“Ill-advised policies” creating economic chaos

On the economic front, the EIU expected little change in what it termed the government’s “ill-advised policies... driven by political expediency.” Among these it included an overvalued exchange rate, restricted foreign currency transactions and uncontrolled growth of the money supply. The “rent-seeking opportunities” [economic advantages] to those in power were expected to ensure that such distortions continued, “despite the increasing evidence that they are contributing to economic collapse”, the report said. Inflation had increased from 21.5 percent in the year to January 2000 to 43.3 percent in March, primarily because a government hike in petrol prices from three francs to nine francs in February had fed through to transport costs, the EIU said. Meanwhile, the exchange rate for the Congolese franc continued to depreciate (falling by some 34 percent on the parallel market between late January and mid-April), thus widening the spread between the official exchange rate and the black market rate to some 355 percent, it added. The main factors driving that depreciation were the shortage of foreign currency and the government expanding the money supply as its main way of financing the budget deficit, it stated. “Because of the adverse economic conditions created by government policies and the war, there is little likelihood of economic recovery during the 2000-2001 forecast period,” the EIU concluded.