The Tragedy of the Congo, presents a startling revelation of the economic woes that befell Congo after its independence making it one of the most indebted countries in Africa with the debts of approximately $14.
6 billion by 1997. The articles argue that Congo, a central African nation, has significant deposit of natural resources such as copper, which would have made the country the richest nation in Africa. However, a series of civil wars that began in 1958 reduced the country into a war zone with the Dictator Mobutu Sese Seko taking over the leadership of Congo. According to the article, the reign of Mobuto reduced Congo’s opportunity of realizing an exemplary gross nation product of $1400 in 1997 to a mere $100 in 1958. Because of the poor performance of Congo’s economy, the local currency was almost worthless, and barter trade was a common practice.
With emphasis on the causes of Congo’s economic turmoil, the article notes that the International Monetary Fund and World Bank were the key players that aggravated the economic challenges of Congo. In 1967, IMF’s intervention in Congo was a cause of a blessing and a curse alike. IMF approved low interest loans to Mobutu’s government amounting to $27 million. IMF’s aim was to stabilize Congo, and it further devalued the local currency. In addition, the IMF installed western officials in Congo’s entral bank not to mentioning urging for increase of taxes. Essentially, the article blames IMF for giving more aid to Congo despite massive corruption issues that saw the president and his cronies accumulate wealth.
As the article describes, Congo stopped repaying the loans, and IMF cancelled its membership. a) Q1. Reinstatement of Zaire as an IMF memberThere is a need for IMF to reinstate Zaire as an IMF member, given the change of leadership in Zaire, and the fact that the IMF played a role in the economic decline of Zaire. IMF reached the decision to terminate Zaire’s member after it stopped repaying its loans, but Zaire can correct this anomaly if it becomes a member of the IMF. By allowing Zaire to join the IMF, it is likely that Zaire will access more loans and use it to alleviate the economic stresses it is facing, and this would undoubtedly make it cooperate with the IMF.
Essentially, Zaire requires loans to improve its GNP and overall economic performance. b) Q2. Cancellation of Zaire’s debt The IMF and other donors should cancel Zaire’s because that nation cannot bear it, and the debt is likely to cause her to impose adverse economic measures that can hurt its economy. Whereas Zaire is responsiblle for offsetting its debt, the current debts have acute negative effect on Zaire’s economy.
First, such a huge, outstanding debt will force Zaire to impose severe measures such as hiking taxes, and this can affect the economy badly. In addition, Zaire’s economy is not strong, and a huge debt can deprive the country of funds to invest in other areas of economy, as the government will be more concerned in paying the debt than improving the economy. These reasons converge and point on why the donor community must cancel Zaire’s debts and give her a new bill of health that may stimulate impressive economic improvements. c) Q3.Should IMF loans be conditionalThe case of Congo illustrates the dangers of unconditional loans, which reinforce the argument that IMF’s loans should be conditional and pegged on a nation’s ability to comply with IMF directives.
In some nations, corruptions and other negative forces contribute to economic woes, and giving these nations unconditional loans can fuel inflation and increase the nation’s debt. Nonetheless, the IMF can use conditions to approve loans as a measure to ensure that recipients use the loans appropriately. Indeed, a measure like installing western official can help promote accountability in the use of funds among recipient of IMF’s loans.