Monetary policy makers of the Democratic Republic of Congo have more than doubled the central bank’s benchmark interest rate in the midst of a depreciating currency and mounting inflationary pressures.
The rate was increased to 18.5% from 7.5%, central bank Governor which is its highest level since April 2018
Policy makers left the rate unchanged at 7.5% in July after cutting from 9% in March to support the economy following the coronavirus fallout.
The most affected fields were foreign reserves which fell from $47 million to $832 million in July as the central bank moved to support the currency.
The franc has lost about 17% against the dollar since January. The domestic currency has been under pressure, partly because around 90% of Congolese bank deposits and loans are in dollars, yet the government spends in francs.
On Friday, President Felix Tshisekedi announced that his government would also tighten fiscal policy to support the currency and fight inflation.
Price-growth might average 20.8% this year against a target of 7%, according to the central bank.
Miners have continued operating despite the pandemic. That could limit economic contraction to 1.7% this year, compared with an earlier forecast to shrink by 2.4%, according to the central bank. Additionally, Congo stopped offering miners value-added tax exemptions on imports in bid to boost government revenue.
