Macroeconomics is one of the disciplines of Economics covering specifically nationwide characteristics of an economy. It differs from Microeconomics in the sense that the latter focus on understanding economic matters turning around individual, business and enterprise decisions of consumption and production. Macroeconomics is rather likely wide and roughly complex as compared to microeconomics. It involves different features such employment, inflation (prices), growth, international trade and exchange as well as government intervention. It remains complex to the extent that even those specializing in the domain are always struggling to capture its fluctuations. However, Macroeconomics departs with microeconomics theories to build up aggregate theories regarding a country level.
Few weeks ago, the DRC Central Bank Governor has announced a failure to stabilize the value of Congolese Francs (DRC’s currency). The Governor, Déogratias Mutombo Mwana Nyembo has likely expressed that since February 2016, the CCB (Congolese Central Bank) has intervened twice to maintain the value of CF versus foreign currencies, particularly versus to US Dollar. He recognized that the hunting issue causing the depreciation turns around discrepancies between currencies stock reserve and the demand of dollars for imports. Within the floating exchange rate, most of commodities in the DRC are imported from outside. Consequently, it increases the demand of dollars to meet these needs in terms of dollars. The only way to deal with the deficit is reducing the demand of dollars or increasing the foreign currencies’ stock reserve. On one hand, reducing imports needs to promote local production, processing and industries to satisfy the demand in terms of consumption. Secondly, the increase of stock reserve of foreign currencies requires the rise and diversification of exports as the latter bring in foreign currencies.
The depreciation of CF versus 1 dollar has extremely mounted within few months. While the value of the former has been stable for roughly a decade, it’s been so strange to see the dollar appreciating against a CF. Since 2010, $1=900-920 CF. Strikingly, within the few months, starting February to June 2016, $1≈ 980-1000 CF; that’s, the depreciation of Congolese francs is estimated to roughly 10%. Within a dollarized economy, a depreciation of CF against the US $ must affect the rest of the economy. The depreciation of Congolese currency will inevitably affect the level of inflation through the cost of the dollar at the domestic market. In the meantime, strategies to contain the level of imports look as ineffective due to the difference between domestic demand and domestic supply of primary commodities.
Back to Mutombo Mwana Nyembo’s statement, he pointed out that monetary policies have failed to bear fruits so long as the problem lies outside of monetary interventions. He asserted that DRC is confronted by structural challenges that require appropriate responses than mechanisms of open market operations. In his declaration, the CCB Governor seemed pointing a finger on the failed macroeconomic policies that couldn’t limit the reliance on imports for primary needs. It’s mostly primary goods that outflow the foreign currencies form the DRC to international trade partners. In this case, as the economy produces or processes few primary commodities, DRC do regularly have to resort on these imported commodities from outside the economy. Hence, importers have to use foreign currencies to purchase them.
Though the blogger hasn’t yet done any formal research on the degree of importing primary commodities, an observation can indicate the extent to which our economy relies on imports. Wherever you come across any primary commodity, it’s mostly “made in outside DRC”. Furthermore, it’s important to note that stock reserve of foreign currency in DRC depends mostly on exporting minerals from which their prices have shrunk few months ago. Consequently, the DRC economy, beyond its failure to transform its stability into more inclusive growth, it is currently facing the lack of diversification of the economy as well as the drawback to establish policies of improving local production.
Though unclear on its spillover effect to benefit to poor people, the Matata’s macroeconomic achievements that we’ve been ‘chanting’ sounded that we can expect the Premier Minister slowly and safely landing as do parachutists. However, the trend of the economy is currently worrying with the 2016 budget getting downsized (25% reduction) while the prices of minerals at the international markets are also dwindling. In addition, an informed observer would unlikely disagree with the blogger that these achievements haven’t yet had a sound effect on the daily life of an ordinary citizen. Therefore, Matata’s macroeconomic policies have experienced the shortfalls to include the majority of Congolese living in the rural areas. The level of poverty and inequality are yet high. He hadn’t yet realized the promises to provide energy and electricity to people living in remote areas. It’s even hard in urban areas to rely on SNEL (Socièté Nationale de l’Electricité) energy for attracting and supporting processing industries. The list of demands in terms of improving their opportunities from local population remains too long. How would he expect entrepreneurs to respond to structural challenges in the domain of production, processing and industrial advancements?
In case he wouldn’t review economic policies that would aim at supporting vulnerable and poor people, supporting local production and processing, diversifying the economy… there might be a possibility that Matata’s macroeconomic achievements wouldn’t last for the long run. Rather than moving forward, the economy would sink in desperate situation to the extent of affecting the level of potential employment. The reader would consider that we are in a context of an economy dominated by inequalities and poverty with a large range of people living under the poverty line. The depreciation of CF would cause the inflation to rise and hence shoving most of poor people into vulnerability. Therefore, it’s advisable to have the premier minister reviewing his policies by plugging these channels through which resources are flowing into the wrong hands. Otherwise, the premier Minister may be plunging the economy and his career as well. Do you have a different viewpoint? Share with the reader.
NTANYOMA R. Delphin
Secrétaire Exécutif & Coordonnateur
Appui au Développement Intégré &
à la Gouvernance
Twitter : https://twitter.com/Delphino12