Country Brief

Last updated October 2008

History                                                                             

At independence on June 30, 1960, the Democratic Republic of Congo (DRC) underwent significant economic and political upheaval. After five years, in 1965, Mr. Mobutu seized power and ruled the country for thirty-two years.

While President Mobutu implemented a massive program of education and created a solid sense of national unity, governance collapsed and corruption was endemic.

By the 1990s the country’s economy was near complete collapse due to economic mismanagement, corruption and political instability. The 1990s were marked by successive episodes of increasing violence: looting by the armed forces in 1991 and again in 1993; a first conflict in 1997 (with the involvement of seven foreign countries and a number of militias); and a second conflict between 1998 and 2003 during which a reported three million people died, and many more were displaced.

In July 1999 a cease-fire agreement was signed in Lusaka by the DRC Government, the major rebel groups, and the foreign countries involved. Soon after, a UN peacekeeping force (MONUC) was deployed amidst continuing unrest.

In 2001, President Laurent-Désiré Kabila was assassinated and his son, Joseph Kabila, was quickly inaugurated. Later in 2001, the Inter-Congolese dialogue was initiated to set the stage for a transition to democracy. A transitional constitution was approved in 2003 and a government of national unity was subsequently formed.

In 2005, a new constitution was approved by referendum and elections were held in July 2006 (first round of presidential election and parliamentary elections) and October 2006 (second round of presidential elections and local elections). Joseph Kabila was elected as president, and in February 2007 a new government was formed.

However, throughout these periods, the Eastern provinces have remained unstable due to protracting conflicts with militia and episodic fighting between the national army of remnant warlords.

Economy

The DRC has the third largest population and the second largest land area in Sub-Saharan Africa. It is rich in natural and human resources, and is endowed with the second largest rain forest in the world, with fertile soils, ample rainfall, and considerable and varied mineral resources. Historically, mining (copper, cobalt, diamonds, gold, zinc, and other base metals) and petroleum extraction accounted for about 75 percent of total export revenues and about 25 percent of the country's GDP.

Despite the abundance of raw materials, the country's formal economy has virtually collapsed in the last few decades due to mismanagement and conflict. The GDP per capita is one of the lowest in the world. In the 1980s it was only a third of that in 1962, and it declined even further in the 1990s. It dropped from US$380 (in constant dollars) in 1960 to US$224 in 1990, and to US$139 in 2006.

The impact of the conflict was tremendous. Infrastructure suffered from a lack of maintenance and physical destruction with many institutions in shambles. Millions of people lost their assets (buildings, livestock, tools), and many enterprises lost assets, staff, and commercial networks. Overall, the economy was transformed, and is now centered on subsistence agriculture and informal activities, with a collapse of export and value-adding activities.

Since 2001, however, with support from the Bretton Woods Institutions, the government has launched the implementation of economic, financial and structural reforms aimed at stabilizing the macroeconomic situation and the creation of a climate conductive to private sector-led development. It managed to break the h yperinflation cycle and to stabilize the exchange rate. From a rate of 511% in 2000, the inflation declined to 135% in 2001, and fell further to 18% in 2006. In 2003, it decreased to 4.4 %. Reforms included the adoption of new investment, labor, mining, and forestry codes which are key to attracting foreign investors and restoring transparency in traditionally opaque sectors.

In addition, DRC reached the HIPC Decision Point in 2003 (with a total relief estimated at $6.3 billion for a total stock of outstanding external debt estimated at $7.9 billion in NPV terms). As a result of the reforms, economic growth returned in 2003 after a decade of contraction. Growth stood at approximately 6 percent a year, driven mainly by a post-conflict rebound of basic activities (a pattern typical of post-conflict countries), notably in the trade, transport, construction, agriculture and selected manufacturing and services. In the coming years, the real GDP growth is projected to rise substantially with a recovery in mining and manufacturing. Private sector investment has been relatively high (about US$2.7 billion in new investments since 2003, i.e., a significant share of private capital flows to Sub-Saharan Africa).

Inflation remains contained, although the situation deteriorated in the period leading to elections. The new Government has prepared its program in early 2007 including a Governance Compact, expressing its determination to strengthen macroeconomic stability, to fight corruption, and to implement strong governance policies with a view to agree to a new PRGF-supported program which should lead to the HIPC Completion Point.

Overall, the situation remains fragile. Going forward, the DRC's main challenges include consolidating the recently achieved macroeconomic stability and deepening far-reaching structural reforms, consistent with the government's Poverty Reduction Strategy Paper, continuing to improve governance and the business climate, and ensuring peace and security in the entire the country.

Social Sectors

The social situation remains fragile and poverty is prevalent throughout the country. Life expectancy stands at 43 years, under-5 mortality above 200 per thousand, and DRC's Human Development Index declined by more than 10 percent in the last ten years; it now ranks 167 out of 177 countries.

The odds of achievement by the DRC of the Millennium Development Goals (MDGs) by 2015 are slim. A significant increase in public spending in support of key social sectors is necessary, as well as continued reliance on non-governmental partners for service delivery.

Large-scale displacements, violence and human rights abuses, as well as impoverishment have caused tremendous psychological suffering and a deterioration of the social fabric, breaking up families and other solidarity networks. As a result, traditional safety nets are no longer functioning and social networks, which are key for economic recovery, have also been severely disrupted.

Donor coordination

Donors continue to be engaged in DRC, and five consultative groups were held annually since 2001. DRC has since received a growing inflow of external economic aid with annual disbursements in 2004 and 2005 of US$800 million (excluding peacekeeping costs, humanitarian assistance, and support for the recent elections). However, this aid level, at about US$15 per capita, is inadequate given the scale of challenges facing the country.

World Bank role

The Bank suspended its financial assistance in 1991 due to the deteriorating economic and political situation. However, it maintained dialogue with the DRC authorities throughout the 1990s allowing for a rapid re-engagement in 2001.

At re-engagement in 2001, the Bank prepared a Transitional Support Strategy (TSS) covering the years 2001 – 2003, which focused on supporting economic reforms, financing rehabilitation works, providing policy advice in a number of sectors, and playing a leading role in mobilizing and coordinating donors.

The Bank helped DRC prepare its Interim Poverty Strategy Paper which was approved in 2002. A year later, after a successful implementation of the I-PRSP, the full PRSP elaboration was launched in 2003. It was approved by the transitional Government in July 2006, and endorsed by the new elected Government in March 2007, before being approved by both the World Bank and IMF Boards in March/April 2007.

The Bank prepared a second TSS covering 2004 - 2006 that focused on: (a) social stability and security, (b) shared economic growth, (c) governance and institutional strengthening, and (d) social development.

The Bank is currently preparing a CAS (covering 2007 – 2010) scheduled for Board discussions during the fourth quarter of 2007.

The Bank also prepared a Country Assistance Strategy(CAS) covering the period 2007-2010, which was examined by the Board during the fourth quarter of 2007. The CAS is based on the full Poverty Reduction Strategy Paper (PRSP) approved by the Council of Ministers in July 2006. The objective of the new CAS will be to lay the foundation for a medium-term poverty reduction effort by strengthening infrastructure, institutions, and policies. Bank Group assistance will reflect the five pillars of the PRSP and will support efforts to:

• Promote good governance and consolidate peace.
• Consolidate macroeconomic stability and economic growth.
• Improve access to social services and reduce vulnerability.
• Fight the spread of HIV/AIDS.
• Promote community dynamics.

In addition, the CAS highlights the strengthened information programs of the International Finance Corporation (IFC), the Multilateral Investment Guarantee Agency (MIGA), and the World Bank Institute (WBI) in DRC. The CAS has been enhanced by broad-based consultations with various stakeholders, including the government, civil society, and the private sector.

The CAS has been prepared in close coordination with over 20 other donors (including the ADB, UN agencies, IMF, European Commission , UK, US, Germany, France, Belgium, Japan, Sweden, etc), with due attention to harmonization and coordination. Efforts aim at reducing the transaction costs for government, minimizing the risks of duplication of efforts, building upon each donor's comparative advantages, and ensuring the most efficient use of resources. Donors have developed a common strategic approach for assistance called the Country Assistance Framework (CAF) which includes a joint diagnosis, a joint results framework, and a joint programming of activities. The CAF helped inform individual donor strategies, including the CAS.

Currently, the Bank's portfolio in DRC comprises 14 active projects, totaling about US$2.22 billion in commitments, approximately US$ 1.21 billion of which has not been disbursed. An area list of the projects and a short description are provided below:

• Emergency Multisector Rehabilitation and Reconstruction Project(US$454 million - approved on August 6, 2002; became effective in November 2002). The aim of the project is to restore basic infrastructure and provide social services.
• Private Sector Development and Competitiveness Project  (US$120 million – approved in July 2003; became effective in December 2003). The aim of the project is to restructure the main public enterprises and provide partial guarantees to investors through the African Trade Insurance Agency (ATI).
• Emergency Economic and Social Reunification Support Project( US$214 million - approved in September 2003; became effective in December 2003). The aim of the project is to assist with the balance of payments, support institution-building, and restore infrastructure and the community-led development process.
• Multisectoral HIV/AIDS Project  (US$102 million - approved in March 2004; became effective in October 2004). The aim of the project is to mitigate the negative impact of the epidemic on the stabilization, recovery, and development of the country.
• Emergency Demobilization and Reintegration Project  (US$100 million - approved in May 2004; became effective in October 2004). The aim of the project is to help strengthen the peace process and promote economic stability and sustainable development in DRC and the Great Lakes region.
• Emergency Social Action Project  (US$60 million - approved in August 2004; became effective in July 2005). The aim of the project is to expand access by the poor to economic and social services, increase the volume of resources available for community development, and strengthen the management of these resources.
• Emergency Living Conditions Improvement Support Project  (US$82 million - approved in May 2005; became effective on September 23, 2005). The aim of the project is to assist the DRC government with its effort to find a way, through multisectoral intervention, to improve the living conditions of the urban population.
• Heath Sector Rehabilitation Support Project (PARSS) (US$150 million - approved on September 1, 2005; became effective on April 17, 2006. The aim of the project is to guarantee the populations in the targeted zones access to a variety of high-quality basic health services and effective use of these services.
• Southern Africa Power Market Project  (US$290.19 billion - approved on November 11, 2003; became effective on April 17, 2004). This subregional project is part of a broad-based program to develop interconnected electrical networks of the various member countries of the Southern African Power Pool (SAPP).
• Education Sector Project (US$150 million - approved on June 5, 2007; became effective on January 11, 2008). The aim of the project is to avoid further reduction in the provision of essential primary education services and to lay the groundwork for the sustainable development and financing of this sector.
• Regional and Domestic Power Markets Development Project (US$296.7 million – became effective on April 2, 2008). The aim of the project is to enhance the operational efficiency of the electricity sector and to strengthen production, transport, and distribution capacity, in order to better meet domestic demand for electricity and foster the integration of the regional electricity market.
• Emergency Urban and Social Rehabilitation Project (US$180 million - approved on April 11, 2007; became effective on July 6, 2007. The aim of the project is to help the DRC government meet post-electoral challenges by providing resources to maintain macroeconomic stability and finance critical expenditures in the immediate future.
• Capacity Building and Governance project (50 million, approved on 22 April 2008). The aim of the project is to establish adequate management practices of public finances, to help restore the credibility of the state as a provider of basic services in a post-conflict context.
• Roads project (50 million, approved on 18 March 2008 and put into force on 7 October 2008). This projects seeks to ensure the reopening and maintenance of 1800 km of roadways. As the country emerges from a decade of civil conflict, roads are of paramount importance to reunite its various regions, help foster sustained growth, and restore social harmony.

Contacts

Marie Françoise Marie-Nelly
Country Director
The World Bank, Kinshasa
Avenue Wagenia, no. 4847
Kinshasa/Gombe, DRC
Tel: (243) 99 994 9015 – (243) 81 700 5215
Fax: +1-202-614-1135 - DAMA: 5377-3058
Email: Mmarienelly@worldbank.org

Eustacius N. Betubiza
Country Program Coordinator
1818 H Street NW
Washington DC 20433, USA
Tel: (202) 458-5618
Fax: (202) 473-8300
E-mail: Ebetubiza@worldbank.org

Mr. Hinh Truong Dinh
Lead Economist
1818 H Street NW
Washington DC 20433, USA
Tel : (202) 458-0556
Fax: (202) 614-0799
E-mail: Hdinh@worldbank.org 

Mr. Johannes Herderschee
Country Economist
1818 H Street NW
Washington DC 20433, USA
Tel : (202) 458-8343
Fax: (202) 473-8466
E-mail: jherderschee@worldbank.org