November 25, 2009 / 4:21 AM / 8 years ago

Government to finance DR Congo despite hitch

KINSHASA/PARIS (Reuters) - The Democratic Republic of Congo on Tuesday accused Canada of holding up progress toward rescheduling its foreign debt but Ottawa said it was now prepared to provide the needed financing assurances.

The Central African nation said the dispute centered on a mining contract it had canceled but it was not right for Canada to delay its debt refinancing.

In response, Canada said it had asked for more time to consult "on the current investment environment" in Congo but that after its consultations it was now ready to proceed.

The International Monetary Fund said this month Congo must make arrangements on the rescheduling of its debt with the Paris Club of creditor nations before it could qualify to enter a global debt relief program.

A source from the Paris Club said a deal could be reached in the coming days and it was not the correct forum for a discussion on the business climate of any particular country.

Congo is estimated to have $10 billion to $11 billion in foreign debt. At the end of September 2008, it owed $6.1 billion to the 19 developed countries who are members of the Paris Club and had fallen behind on its repayments.

Talks with the Paris Club creditors were held this week, but Congo said they had become snagged over its decision in August to cancel a copper and cobalt project. Toronto-listed First Quantum Minerals was the majority shareholder in the project.

The Canadians "have a problem with what's happened with a Canadian company, KMT," Information Minister Lambert Mende said of First Quantum's Kingamyambo Musonoi Tailings (KMT) unit. "The Canadian government wants to use the Paris Club in order to resolve a particular problem. This is unacceptable."

MORE TIME TO CONSULT

A Canadian government finance official said Ottawa had not blocked the rescheduling but its fellow Paris Club creditors had agreed to its request for more time to consult.

"Our mission in Kinshasa has been in an active dialogue with the DRC authorities. The DRC government has indicated their commitment to specific actions to improve transparency and relations with the international investment community," said the official, asking not to be identified.

"Based on these various consultations, Canada is now ready to provide its financing assurances over the duration of the IMF's proposed three-year arrangement."

A separate Canadian statement said the issue was a confidential matter for First Quantum Minerals as well as Lundin Mining, which also is active in the country.

Congo still expected its push for debt relief to go before the IMF next month, Information Minister Mende said. The Paris Club source said its members could reach a decision soon.

"The Paris Club is in the process of putting together financing commitments from its members. A decision should be taken in the next few days," the source told Reuters.

The source added that Paris Club creditors should take decisions based only on matters relating to the debt strategy of a debtor country.

"It is not the job of the Paris Club to discuss subjects relating to the business climate," the source said.

"These subjects should be discussed on the boards of the IMF and World Bank and in the case of Congo, the IMF program and the conditions for reaching the completion point (of the debt relief program) contain commitments taken by the Congolese authorities to improve the business climate."

Separately, Deputy Mines Minister Victor Kasongo told Reuters Congo planned to make an official response to Canada on Wednesday.

Congo canceled the $500 million KMT project in the Katanga mining heartland as part of a government review of contracts deemed to have been struck on unfair terms. The Congolese government has since said the deal could be renegotiated.

Court documents seen by Reuters late last month showed First Quantum must pay Congo $6 million in damages over three failed lawsuits it filed against the government and state agencies after the project was canceled.

The company had earlier attempted to withdraw the suits. Analysts have said First Quantum could move the dispute to a court of international arbitration to defend its investment. (Writing by Mark John and Randall Palmer; editing by Patrick Graham, Gary Crosse and Mohammad Zargham)

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