KINSHASA (AFP) – With the economy on the mend, the government of the Democratic Republic of Congo has begun a campaign to rebuild the national currency and wean the country off the US dollar.
In the 1990s, during the waning days of the brutal regime of dictator Mobuto Sese Seko, hyperinflation that hit 2,000 percent led to the marginalisation of the Congolese franc and the rise of the safehaven greenback.
By the end of last year, the dollar accounted for 89 percent of bank deposits and 95 percent of loans, according the country’s central bank.
Since that spate of hyperinflation, the dollar has been the currency for savings and major transactions, with the Congolese franc relegated to small retail transactions which are conducted in increasingly worn wads of 500 franc (around $0.50) notes.
Since July, the Congo Central Bank has introduced new denominations of 1,000, 5,000, 10,000 and 20,000 francs.
But these, along with existing franc notes of lower denominations, have been poorly received and small retail businesses shun them.
However, Bruno Degoy, head of the local unit of the Bank of Africa, which operates in a dozen African countries, said he believes new bills “should appear little by little” in circulation.
With inflation down to 2.7 percent and the dollar exchange rate fixed at around 920 francs by the central bank, “everything is in place” to ensure the gradual wider use of the national currency, he said.
The economic situation is also favourable, growth came in at 7.2 percent last year and is forecast to hit 8.3 percent this year, according to the government.
Foreign exchange reserves are also more plentiful, with the central bank now holding more two months worth compared to just two days in 2009.
But the Congolese authorities are careful not to push the process.
When the chief of the central bank, Jean-Claude Masangu, launched the de-dollarisation effort in a speech last year, he was careful to reassure Congolese.
“There will be no forced conversion” of currencies, he promised.
In an interview with AFP, Masangu said the process of de-dollarisation could last up to a decade.
“Only once we’ve established confidence throughout the system, will we shut the valves so all payments are in the national currency,” he said.
So far the government has only taken small steps encourage the use of the franc.
Shops must publish prices in francs. And tax bills are now sent out in francs, even though they are usually still paid in dollars.
Budget Minister Daniel Mukoko Samba, when announcing the de-dollarisation effort, noted that Congo is following in the footsteps of a number of other African countries such as Angola, Ghana, Mozambique.
Zambia, Samba noted, chose to force the use of the national currency.
In Congo the “the fiscal and monetary authorities have chosen to let market forces work,” he said.
But businesses are wary.
“This de-dollarisation doesn’t have any up side for us,” said an importer of generators into the country for two decades who asked his name not be used.
“For the moment, the Congolese franc is incredibly stable, but we remember times when prices were changing every 10 minutes,” he noted.
“The problem isn’t the abandoning of the dollar, it’s the convertibility of the” franc if it becomes the dominant currency for transactions.
Franck Meriau, head of the Franco-Congolese Chamber of Commerce, said the there would be practical advantages to having a single currency in circulation, but only so long as “it remains stable with the dollar” and “that importers can obtain dollars without difficulty.”
Bank of Africa’s Degoy said “people have to get used to using the national currency and the banks participate in the process.”
He warned that “if you go too fast, you will destabilise the banks and businesses which have loans in dollars.”
He forecast that within a decade half of financial transactions in Congo could be made in francs.
Indeed it may take time to wean Congolese from dollars, given the way they treat them.
Dollar bills must always be in impeccable condition, with creased or worn bills often refused during transactions or only accepted at a discount.
Meanwhile francs circulate with stains or torn at the edges. Congolese, no strangers to conflict, in dark humour jokingly call such “amputated” bills “war casualties”.