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Zaire Economic Decline
By early 1976, Zaire was in a grave economic and
financial
crisis and faced international bankruptcy. Mobutu and the
unproductive political elite sought relief from the eleven
members
of the
Paris Club (see
Glossary), the World Bank, and the
IMF as
debt arrears mounted rapidly. However, the thorough
implementation
of changes and reforms required by the World Bank, the
IMF, and
other Western donors was perceived as a threat to the very
basis of
the elite's power--access to and free use of the nation's
resources. If the president were to execute effectively
the reforms
his foreign partners demanded, the heart of his authority:
complete
personal discretion and the fiscal privileges and
corruption that
bound the system together, would be undermined. As a
result, Mobutu
and the political elite used their control of government
institutions to sabotage economic change by manipulating
their
donors' economic interests against one another and by
exploiting
foreign anxieties about the instability that might result
from a
collapse of the regime.
The members of the Paris Club fitfully coordinated
efforts to
persuade Zaire to service debts, control expenditures,
diminish
corruption, and implement hard economic decisions. They
attempted
to draw up joint plans of action, but they sometimes
worked at
cross purposes as their national interests did not always
coincide.
Lack of coordination among the different donors and
multilateral
institutions was also a problem. Foreign contractors were
often not
entirely supportive of reform since many of them actually
benefited
from the economic chaos and the opportunities for personal
enrichment. Pressure for reform from the West fluctuated
as
governments changed hands. Mobutu took skillful advantage
of these
differences and lapses in attention; the inability of
Western
governments to sustain effective coordination presented
Mobutu and
those close to him with opportunities to deflect the
pressure to
reform.
Between 1975 and 1983, Zaire experienced a relentless
economic
decline. Significant economic and financial imbalances
including
high inflation and a decline in per capita income gripped
the
country and turned Zaire into a beggar in the
international
marketplace. The nationalization measures of 1974, while
shortlived , destroyed commercial distribution networks and
undermined
private-sector confidence.
From 1975 to 1978, the gross domestic product (
GDP--see Glossary)
dropped 3.5 percent annually. Annual inflation
rates
averaged 75 percent. In 1980 and 1981, the price of copper
recovered briefly but then dropped again the following
year. Prior
to 1975, Zaire had shipped almost half of its Shaba Region
copper
exports to the Angolan Atlantic seaport of Lobito via the
Benguela
Railway. The closure of this rail line in 1975 because of
the
Angolan civil war forced Zaire to export a large share of
its
mineral exports via the more costly and politically
embarrassing
South African route.
The period from the early 1970s to the early 1980s was
also
marked by excessive government regulation of the economy.
The
central government imposed price controls on food, fuel,
and other
items, regulated interest rates, and overvalued the zaire.
The
country sustained chronic budget deficits, and the
infrastructure
was allowed to deteriorate further into dilapidation.
In the early 1980s, the IMF appointed Erwin Blumenthal,
of the
central bank of the Federal Republic of Germany (West
Germany), to
monitor and advise Zaire's central bank, the Bank of
Zaire.
Blumenthal cut off credit and foreign-exchange facilities
to firms
of key members of the political elite, which led to
conflict with
President Mobutu. Blumenthal's efforts to impose budgetary
control
over the president and others were delayed and
circumvented.
The Zairian political elite thus blocked efforts by
international lenders to control the country's financial
practices.
The IMF supported Zaire with four stabilization programs
between
1976 and 1983, and there were as many Paris Club
reschedulings and
five currency devaluations. These efforts were aimed at
cutting
corruption, rationalizing expenditures, increasing tax
revenues,
limiting imports, boosting production in all sectors,
improving the
transportation infrastructure, eliminating debt-service
arrears,
making principal payments on schedule, and improving
economic
planning and financial management. But the custom for
Zaire quickly
became to make the first drawing and then to drift away
from the
economic reform performance criteria. The 1981 program of
special
drawing rights (
SDR--see
Glossary) 912 million was blocked
in
September of that year after disbursement of only SDR175
million
because of Zaire's failure to meet performance criteria,
mainly
budgetary deficit limits. The fate of other programs
during this
period was similar. In 1983, however, Zaire finally agreed
on
another economic reform plan.
Data as of December 1993
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