Sunday, October 07, 2007

IMF Expresses Concern About Recent Chinese Loan to the Democratic Republic of Congo

Sources: AFP: IMF warns about Chinese loan to DR Congo; Reuters: IMF worried over China’s $ 5 bln loan to Congo

On October 3, the International Monetary Fund (“IMF”) cautioned the Democratic Republic of Congo against the $5 billion loan it agreed to receive from China last month. Congo plans to use the funds from China to build infrastructure, particularly in its mining industry. Loan repayments will include (1) mining privileges for China and (2) funds collected through transportation tolls.

IMF’s concerns are twofold. First, the Fund is afraid of the possible detrimental effects that Congo’s new, sizeable debt would have on the country’s current efforts at debt relief. Second, the IMF is worried that the Chinese loan does not necessarily meet the standards it demands of its funds to the Congo and other recipient countries.

China is not the only significant investor in the Congolese mining sector. The African Development Bank announced its $100 million loan to the Tenke Fungurume copper mining project.

Discussion:

1. Is the IMF the proper institution to be evaluating China’s loans to Congo? Why or why not?

2. Should the IMF discuss the propriety of the loans only with Congo, the recipient, or engage in dialogue simultaneously with China, the donor?

3. How should we view the increase in the number of donors wanting to invest in Africa? Is this a positive development that allows African countries to choose the best economic package offered, or is this merely a second-coming of the scramble for Africa?

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