Congo Franc Hits New Low Against Dollar on Parallel Marketby
Official exchange rate down 4 percent since start of year
Government options limited by falling foreign reserves
The Democratic Republic of Congo’s franc fell to a record low on the parallel market as the slump in commodity prices took its toll on Africa’s biggest copper producer.
The Congolese franc traded at an average of 1,001 per dollar in unofficial trading on June 16, the Prime Minister’s office said Monday in an e-mailed statement, bringing its decline this year to 7 percent. On the official market, the franc traded at 966 per dollar, down 4 percent in 2016, according to the central bank.
Since the start of the year, the government has stepped in to support the currency. The central bank has twice sold dollars to meet demand from the banking industry and in April it suspended the payment of value-added tax reimbursements to reduce pressure on the domestic currency and shore up government finances. Its foreign-exchange reserves dropped to $1.2 billion on June 15 from $1.5 billion in December.
The collapse in the prices of copper, the country’s biggest export, and other natural resources like cobalt and oil reduced foreign-exchange earnings, bringing pressure to bear on the franc. Congo is the world’s largest source of cobalt, which is used to make rechargeable batteries. It produced 995,805 metric tons of copper last year and pumps about 25,000 barrels of oil per day.
Copper retreated from the highest close in two weeks after data showed top user China exported the most metal in four years, adding to concerns about weak demand. Copper for delivery in three months lost 0.9 percent to $4,604 a ton by 11:19 a.m. on the London Metal Exchange.