By CultureBanx Team
- The Republic of Congo has $9 billion in outstanding debt
- African nations had $7.2 billion in bailouts with the IMF at the end of 2017
Teams at the International Monetary Fund (IMF) have been logging a lot of miles across Africa the past year. In 2018, eight countries are under bailout agreements with the IMF. This week the IMF is meeting to discuss a bailout request from the Republic of Congo to help address the $9 billion in debt the country has on its books. Is securing bailout funding from the IMF a sustainable move for African nations?
Why This Matters: The Republic of Congo relies heavily on oil revenue to fund its budget. The country took on a lot of debt to make up for the dramatic fall in oil prices in 2015 when they dipped below $40 per barrel. While oil prices have hit $80 in 2018 they have not gotten high enough to make up for the $9 billion in debt the country has racked up.
IMF managing director Christine Lagarde may have had the Republic of Congo in mind when she warned about high debt levels at the end of 2017. “There are countries in Africa—I’m not going to point fingers at any of them—but some of them are seriously at risk,” said Lagarde. Her concern is warranted considering the IMF’s bailout programs with African nations hit $7.2 billion in 2017 up from $1.8 billion in 2014.
African countries have been able to prevent capital from hitting the exits in situations like this with the IMF’s help. A number of countries have also been able to improve their creditworthiness. These include countries like Ivory Coast, Ghana, and Rwanda. On the other hand, countries run the risk of facing a situation similar to Mozambique which did not disclose all of its liabilities to the IMF. Subsequently the IMF put a hold on its loan disbursements and the country is on a path to default on its debts for the next several years.
Situational Awareness: The IMF is scheduled to review the Republic of Congo’s bailout request on July 6. The organization is also in talks with Zambia about entering into a similar bailout agreement.
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