No money, more problems

Republic of Congo: Is Brazzaville finally close to reaching an agreement with Trafigura?

By Jeune Afrique

Posted on January 21, 2021 17:37

Firefox_Screenshot_2021-01-21T15-37-29.377Z A branch of Trafigura in Geneva © FABRICE COFFRINI / AFP
A branch of Trafigura in Geneva © FABRICE COFFRINI / AFP

A few days before its case is due to be examined by the IMF board of directors, the Republic of Congo is finally on the verge of reaching an agreement to restructure its debt with the trading company Trafigura.

This is a prerequisite that must be met before the IMF will provide any further aid.

The agreement – whose existence neither party wishes to confirm or deny – is being “finalised”. However, no official date has yet been announced.

Debt of more than $900m to be rescheduled

The agreement will involve the rescheduling of more than $900m of debt and a lowering of interest rates. It is being finalised by Raoul Ominga, CEO of the national oil company SNPC, Clément Mouamba, the Congolese prime minister, Calixte Nganongo, the finance minister, and by the French-Ivorian Frédéric Fatien, president of the company Worldwide Energy Marketing & Consulting, a trading company registered in Dubai that is reputed to be close to Trafigura.

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A deal struck just in time to hope for a breakthrough with the IMF. After the failure of January 2020, the institution has begun its new annual round of Article IV consultations, the validation of which will be accompanied by immediate payments.

Despite the three-year $448.6m agreement approved by the IMF board on 11 July 2019, the Republic of Congo has not been able to access any of the funds from the deal except for the first payment of $44.9m.

“Unsustainable” debt

The IMF has deemed Congo’s public debt “unsustainable”, despite the restructuring agreements entered into with Beijing in April 2019 and with the Orion Trading Company in 2020. According to data published by the IMF in October 2020, the country’s debt – which represented 78% of GDP in 2018 – was close to 105% of GDP in 2020. One of the reasons for this was a decline in GDP by nearly 7% over the year.

While Covid-19 and the fall in oil prices have been the cause of some of the country’s debt, the level of indebtedness to private creditors remains a cause for concern. Brazzaville, as of September 2019, was $966m and $732m in debt to Trafigura and Glencore, another trader, respectively. These two companies are at the heart of the oil-backed loan system that has long been the norm in the country.

Glencore, which Brazzaville hopes will be as open to negotiating as Trafigura is, did not wish to comment on the status of its negotiations.

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