By Ren Yaqiu
BRAZZAVILLE, Nov. 5 (Xinhua) -- After several attempts to attain the qualification point of the very poor and indebted countries (PPTE), the Republic of Congo is at the crossroads of debt pardon of 1,400 billion FCFA (2.8 billion U. S. dollars) from its future payments of debt totaling an estimated 3,500 billion FCFA (7 billion dollars).
The debt cancellation falls within the framework outlined by the World Bank and the International Monetary Fund (IMF) PPTE, under which candidate countries must adjust their economic plans and conduct reform to fulfill the target of poverty alleviation and good governance.
The PPTE initiative targets 33 countries worldwide, including 27 in Africa of which 10 are in the temporary phase with the rest yet to arrive at the point of decision.
"Once she attains this, the objective is to make available additional resources for Congo which will be concentrated to the construction of infrastructure and provision of basic services for the economic development. This will allow Congo to solve the two major problems of the country especially unemployment and poverty," said the IMF official Oscar Melhano.
Coming at a decisive moment when the authorities are aware of the challenges to be surmounted, the decisions to be taken in order to reach that point will also help the country move from a poor country to an emerging economy, and correct the persistent contrasts that have been observed between Congo's natural riches and the impoverishment of its 3.5 million people.
In order to reach this point, it is necessary to improve transparency and effective use of state resources, especially oil.
"There must be total transparency from everyone and in every payment that is made. In this perspective, investment projects should be meticulously analyzed and the feasibility studies carried out," Melhano indicated.
The official also suggested opening up to the private sector to solve the problem of unemployment among the youth, saying the state alone cannot do it and that it will lead to the correction of impoverishment of more than 60 percent of the population.
Another "decision for Congo is for the government to play an active role in the socio-strategic sectors especially education and health which are the foundation for a solid future for Congo," he proposed.
The official urged Congo to take the same route as the emerging East Asia economies like South Korea, Malaysia, Singapore and China, warning the moment to take concrete decisions has arrived and the country should not miss the opportunity.
WHAT HAS BEEN DONE AND ACHIEVED
A three-year program (2004-2007) with the backing of the World Bank permitted Congo to benefit from 44 billion FCFA international funds.
The accord on the program removed all the obstacles that had always been placed in the relations between Congo and the financial institutions grouped as Paris Club and the London Club.
In effect, in 2006, the Paris Club canceled or sweetened the payment of 67 percent of Congo's debt. The London Club followed the suit by canceling 80 percent of Congo's debt in November 2007.
"This cancellation will allow Congo to have a tenable debt because she had been highly indebted and this had prohibited her from developing," said Thierry Desjardins, the then president of a committee coordinating private bank creditors of Congo.
The restructuring of Congo's debt was achieved thanks to the agreement concluded in 2004 between Congo and the IMF. "The accord with the IMF mapped out the route," Desjardins commented.
The funds which had initially been earmarked for paying external debt, estimated each year to be 30 percent of the state budget, could now be channeled to the stabilization account opened at the Bank of Central African States (BEAC).
These financial resources will essentially be directed towards pro-poor sectors, especially health, education, water, electricity and infrastructure, and will also be used in the future generations.
Congo has reported an overall improvement in transparency and good governance in oil management, while reinforcing discipline in the administration of public finances. It has not ceased measures to promote the private sector to boost economic growth.
The country has taken a very important step in her journey towards PPTE as the World Bank approved in October 2008 Congo's strategic document on poverty reduction (DSRP).
And yet, the approval of DSRP is one of the principle steps if not one of the conditionality for attaining the point of completion and whose duration is never fixed, according to the IMF.
"This important decision (that of approving DSRP) will allow Congo to commit herself to a coherent economic and social development program," the government said in a press statement signed by spokesman Alain Akouala Atipault.
"The government reaffirms its willingness to pursue governance reforms under the leadership of President Denis Sassou Nguesso with an aim of reaching the point of completing the initiative of PPTE which will lead Congo to free herself from the debt burden," he added.
Shortly before the approval of DSRP, Congo signed an accord with a financial group termed as "vulture creditors" who had bought back some of Congo's debt.
"At the end of the concerted efforts, Congo put an end to the disagreement with her creditors concerning the external debt that she had taken several years back," the government statement said.
This accord was with the Kensington International Limited, an affiliate to Elliot Associates, L.P, which is a financial group based in the Caymans Islands.
The "vulture creditors" are international companies which redeemed Congo's debts with the private creditors and demanded a sum of money much more than that of the first creditors.
In 2006, Kensington International Limited demanded from Congo more than 200 million dollars after having redeemed it some years back from one of its creditors who wanted only 1 million dollars.
