China agrees to Congo’s debt restructuring

The debt restructuring plan by China was confirmed by Thierry Moungalla. (AFP pic)

DOUALA: China agreed to restructure debt owed by the Republic of Congo – one of a series of preconditions sought by the International Monetary Fund (IMF) before it grants the debt-laden central African nation a bailout.

The restructuring was agreed April 29 at a meeting between a high-level Congo government delegation and officials in Beijing, Congolese government spokesman Thierry Moungalla said by phone from the capital, Brazzaville. The details of the restructuring aren’t immediately available, he said.

The OPEC member owes state-owned Chinese entities and other creditors including commodity traders Glencore and Trafigura Beheer more than US$9 billion.

The government has been trying to secure funding from the IMF since March 2017 to revive an economy that barely grew in 2018, after contracting in the two previous years as oil prices declined.

“Congo has just scaled a major hurdle with this debt restructuring with China because it was the most important of the debts that we had to restructure and which was also an obstacle to obtaining the bailout agreement with the IMF,” Moungalla said.

Biggest creditor

Chinese entities account for about 34% of Congo’s external debt, Moungalla said.

“We take note that Republic of Congo stepped up its discussions on possible debt restructuring with key creditors, including China, to restore debt sustainability,” the fund said in an emailed response to questions on Friday. “We are currently assessing recent agreement with China.”

China is the largest single creditor nation to African countries, accounting for about 20% of the continent’s external debt, according to the Jubilee Debt Campaign.

The discussions between Congolese and Chinese authorities echo similar talks taking place with officials from Zambia, which is seeking a debt swap to ease pressure on its foreign reserves

Congo’s external debt to China is estimated at 1.6 trillion CFA francs (US$2.7 billion), according to a February 2018 report by the French Embassy in Congo, which cited the Finance Ministry. Private creditors like Glencore and Trafigura are owed 1.2 trillion CFA francs, it said.

Congo also has a US$322 million Eurobond maturing in 2029. The price has soared to 87 cents on the dollar from 79 cents since late April.

The government will now focus on dealing with debts owed to private creditors, which also include Nigerian lender UBA, Moungalla said, without providing further details.

The IMF said in November that Congo’s government must take a series of steps before the lender agrees to a bailout, including reforms to improve governance and transparency, adjustments to the state budget.