The Banque centrale du Congo, the central bank of the Democratic Republic of Congo (DRC), has raised its main interest rate to 18.5% from 7.5%, central bank official Plante Kibadhi said.
The central bank lowered the rate from 9% in March to cushion the economy from the impact of the coronavirus crisis.
The latest rate increase was carried out to re-anchor inflation expectations, the International Monetary Fund said.
Devastating effects of virus
Year-on-year inflation in Congo stood at over 14% at the end of July, roughly 10 percentage points higher than at the same point last year, central bank figures say.
The Bank had previously said it expects the economy to contract by -2.4% this year compared with growth of over 4% in 2019, partly due to coronavirus-linked disruptions to mining, which accounts for one-third of national economic output.
The pandemic has also dampened the global demand for metals and other raw materials.
The DRC’s central bank kept its 2020 economic growth forecast unchanged at -2.4% because of uncertainty over the COVID-19 pandemic
“The situation has contributed to weakening growth prospects both globally and regionally,” the central bank said in a state.
In April 2020, the executive board of the International Monetary Fund (IMF) approved a disbursement under the Rapid Credit Facility (RCF), equivalent to US$363.27 million, to help the Democratic Republic of Congo (DRC) meet urgent balance-of-payments needs stemming from the COVID-19 outbreak.
Deteriorating outlook
DRC is experiencing a severe shock as a result of the COVID-19 pandemic.
The short-term economic outlook has deteriorated quickly with the fall in mineral prices and the impact of necessary containment and mitigation measures.
The deteriorating macroeconomic outlook and additional fiscal pressures are creating an urgent balance-of-payments need.
The IMF support through RCF financing would help fill part of the financing gap, while additional support from other development partners is expected to close the remaining gap and ease budgetary financing needs.
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