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Zaire The 1987 Plan
In May 1987, Zaire negotiated another economic reform
program
with the IMF, the World Bank, and its bilateral partners.
Along
with the usual fiscal and monetary restrictions, Zaire
agreed to
revise its investment code to streamline the incentive
framework
and to revamp the tariff structure. Mobutu also backed
away from a
threat to reinstitute the fixed exchange rate and agreed
to sharp
increases in fuel prices and taxes. The IMF in turn
allowed a 20
percent public-sector wage increase as opposed to the 40
percent
increase the government had originally sought.
This program, like past efforts, was subsequently
supported by
Paris Club rescheduling. The IMF agreed to a twelve-month
standby
credit of SDR116.4 million. The World Bank initiated a
US$165-
million loan in June 1987 to assist with structural
adjustment and
balance of payments. The loan was to support improvements
in the
management of public enterprises and public
administration,
agriculture, and transportation, and to provide support
for the
private sector. Disbursements were to occur in two
drawings
conditional on meeting performance criteria.
The Paris Club rescheduled US$884 million due between
May 1987
and May 1988 over fifteen years with six years' grace.
Monthly debt
payments were expected to drop from US$15 million to US$7
million.
This agreement was exceptional because the Paris Club
usually set
ten-year ceilings on repayment delays. Private lenders
agreed to
lower repayments from US$3.5 million a month to US$3
million. A
Belgian bank provided a bridge loan of SDR100 million to
clear
Zaire's arrears to the IMF.
Soon after the 1987 program was under way, excessive
deficit
spending prevented Zaire from meeting the program's
targets, and
further credits were withheld by both the World Bank and
the IMF.
Continued excessive government spending through 1988 led
to a
decline in foreign reserves, and the black market again
became
active. In 1988 the zaire depreciated 100 percent against
both the
United States dollar and the Belgian franc. The budget
deficit went
from 3 percent of gross national product (
GNP--see Glossary)
in
1986 to 12 percent in 1988. The growth in GDP from 1987 to
1989
averaged 2.5 percent a year, well below population growth,
resulting in a decline in per capita income.
Data as of December 1993
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