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The Democratic Republic of the Congo: Investment Risk

By Stephen Krebs

Introduction

Macroeconomic Environment

The Macroeconomic Environment

Current Economic Trends

  • Recent recession
  • Trade balance (+) Current Account (-)
  • Lack of other important data

Current Economic Trends

Exchange Rate Dynamics

  • "Other Managed Arrangement"
  • Crawling peg
  • Recent recession

Exchange Rate Dynamics

Balance of Payments

  • Diversified imports
  • Concentrated exports
  • Mining-based economy (risky)

Balance of Payments

Institutions and Political Risk

“If you want to steal, steal a little in a nice way. But if you steal too much to become rich

overnight, you'll be caught.”

~ Mobutu Sese Seko

Historic Information

  • Congo Civil Wars
  • Ineffective government policy
  • Caa1 credit rating (Moody's)
  • Downgrade and negative outlook

Historic Information

Congo Civil Wars

  • Mobutu's takeover of foreign firms and 1989 Belgian loan default (sovereign debt)
  • Rwandan genocide
  • 1993-1994: worst economic years
  • Ethnic conflict, warring militias, proxy wars

Congo Civil Wars

Monetary and Fiscal Policy

  • Ineffective monetary policy
  • FX rate arrangement
  • Dollarization
  • Ineffective fiscal policy
  • Stabilizing FX rate
  • Increased mining taxes

Monetary and Fiscal Policy

Quality of Institutions

Quality of Institutions

Doing Business Survey

Doing Business Ranking

Worldwide Governance Indicators

Governance

Contemporary Affairs

  • Northeast Congo
  • Ebola
  • Militia violence
  • Hydroelectric dam project
  • Congo river: second in flow to Amazon
  • Regime change: ‎Félix Tshisekedi‎

Contemporary Affairs

Overall Assessment : Do Not Invest

  • Positives
  • Hydroelectric dam
  • New president
  • Natural resources
  • Negatives
  • Concentrated economy
  • Weak institutions
  • Violence and Ebola

Overall Assessment

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