(Ecofin Agency) – The institution underlines that a revised Finance Law for 2024 must integrate the positive impact of the amendment to the mining contract recently signed with Chinese companies, both in terms of revenue and investment expenditure.
The International Monetary Fund (IMF) recommended, in a press release published on Wednesday, May 8, 2024, to the Congolese government to ensure the proper use and governance of the funds that should be mobilized thanks to the recent revision of the mega-mining contract “minerals versus infrastructure” signed with China.
“A revised Finance Law for 2024 must integrate the positive impact of the amendment to the contract with the mining company Sicomines recently signed, both in terms of revenue and investment expenditure. In addition, mechanisms will need to be put in place or strengthened to ensure the proper use and governance of these funds.underlined the institution in this press release published following the completion of discussions with the Congolese authorities on the consultations under Article IV for the year 2024 and on the 6e and final review of the economic and financial program supported by an agreement under the Extended Credit Facility (ECF).
“The revised Finance Law must reflect these changes and other modifications to the budgetary framework. Revised budget commitment plans consistent with these objectives will be published “, she added, noting that “strengthening public finance management remains essential to continue to mobilize revenue and improve the quality and efficiency of public spending”.
The “minerals for infrastructure” mega-deal was signed with Beijing in 2008 by the administration of former President Joseph Kabila. It stipulated in its initial version that the Chinese groups Sinohydro Corporation and China Railway Engineering Corporation must build infrastructure (roads, bridges, hospitals, supply of drinking water, etc.) for a total investment of 3 billion dollars between 2008 and 2040 in exchange for a 68% stake in the Société sino-congolaise des mines (Sicomines), a joint venture specializing in copper and cobalt mining with the state-owned Congolese mining company Gécamines.
Following tough negotiations which took place in recent months between Beijing and Kinshasa, the total amount of these investments was increased to 7 billion dollars to reflect the real value of the mining concessions. Of this amount, around $1.5 billion has already been disbursed since 2008.
According to the new amendment to the contract signed between the two countries in March 2024, the DRC will receive $324 million per year from its Chinese partners for infrastructure projects until 2040, as long as the price of copper remains above $8,000. per ton.
If the price of the red metal exceeds $12,000 per tonne, 30% of the additional profits made by Chinese groups will be devoted to financing new infrastructure projects. If it falls below $8,000, funding will gradually decrease until it stops completely at $5,200 per ton.
The IMF also indicated that it reached an agreement with the Democratic Republic of Congo on the latest review of an economic and financial program supported by an agreement under the Extended Credit Facility (ECF). This agreement, lasting 3 years and worth approximately $1.52 billion, was approved by the Fund’s Board of Directors on July 15, 2021.
The world’s leading producer of cobalt and one of the top three producers of copper internationally is thus moving closer for the first time to the completion of an IMF program. Previous deals have been halted due to issues including a lack of transparency in the vast mining sector.
“The results achieved under the program have been generally positive, with most quantitative targets achieved and key reforms implemented, albeit at a slow pace,” said the IMF in its press release.
Once approved by the IMF Executive Board, the agreement on the 6e review of the program will allow the payment of a final loan tranche of more than $200 million.
Also read:
07/05/2024 – DRC: Chinese investments in infrastructure will depend on the price of copper
03/15/2024 – The DRC officially signs the new $7 billion mining agreement with China
05/25/2023 – The DRC wants to more than double its interests in Sicomines, the copper-cobalt joint venture with China
02/17/2023 – DRC-China mining mega-contract: Kinshasa demands $17 billion in additional investments in infrastructure
