Monday, January 12, 2009

Economic Slide Halted--for Now

The Central Bank of Congo appears to have acted quickly and effectively to halt last week's nosedive in the Congo's currency, which plummeted from 680 francs per dollar to over 850 in some places. It raised key interest rates from 28 percent to 40 percent to 55 percent, injected dollars into the foreign exchange markets, and raised banks' reserve requirements from five to seven percent. The result was immediate: the franc strengthened to under 600 per dollar by week's end. Good analysis here from Le Potentiel.

In related news, Reuters reports that the DRC is seeking an emergency $200 million loan from the International Monetary Fund to halt the rapidly worsening financial crisis.

The impression this leaves is that the DRC's top financial people are actually a quite competent and serious group, able to staunch a run on their currency through bold and aggressive action. That's a very hopeful sign.

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