The Democratic Republic of Congo’s new central bank governor has launched an effort to restore trust in the Congolese franc and reduce the country’s heavy reliance on the US dollar, which currently dominates nearly 90% of local transactions.
The Congolese economy is highly dollarized, with both commodity exports and everyday spending largely conducted in US dollars.
Governor Andre Wameso faces a major challenge, many citizens still remember the hyperinflation of the 1990s, and the franc remains volatile, trading near record lows against the dollar, according to Bloomberg.
Congo earns almost all its export revenue in dollars from copper., cobalt, oil, and gold, and the greenback is widely used in daily life, from rent and restaurant bills to airport fees. Even government wages paid in francs are often quickly converted into dollars for security.
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“If the economy is so dollarized, it’s because we import almost everything we consume. We need the population to trust its money again, because I don’t think we can build a new Congo with a currency other than the national currency,” Wameso told Bloomberg.
The banking sector has long been constrained by concerns over money laundering and conflict financing.
Dollar transactions within the country often pass through correspondent banks abroad, causing delays of several days.
To tackle this, Wameso plans to work with the US Treasury to create a clearing house at the central bank, which he says will speed up domestic transactions and reduce dependence on foreign intermediaries.
Rebuilding confidence in the franc, Wameso emphasizes, will require wider economic reforms.
This includes overhauling the social security system, reforming the housing market so construction materials are bought in francs, and eventually issuing mortgages and financing in the local currency.
He also supports launching franc-denominated securities to create a long-term yield curve and encourage citizens to view the national currency as a viable investment.
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Image Credit: Bloomberg
