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Economic Decline

By early 1976, Zaire was in a grave economic and financial crisis and faced international bankruptcy. Mobutu and the unproductive political elite sought relief from the eleven members of the Paris Club (see Glossary), the World Bank, and the IMF as debt arrears mounted rapidly. However, the thorough implementation of changes and reforms required by the World Bank, the IMF, and other Western donors was perceived as a threat to the very basis of the elite's power--access to and free use of the nation's resources. If the president were to execute effectively the reforms his foreign partners demanded, the heart of his authority: complete personal discretion and the fiscal privileges and corruption that bound the system together, would be undermined. As a result, Mobutu and the political elite used their control of government institutions to sabotage economic change by manipulating their donors' economic interests against one another and by exploiting foreign anxieties about the instability that might result from a collapse of the regime.

The members of the Paris Club fitfully coordinated efforts to persuade Zaire to service debts, control expenditures, diminish corruption, and implement hard economic decisions. They attempted to draw up joint plans of action, but they sometimes worked at cross purposes as their national interests did not always coincide. Lack of coordination among the different donors and multilateral institutions was also a problem. Foreign contractors were often not entirely supportive of reform since many of them actually benefited from the economic chaos and the opportunities for personal enrichment. Pressure for reform from the West fluctuated as governments changed hands. Mobutu took skillful advantage of these differences and lapses in attention; the inability of Western governments to sustain effective coordination presented Mobutu and those close to him with opportunities to deflect the pressure to reform.

Between 1975 and 1983, Zaire experienced a relentless economic decline. Significant economic and financial imbalances including high inflation and a decline in per capita income gripped the country and turned Zaire into a beggar in the international marketplace. The nationalization measures of 1974, while shortlived , destroyed commercial distribution networks and undermined private-sector confidence.

From 1975 to 1978, the gross domestic product ( GDP--see Glossary) dropped 3.5 percent annually. Annual inflation rates averaged 75 percent. In 1980 and 1981, the price of copper recovered briefly but then dropped again the following year. Prior to 1975, Zaire had shipped almost half of its Shaba Region copper exports to the Angolan Atlantic seaport of Lobito via the Benguela Railway. The closure of this rail line in 1975 because of the Angolan civil war forced Zaire to export a large share of its mineral exports via the more costly and politically embarrassing South African route.

The period from the early 1970s to the early 1980s was also marked by excessive government regulation of the economy. The central government imposed price controls on food, fuel, and other items, regulated interest rates, and overvalued the zaire. The country sustained chronic budget deficits, and the infrastructure was allowed to deteriorate further into dilapidation.

In the early 1980s, the IMF appointed Erwin Blumenthal, of the central bank of the Federal Republic of Germany (West Germany), to monitor and advise Zaire's central bank, the Bank of Zaire. Blumenthal cut off credit and foreign-exchange facilities to firms of key members of the political elite, which led to conflict with President Mobutu. Blumenthal's efforts to impose budgetary control over the president and others were delayed and circumvented.

The Zairian political elite thus blocked efforts by international lenders to control the country's financial practices. The IMF supported Zaire with four stabilization programs between 1976 and 1983, and there were as many Paris Club reschedulings and five currency devaluations. These efforts were aimed at cutting corruption, rationalizing expenditures, increasing tax revenues, limiting imports, boosting production in all sectors, improving the transportation infrastructure, eliminating debt-service arrears, making principal payments on schedule, and improving economic planning and financial management. But the custom for Zaire quickly became to make the first drawing and then to drift away from the economic reform performance criteria. The 1981 program of special drawing rights ( SDR--see Glossary) 912 million was blocked in September of that year after disbursement of only SDR175 million because of Zaire's failure to meet performance criteria, mainly budgetary deficit limits. The fate of other programs during this period was similar. In 1983, however, Zaire finally agreed on another economic reform plan.

Data as of December 1993

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