Republic of Congo’s Debt May Be Much Higher Than Estimated

KINSHASA (Capital Markets in Africa) – The Republic of Congo’s public debt may exceed $12.5 billion, more than a third higher than previous International Monetary Fund estimates, corruption watchdog Global Witness said.

The debt could further complicate Congo’s three-year, $449 million loan program it began with the IMF in July. The Washington-based lender has already postponed its first review of the program while Congo restructures external commercial debt, an IMF spokesman said by email Friday before it had seen the Global Witness report.

The London-based group says as much as $3.3 billion owed by Congo and state-owned oil company Societe Nationale des Petroles du Congo, or SNPC, was previously undisclosed, based on an analysis of documents and contracts that were released under conditions of the IMF bailout.

Global Witness’s analysis shows “a government that is mismanaging the primary source of sovereign wealth today, while mortgaging off what will remain of that finite resource for the generations of tomorrow.” Millions of dollars are also missing from SNPC accounts, according to the report.

Calls to Congo’s government spokesman and the SNPC weren’t answered when Bloomberg sought comment.

Congo, rated Caa2 by Moody’s Investors Service, or eight steps below investment grade, has one Eurobond outstanding. The amortizing bond totals $295 million and has a final maturity of 2029. It yields 9.5% and has made investors a total return of 20% in the past year, according to data compiled by Bloomberg, almost double the average for emerging-market sovereign dollar debt.

IMF Bailout
The IMF stepped in in July after low oil prices had devastated the economy of Congo, which is sub-Saharan Africa’s third-largest crude producer. The loans came with increased transparency requirements for the government and SNPC, which “does not meet international benchmarks for sound corporate governance,” according to the IMF.

Between 2012 and 2018, the company made only $123 million in profits despite $5.7 billion worth of sales, Global Witness said.

The group also questioned the fairness of some of Congo and SNPC’s contracts, which allow oil companies to write off millions in expenses that are not always audited.

“Congo’s representatives have agreed to subsidize the business overheads of some of the largest oil companies in the world,” the report said.

Of the debts Global Witness said it found, SNPC owes at least $2.7 billion to companies including Total SA, Eni SpA, and Chevron Corp. The government owes another $606 million to banks for loans secured by oil, it said.

Chevron’s Congo operations did not immediately respond to an emailed request for comment. Total said in a statement Monday that the terms of its Congo projects were “not uncommon” in the industry.

“Total does not finance Republic of Congo other than as expressly reported in our obligatory annual public financial reporting of payments made to governments,” it said.

Eni said in an email Monday that the money due to its Congo subsidiary was to reimburse the company for advances made to SNPC for operating and capital costs.

“Such amount will be gradually reimbursed in kind by SNPC, which is a contractual practice widespread in the industry,” it said. “No interest rate is applicable as reimbursement will be in kind.”