Why the Congo is so dependent on the U.S. dollar
Ask anyone in the Democratic Republic of Congo what they have in their wallets, and you will most likely get the same answer: Congolese francs, and U.S. dollars.
“It’s not normal. It’s not normal!” says Arsene Ntambuka with a resigned laugh. Ntambuka is regional head of TMB, one of the major banks here.
The U.S. dollar is one of the many scars Congo bears from the two wars and prolonged guerilla conflict that has stayed with the country since Rwanda’s genocide spilled over the border in the mid ’90s. Congo’s own currency, the franc, fell apart as the country was plunged into chaos 20 years ago.
“We had hyperinflation in the Congo, running at thousands of percent,” recalls Mwanza Singoma, head of the the chamber of commerce for the North Kivu province. Inflation got so bad, groceries would double in price every 25 days.
The government decided it had to let in the dollar.
“The only haven that companies had was to operate in foreign currency; this was the only way they could protect themselves against inflation,” says Singoma.
The U.S. dollar saved the bank accounts and mattress hoards of innumerable Congolese from evaporating. To this day, 90 percent of Congolese savings are in dollars.
So why not just adopt the dollar as the Congolese currency? There’s one small, but simple, hitch.
“The Congolese Central Bank cannot issue dollars,” Ntambuka says dryly.
As time moved on, the dollars didn’t. The Federal Reserve doesn’t operate in Congo, so there was nobody replacing old dollars. They got older, and dirtier. By 2008, some U.S. dollars in circulation were so fouled they were practically jet black. It was hard to see if they were actually dollars at all.
“Worn out dollars lose value,” explains Esoko Akambele, a money trader. He stands on street corners with fat stacks of Congolese francs, euros and U.S. dollars, willing to trade with any car that pulls up. “The worn out or torn dollars are cheaper than new dollars.”
Westerners accustomed to pulling out crumpled dollar bills receive glares or indignant stares for “keeping your dollars so badly.”
These days, many of his Akambele’s bills are sparkling, crisp, new. The brand new hundred-dollar bill can be found coming out of ATM’s in Goma in the eastern part of the country.
“Currently we can find new dollars bills, it’s easier,” he says.
In some ways that is a good sign. It means trade is bringing in new dollars, and banks are operating normally.
The dollar, however, has come with a price, says Ntambuka the banker.
“It costs us dearly to bring in those dollars,” he says. Literally, his words translate to “it costs us gold to bring in these dollars.” (It may well indeed – Goma is one of several regional hubs for gold trading.)
And quite literally, banks have to fly planeloads of dollars in from accounts in the U.S. These are either accounts that hold U.S. dollars earned from the export of Congolese goods or minerals, or they are investment accounts held by the banks.
“We have to. All the banks in Congo have to do this,” Ntambuka says.
Banks pass on those costs in fees, says Ntambuka. And there are no U.S. coins here – too expensive to ship – so a price tag that should read $1.50 gets rounded up to $2.
“It’s unjustified inflation,” he says. But the biggest problem is that the Congolese government can’t control its country’s money supply.
“It’s not your money, so you have to submit to the consequencs of decisions taken there [in Washington]. You have to adjust your own policy to deal with a monetary policy made by another country,” he says.
The Congolese government is trying to slowly reassert the franc. It has kept inflation under control successfully for the past few years, which is important to regaining the trust of every day Congolese. It is slowly releasing 20,000 franc bills to make it more practical to make large payments in francs. Civil servants are only paid in francs, and taxes are demanded in them. But ultimately, currency is restored “not by law, but by confidence,” says Ntambuka.
Which means a dollar-free Congo is still a long way off.
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