Paul Connors
The most effective approach to understanding the economic history of the Democratic Republic of the Congo is to facilitate the process within the context of the political history of the country. One of the most important things to keep in mind when evaluating the economic conditions in the DRC is that the country is a former colony. Appropriately enough, this is where the account of its economic history shall begin.
When the area was a Belgian colony, its economy depended on the export of commodities whose presence have been rich in the area, such as copper (5th largest producer in the world), cobalt (largest producer in the world) and coffee (3rd largest producer in the world) and other abundant natural resources such as gold, diamonds (3rd largest producer in the world), and tin (2nd largest producer in the world). Throughout the 19th century and the first half of the 20th century, Belgium simply exploited the area for these resources and reaped all of the profits. De-colonization led to the collapse of civil administrators and therefore played a significant role in affecting the status of the DRC’s economy. This was the case because the economy was left in the hands of people who did not have the necessary knowledge and skills to run a formal economy.
When the DRC gained independence on June 30th, 1960, Patrice Lumumba was prime minister and Joseph Kasavubu became the head of state. Shortly after this in 1965, Joseph Mobutu assumed the presidency and renamed the country Zaire. From 1973-1974, Mobutu put “Zairinization” into effect, which privatized foreign owned firms and forced European investors out of the country. He then redistributed these foreign businesses to the elites of Zaire. Again, this meant that unqualified people were running these businesses, which eventually failed, and led many of the elites to liquidate assets and abandon property, which in turn caused a shortage of food and goods. In 1977, Mobutu changed his mind about privatization and invited foreign investors back, but did not get a good response, causing economic decline to continue and sustain throughout the 1980’s. In 1989, Zaire defaulted on loans from Belgium, which did not assist in allowing a respectable economic outlook for the new decade. Zaire experienced severe economic decay in early 1990’s. There was hyperinflation, widespread poverty, and unemployment. The formal sector of the economy experienced negative growth rates throughout the 1990’s. In 1992, the country terminated debt repayment altogether.
More recently, the DRC has shown signs of a possessing the potential for economic recovery. Laurent Kabila, in 1997, became the head of the reformed government that instituted new, tight fiscal policy that successfully curbed inflation and depreciation. However, these small gains were lost after rebellion backed by Rwandan and Ugandan troops in 1998. A general theme throughout the DRC economy’s history is that “war is expensive”. This is because war reduces output and government revenue, which in turn increases debt. Foreign businesses pulled out causing the IMF and World Bank to put programs on hold, and the DRC was declared ineligible for further loans.
Nowadays, it seems that the DRC may be able to make the small gains count and even make more substantial economic gains than many predicted. Joseph Kabila, the head of state is committed to balancing the state budget, which has rapidly strengthened the economy. Also, the World Bank and IMF arranged relay loans to address the DRC’s debt to them of $800 million. Finally, the World Bank approved a $50 million grant for their economic recovery program.