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Zaire The 1983 Reforms
Devaluation of the currency was the centerpiece of the
1983
reform. An initial 80 percent devaluation and subsequent
adjustments in the value of the currency reduced
substantially
black-market activity, which had mushroomed when the
currency was
way overvalued at the official rate. The central bank and
commercial banks began to meet weekly to fix a rate for
the zaire
based on the basis of recent transactions among
themselves. The
supply of foreign exchange at the official rate increased
markedly,
and traders were readily able to purchase foreign exchange
from
commercial banks for the import of most necessities.
Nonetheless,
restrictive monetary and fiscal policies made it difficult
for many
firms to muster the deposit in local currency that the
commercial
banks required to open a letter of credit.
The government's 1983 attempts at economic
liberalization were
the first serious reform efforts since the economic crisis
began in
1974. The government reduced its role in the decision
making of
state-owned industries and in the economy as a whole. Most
prices
were decontrolled except for petroleum products, public
utilities,
and transportation. Deficit and government expenditure
reduction
efforts were undertaken. The trade regime was liberalized,
customs
duties (a significant source of government income)
revised, and
external debt payments regularized.
Results were positive, and exporting enterprises were
more free
from government intervention than at any time since the
seizure of
UMHK in 1967. Where government chose to maintain its
ownership of
a company for strategic reasons, important decisions on
production,
investment, and marketing were increasingly taken by the
company
rather than by the government itself. Interest rates were
deregulated, and controls on producer and retail prices
were
largely dismantled, though firms remained subject to a
subsequent
review by Zairian authorities to ensure compliance with
legal
profit margin limits.
In late 1983, after Zaire had undergone a year of
fiscal
discipline, the IMF approved a support plan of SDR114.5
million and
an additional fifteen-month standby loan amount of SDR228
million,
both repayable over five years. This plan was accompanied
by Paris
Club multilateral debt rescheduling, the fifth
rescheduling of
Zaire's external debt in a period of eight years. Under
the
agreement, loans totaling US$1.2 billion for 1983-84 were
rescheduled. These actions ensured a marginally positive
net
transfer of resources to Zaire between 1983 and 1986.
Although
immediately after the devaluation inflation doubled, debt
arrears
continued to build, and GDP rose by only 1.3 percent, by
1984
inflation had dropped to 52 percent and GDP grew by 1.3
percent.
The 1983 reforms began to unravel in 1986. Export
earnings in
1986 were indeed far below expectations because of
extremely low
copper and cobalt prices. The government raised civil
servant
salaries despite stagnant budget receipts. Over half of
the budget
was paid to foreign and domestic creditors. Frustrated by
the slow
pace of recovery, the government reestablished some
controls and
discontinued some reforms. Deficit spending rose
dramatically,
inflation accelerated, and the zaire began a rapid
depreciation.
Gains from the reform effort had been largely eroded by
late 1986.
Much of the opposition to the reform plan was voiced by
members
of the political elite and organs of the sole legal
political
party, the Popular Revolutionary Movement (Mouvement
Populaire de
la Révolution--MPR). Their complaints were voiced under
the guise
of economic nationalism in opposition to the "economic
imperialism"
of the donors. They especially vilified the IMF. Their
actual
opposition to the 1983 reform may have stemmed less from
national
pride than from the fact that the previously untouchable
political
elite was being made to pay taxes and duties and was being
denied
the economic privileges and access to resources for
personal
enrichment to which members had grown accustomed. Economic
reform
and liberalization were incompatible with patrimonial
economics
because they restrained the government from determining
who should
profit from the nation's natural wealth and domestic
markets.
Data as of December 1993
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