Booming investment in the Democratic Republic of Congo's long-neglected mining sector is expected to boost growth to 12 percent this year, the central bank's director of research said on Tuesday.
However, cumulative 2008 inflation by early June topped 11 percent and rising food and fuel costs are expected to push the rate for the full year above 27 percent, more than twice the year-end target of 12.1 percent, Vincent Ngonga told Reuters.
We've raised the expected growth rate. By the end of the year it will be at 12 percent, compared to our goal of 8 percent, he said in an interview in the capital Kinshasa.
The Central Bank agreed a year-end 12.1 percent inflation target with the International Monetary Fund (IMF) earlier this year, as part of Congo's efforts to qualify for debt relief.
But prices in early June were 13.6 percent higher than a year before, according to Central Bank data, and Ngonga said annual inflation was now set to reach 27.43 percent by the end of the year.
Perhaps 20 percent of that is due to budgetary slippage, but 80 percent is the result of the rising cost of food and fuel on the international market, he said.
Congo recorded annual inflation of 9.96 percent at the end of 2007, with growth of 6.3 percent.
No reliable inflation data is available on areas outside of Kinshasa, Congo's capital of around 8 million inhabitants. However, the Central Bank and IMF use Kinshasa's rate as the country's indicative rate of inflation.
MISMANAGEMENT AND WAR
Congo is still recovering from decades of kleptocratic rule under late dictator Mobutu Sese Seko that destroyed the national economy of the former Belgian colony, then known as Zaire.
Before Mobutu's overthrow in 1997, the country experienced hyperinflation, with rates reaching 10,000 percent in 1994.
A 1998-2003 war further wrecked infrastructure and production capacity. Violence continues in eastern Congo and the conflict has killed an estimated 5.4 million people, mainly through hunger and disease.
In early 2006, during a three-year post-war transition period marked by rampant corruption, the IMF suspended its programme in Congo due to fiscal overruns.
Elections later that year confirmed President Joseph Kabila as the central African nation's first democratically elected leader in more than four decades, and had been meant to usher in a new period of political and economic stability.
Boosted by post-election investor confidence, mining interest has boomed in the vast country which has a tenth of the world's copper reserves and a third of its cobalt.
International companies with projects in Congo include BHP Billiton, Freeport McMoRan Copper & Gold Inc and the world's biggest diamond company De Beers, which is 45 percent owned by Anglo American Plc.
However, Congo's post-war government has been criticised domestically for a lack of progress in reconstruction.
International donors and traditional partners have expressed concern over a $9 billion Chinese loan and investment package agreed earlier this year.
Congo signed the deal as it tried to qualify for debt relief under IMF and World Bank programmes, and it forced the Central Bank to revise an initial goal of single-digit inflation.
Ngonga said difficulties in sticking to 2008 inflation targets did not indicate a lack of fiscal responsibility.
We were not expecting the food and fuel crisis when we set (the targets) ... You cannot erase 30 years of recession just like that, he said. (Reporting by Joe Bavier; Editing by Gerrard Raven)
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