second review was concluded in June 2022.

What a business does with a 2.3-month cushion

Thin cover narrows the room the BCC has to smooth the franc if one large shipment slips.

The decline is modest in percentage terms, 3.3 per cent, and the BCC has kept the indicative rate within one per cent of its starting point. The risk is asymmetry. If a copper or cobalt export is delayed by a few weeks, receipts fall while the import bill does not, and the central bank has less to sell.

Importers of fuel, flour and equipment should budget on a rate nearer the parallel quotation than the indicative one. Suppliers to mining firms should ask for settlement in dollars, because that is where the cushion is thinnest and where a contract paid in francs carries the exchange risk. Cobalt-linked contractors should plan around US$34,000 a tonne, not the US$56,000 of December.

The line to watch is 2.2 to 2.3 months of cover. Below it, expect the BCC to tighten again.