WASHINGTON/KINSHASA (Reuters) - The World Bank on Thursday approved debt relief for the Democratic Republic of Congo without the backing from Canada and Switzerland, which both cited governance concerns in the country.
The estimated $8 billion debt relief deal is the largest debt write-off by the World Bank and the International Monetary Fund under global programs launched in 1996 to ease the debt burdens of the world’s poorest countries.
Both bodies said the deal would generate total debt-servicing cost savings of $12.3 billion for the mineral-rich, Central African country, which despite a 2003 peace deal, is still plagued by a violent conflict with rebels in the east and sporadic insecurity elsewhere.
“The DRC will no longer face a heavy debt-service burden in relation to its revenue and foreign exchange resources,” they said in a joint statement.
Canada blocked the debt relief deal at the World Bank board on Tuesday by requesting a delay due to its concerns related to a dispute between Vancouver-based First Quantum Minerals and the Congolese government over mining rights, officials said.
Canadian officials said they were concerned with governance and rule of law in the Congo, which Ottawa raised at a leaders’ summit of the Group of Eight in Toronto last weekend.
But Canada’s last-ditch efforts to slow the debt relief process did not sway enough support among other World Bank member countries, mainly because the Kinshasa government had met all of the key economic benchmarks required under the international debt relief program.
The IMF board approved the deal on Wednesday and said Congo was strongly committed to tackling corruption and improving transparency in its mining and oil sectors. Approval by both institutions was needed.
Lambert Mende, Congo’s minister of information, said there were no hard feelings toward Canada.
“Canada did something that disrupted our efforts as it took a lot for us to meet the debt relief conditions, but we have no problem with them and we will follow our relations with them as usual,” Mende told Reuters in Kinshasa.
Investors in Congo’s lucrative minerals sector were unsettled by the government’s move last September to close First Quantum’s Kingamyambo Musonoi Tailing copper and cobalt project. The company is seeking international arbitration along with the World Bank’s private sector lender, the International Finance Corp, which is a junior partner in the project.
Last month, Congo’s Supreme Court also annulled First Quantum’s rights on two other mining titles.
Marie-Francoise Marie-Nelly, the World Bank’s country director for Congo, said the debt relief could be a turning point in the country’s long troubled history.
“Going forward, strengthening the rule of law, improving governance, especially in the oil and mining sectors, and improving the business climate are essential next steps to benefit the most vulnerable Congolese citizens,” she said.
The World Bank on Thursday approved a $50 million grant to help Congo improve governance in its mining sector.
The debt accord was meant to be a high-point of celebrations on Wednesday in Congo to mark the country’s 50th anniversary of its independence from Belgium.
With the debt relief, President Joseph Kabila had hoped to show the world his country had moved beyond its painful past after a 1998-2003 war in which an estimated 5 million people died.
Congo’s Minister of Finance Matata Ponyo said the debt relief would significantly reduce debt service payments, freeing up resources to rebuild the country and reduce poverty.
“We will put it into sectors that will help the reconstruction of the country -- health and social affairs,” Ponyo told Reuters. Congo pays about $300 million a year in debt services, he added.
Negotiations with remaining creditors, including other commercial and non-Paris Club bilateral creditors, are expected to start by October.
The Paris Club of 19 creditor nations, which were owed $7.368 billion at the end of 2009 by Congo, may later in the year decide to wipe out up to 100 percent of their debt.
Congo’s largest bilateral lender outside the Paris Club is United Arab Emirates, which is owed $171 million.
Jean-Louis Kayembe wa Kayembe, director general at the central bank and head of the monetary policy committee, said debt reduction could boost economic growth.
“Although there’s no direct line to economic growth, debt reduction may increase our growth rates because it means we can now attract and make more investment,” he told Reuters, without elaborating. Congo’s GDP growth is expected to reach 5 percent in 2010.