Soutenabilité du compte courant de la R.D Congo: risques et perspectives

Sustainability of D.R. Congo Current Account: Risks and Outlook

Jonathan Muya and Alain Malata

MPRA Paper from University Library of Munich, Germany

Abstract: The Democratic Republic of Congo (DRC) has faced persistent current account deficits despite a period of economic growth fueled by Foreign Direct Investment (FDI). This paper uses an Autoregressive Distributed Lag (ARDL) model and the Balance of Payments (BOP) framework to explore the dynamics of the current account. It identifies economic growth and FDI as key factors influencing the current account balance, both in the short and long term. A key finding is that FDI inflows often coincide with a worsening current account. This is attributed to the relationship between capital inflows, increased private income, and higher imports, driven by limited local competitiveness. This dependence on imports highlights the structural weaknesses in the DRC’s economy. The study’s contribution is in identifying the dual role of FDI: while it boosts economic growth, it also increases external vulnerabilities by promoting import reliance. This insight is crucial for understanding the DRC’s current account issues and shaping policy to address them. To ensure sustainable development, the DRC must address these structural challenges through comprehensive reforms in industry, infrastructure, and education. These efforts would enhance local productivity, reduce import reliance, and lessen economic vulnerabilities. Moreover, promoting value-added sectors and export diversification is essential for long-term sustainability. Improving the business environment and fostering innovation could further support economic resilience. By addressing these issues, the DRC can better harness FDI for growth while reducing the current account deficit. In conclusion, this paper highlights the complex relationship between FDI and the current account in the DRC. It calls for urgent structural reforms to improve economic resilience and move towards more sustainable growth.

Keywords: Current account sustainability; Intertemporal approach; FDI; Inertial Vulnerabilities (search for similar items in EconPapers)
JEL-codes: F21 F31 F32 F41 F43 O14 O55 (search for similar items in EconPapers)
Date: 2024-11-17
New Economics Papers: this item is included in nep-fdg and nep-inv
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