Previous Quarterly Editions
Expropriation Risk: 75 75 75 75 ►Political Violence Risk:73 73 73 73 ►Terrorism Risk:42 40 40 44 ►Exchange Transfer and Trade Sanction Risk: 73 73 73 73 ►Sovereign Default Risk:83 83 83 83 ►
TREND ►
Protest intensity to date* 2022 2023 Low Low Unrest risk in 2024**Cost of living: HighAnti-austerity: High
*Note: Protest intensity is calculated based on ACLED. **Risk levels are calculated by WTW. Where data are missing no risk level will be displayed. For details of 'anti-austerity' calculations, see the essays in the introduction; for details of 'cost-of-living' calculations, see the previous edition of the Index.
The economy of the Democratic Republic of Congo (DRC) is recovering well from the COVID-19 pandemic shock and higher inflation caused by Russia’s February 2022 Ukraine invasion. This has helped reduce the public debt burden. Thus, although the total public debt book has risen significantly in recent years, from around US$5.6 billion in 2019 to nearly US$10 billion in 2022, strong GDP growth has resulted in a reduction in the public debt ratio, down from approximately 24% of GDP in 2021 to around 22% in 2022.
Nevertheless, rising interest rates have required the central bank to adopt a more restrictive monetary policy for the current financial year, which, combined with rising inflation (projected to grow by 13% in 2023), is weakening confidence. Furthermore, as one of the poorest countries, the DRC remains highly vulnerable to further economic shocks. In addition, with elections due in December 2023, during which incumbent President Felix Tshisekedi is seeking a second term, the International Monetary Fund (IMF) is worried that borrowing may increase to fund campaign promises, adding to the debt burden.
Tshisekedi came to power in January 2019, following a controversial election. He has used new borrowing as the primary tool for trying to consolidate his position, with international agencies among his electorate. To build confidence in his financial management with the IMF and World Bank, in particular, Tshisekedi has borrowed heavily to revive and reorganize some of the DRC’s major public sector companies, including in electricity, oil and mining. Much of this money has been borrowed from the IMF and International Development Association directly, and these organizations remain the country’s largest creditors (with a combined debt of around US$3.1 billion).
To bolster his position with the electorate, Tshisekedi has also borrowed heavily to fund a major program of infrastructure projects.
Tshisekedi remains committed to developing a business-friendly investment environment, following the DRC’s accession to the East African Community (EAC) trade bloc in March 2022. The IMF regards his finance minister, given his experience, as a “safe pair of hands,” and he enjoys investors’ broad support. Both the president and his finance minister have made multiple public statements of their intention to avoid any preelection investment shocks.
Although the DRC’s debt burden continues to rise, because of the factors outlined above, the IMF continues to classify the country as only at “moderate” risk of debt distress, which is a lower risk rating than for many other African countries.
Ongoing armed violence in the country’s eastern regions has continued to escalate. Now more than 300 armed rebel groups are operating in the east (including the previously dormant ethnic Tutsi-dominated M23 Movement), many of which are increasingly emboldened by their control of vast networks of trade and regional smuggling. This has led to a sharp rise in regional tensions, especially between the DRC and Rwanda, as Kinshasa regards M23 as a proxy force for Rwanda. This has resulted in a complete breakdown in diplomatic relations between Tshisekedi and his Rwandan counterpart, President Paul Kagame.
In early September, the EAC agreed to extend the mandate of its new peacekeeping force in eastern DRC, the EAC Regional Force (EACRF), first deployed in December 2022. Tshisekedi agreed to this extension, albeit reluctantly. Although the president initially supported EACRF deployment, he has since become highly critical of the mission’s effectiveness. It is likely that part of Tshisekedi’s agreement stems from wanting to keep positive ties with neighbors, including Burundi.
However, even with the EACRF, recent months have been among the most violent in the eastern region in years. Unless the violence can be rapidly brought under control, it will not be viable to hold elections in the region in December — or potentially nationally.
In 2019, the Allied Democratic Forces (ADF) pledged allegiance to Islamic State (IS), and in 2021 the U.S. State Department reclassified the group as a designated Foreign Terrorist Organization. Since then, both IS propaganda and the ADF’s own online content have made increasing claims about the ADF’s inks between the group and jihadist groups elsewhere, and security assessments suggest that the group is growing its links with Islamic fundamentalist networks and funding channels in East Africa and beyond.
The pledge of allegiance to IS and the U.S. response seem to have precipitated a shift in the ADF’s tactics. Buoyed by their new jihadist links, recent months have seen an uptick in the group’s use of suicide bombings, improvised explosive devices and other kinds of terrorism attacks, in both the DRC and Uganda. In mid-June 2023, the group carried out its most audacious attack in many years, when it attacked a boarding school in the western Ugandan village of Mpondwe, launched across the border from the DRC. The attack left at least 37 pupils dead, and eight in a critical condition, and resulted in six others being kidnapped.
The attack caused outrage in Uganda and has resulted in a major upscaling of the DRC’s armed forces and the Ugandan army’s counterinsurgency operation against the group in Eastern Congo.
The IMF forecasts GDP growth for this year will be around 6.8%, slightly down from 8.9% in 2022. Despite the pressures of inflation, especially in food and oil prices, the DRC’s economy continues to benefit from increased copper production (the country’s largest export earner) and a strong copper price and from general momentum in the extractives sector (which grew 20.8% in 2021). The DRC will also benefit from long-term rising demand for battery metals, including for electric vehicles; the country holds 70% and 60% of the world’s cobalt and coltan reserves, respectively.
In January, the DRC completed an auction of 27 new oil exploration blocks across Tanganyika Province, and in September and October expressions of interest are due for 11 more oil blocks in that same province. The auctions have raised the international community’s consternation given that many of the blocks are in ecologically sensitive areas. It is also open to question whether the blocks will be economically viable, given environment, social and governance trends and insurance needs. Therefore, it is not clear what impact new oil may eventually have for the Congolese economy.
The DRC has a track record of default on its commercial loans, most of which relate to a major 2007 Eurobond issue of US$454 million. Kinshasa has defaulted on this twice, in 2016 and 2017; however, the risk of further defaults has diminished, following the finance ministry’s restructuring of its external commercial debts with the oil companies last year.
Nevertheless, external debt still accounts for over 65% of public debt. Most of this is owed to multilateral donors, especially the IMF and World Bank. With relations between the IMF and DRC slowly improving after several years of difficulties, the multilateral community is unlikely to withdraw these kinds of mechanisms.
However, it must be emphasized that Tshisekedi’s own performance is unlikely to be the main driver in the elections. Instead, the upcoming campaigns will be primarily shaped by the ongoing rivalry between the president and his predecessor, Joseph Kabila, who remains highly active and who may make another run for State House. So, too, rising insecurity in the troubled eastern regions, and how Tshisekedi responds, will be a key factor in how DRC votes. Indeed, if eastern insecurity further deteriorates, it may even make elections impossible in the region, potentially resulting in a postponement of the December polls nationwide.
Meanwhile, negotiations with creditors are ongoing in relation to around roughly one-quarter of DRC’s historic debts before 2010.
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