The economic situation in the Republic of Congo will be a challenge for the Bank of Central African States (BEAC) in 2020, in the light of the latest analysis provided by S&P Global Ratings. According to this rating agency, the CEMAC zone country should experience a recession this year, difficulties in honoring its payment commitments abroad (current account deficit) and in financing its entire budget (budget deficit).
“Little progress has been made in diversifying the economy. Congo-Brazzaville remains highly dependent on oil, which represented more than 90% of its exports, two-thirds of government revenue and around 60% of economic activity in 2019. It is therefore extremely vulnerable to price fluctuations”, the experts from the rating agency explain.
BEAC must therefore find solutions that allow the member country to continue paying its bills internationally; which is not easy given the rather fragile situation of foreign exchange reserves in the sub-region.
The Bank has also taken a number of exceptional measures aimed at increasing its liquidity injections into the banking system. However, it will have to be cautious with the Congo, whose public debt is a source of concern.
S&P Global Ratings is however optimistic and believes that the country could benefit from the support of multilateral institutions as part of the global movement which calls for taking exceptional measures against covid-19. But Congo-Brazzaville has a dispute over its debt with commodity traders. The country is bound to repay a debt owed by the national oil company, which was contracted against cargoes of crude oil.
In this kind of commitment, the lower the oil prices, the less the share that goes to the debtor country. There is therefore much to fear that export revenues will fall sharply. The American rating agency remains optimistic. After the covid-19, world trade will be revived and a fairly predictable rise in oil prices will give back levers in the Congo and its sub-region.
