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China says IMF wrong to question Congo deal

Posted by smeddum on June 6, 2009

China says IMF wrong to question Congo deal
Tue Jun 2, 2009

By Joe Bavier

KINSHASA (Reuters) – The IMF must present new arguments to justify its call for changes to a $9 billion infrastructure-for-minerals deal between China and Democratic Republic of Congo, China’s ambassador to the country said on Tuesday.

International Monetary Fund officials worry the contract, a key element of President Joseph Kabila’s post-war economic policy, will plunge the central African nation deeper into debt, and have delayed forgiveness of most of the $10 billion Congo already owes.

In a recent visit to Congo, IMF managing director Dominique Strauss-Kahn said aspects of the deal needed to be changed to make it compatible with the lending institution’s debt relief programme.

“We have avoided from the very beginning a situation that would eventually lead to further debt. And so there is no discussion possible,” Wu Zexian, China’s ambassador to Congo, said.

“They must find new elements, and it’s not our job to find them,” he told journalists. “We are working to help Congo, and we’re not the ones creating the problem.”

Congo is attempting to recover from decades of kleptocratic dictatorship and a devastating 1998-2003 war.

Under the deal, Chinese companies are building much-needed roads, railways, and hospitals in the cash-strapped Congo in exchange for lucrative copper and cobalt concessions intended to fuel China’s export economy.

Wu said Chinese enterprises had already begun work on three roads and a hospital and rejected the IMF’s stance that the use of Congo’s mineral reserves as a guarantee for the infrastructure projects constitutes an external debt.

“(IMF experts) came to see me to ask precise questions on elements that bothered them, but after that there was no more discussion,” he said.

“They must say why it’s necessary to give up this cooperation, these relations, if we are able to explain these things.”

Congo’s mining-driven economy has been crippled by the global economic downturn that has led to a fall in demand for mineral exports, its primary foreign currency earner. Income from mining and oil exports make up around 60 percent of state revenues.

Benchmark world prices for copper, Congo’s primary mineral export, traded at around $5,000 per tonne on the London Metal Exchange on Tuesday, down from a record high of almost $9,000 per tonne last July.

In December, the IMF slashed its forecast for 2009 foreign investment in Congo, whose mining sector boomed following 2006 elections, to around $800 million from $2.5 billion.

In March, Congo’s 2009 growth forecast slipped to 2.7 percent, down from an October projection of more than 10 percent.

© Thomson Reuters 2009 All rights reserved

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