IRIN interview with central bank governor Jean-Claude Masangu

During more than four years of war in the Democratic Republic of the Congo (DRC), it is estimated that 3.3 million people died, according to the International Rescue Committee, and another 2.7 million were displaced, according to UN agencies. The economy was left in shambles, as parallel economies evolved in rebel-controlled zones, with various foreign currencies replacing the Congolese franc.

On 30 September, the Central Bank of Congo (Banque Centrale du Congo - BCC) introduced small denomination bank notes, three months after the inauguration of a two-year transitional government intended to lead to national elections.

IRIN spoke with the bank’s governor, Jean-Claude Masangu, on 30 September about the introduction of the new notes, and what implications it could have on the reunification of the vast central African country.

QUESTION: Three months after the installation of the transitional national government, the BCC has issued these new 10- and 20-Congolese franc bills. Why was this done now, and what impact could this have on the reunification process underway in the DRC?

ANSWER: There was a great deal of preliminary work done by the BCC. On one hand, we had the hyperinflation of the years 1999 and 2001, during which bank notes lost a great deal of their value following the entry into circulation of the Congolese franc in 1998, replacing the "zaires" used under [late President] Mobutu [Sese Seko].

On the other hand, the population continued to keep and use these small denomination notes, which became very dirty and dilapidated. This happened because people needed small change. Today, we need to replace them because they are in such a dirty state that they are having negative health consequences for the population. (1)

Finally, we issued these bills as a means of supporting the reunification of the country. Now all regions of the country will be using the same currency. All regions of the country need these small denomination Congolese franc notes.

Q: How many of these bills are you introducing into circulation? What is the total value?

A: Our strategy is to not change the amount of money in circulation. We simply plan on replacing the dirty bank notes currently in circulation - about six to seven million Congolese francs that were printed in 1998, of all denominations, that we must progressively replace. To the degree that new bills are introduced into circulation, we will recover and destroy the old ones. Therefore, this is only a replacement operation.

We also need to educate the population on the proper handling of these new 10- and 20-franc bank notes.

Q: During the war, various currencies were used throughout the country - Congolese francs, zaires, and foreign currencies. How does the BCC plan to have the same currency used across the national territory?

A: The strategy of the BCC is to replace the money in circulation in what we are now calling "the unified territories". This means that the new notes will be introduced over a period of six months, after which time we will see if a sufficient amount has been produced. You might recall that because of a shortage of Congolese francs in the past, people began to use the old currency, the zaire. We must replace this currency with Congolese francs.

We also plan on replacing the 50- and 100-franc bank notes with new ones, as we had information indicating that there were attempts to introduce counterfeit bills in these denominations. This operation will also take place in six-month cycles.

Q: What is your opinion on the use of foreign currencies, such as the Rwandan franc, which have practically become the local currency in eastern DRC?

A: In the east, Rwandan francs are common. In the west, central African franc zone notes are used. In other parts of the country, US dollars are used. We accept that foreign currencies will be in circulation alongside local currency, in general. This is perfectly normal for regions that share borders with neighbouring countries. But what is truly important is that there be a will among the Congolese people, be they from the east, north, south or west, to use a single currency for a united people. It is an act of unity to use Congolese francs.

Q: How concerned are you that the replacement of the old notes with the new could lead to a depreciation of the Congolese franc?

A: We have been announcing the introduction of these 10- and 20-franc bank notes for the past week. The amount of money in circulation will not change, because we are replacing what we collect and destroy. Nevertheless, there might be some psychological effect, because there are always speculators who will try to make money from this. But the bottom line is that the economy has not changed. The BCC has the means to intervene in the market to buy the old bank notes and keep the money supply stable.

Q: You mentioned that these bills had become a means of transmitting illness. What does the BCC plan to do to change the behaviour of Congolese with regard to their handling of the bank notes?

A: We need to launch a public-awareness campaign regarding the proper handling of these bank notes. Today, for example, people tie bank notes in knots, together with a piece of one's clothing. This is not the best way to preserve a bill, as it causes serious wear and tear.

NOTES:

(1) Health experts at the School of Public Health (Ecole de Sante Publique) of the University of Kinshasa recently found that these damaged bills - nicknamed "blesses de guerre", or "casualties of war" - were responsible for transmitting disease. "Many respiratory and skin diseases affecting the Congolese were transmitted by these bills, which are sometimes kept for safety in a person's genital region, as well counted by licking one's fingers," faculty member Dr Kihombo Mbela told IRIN. Having become scarce, these bills were sold in the streets of Kinshasa at an elevated rate, despite their dilapidated state.