Brussels, 12/12/2008 (Agence Europe) - The European Investment Bank (EIB) has signed its first contracts in the Democratic Republic of Congo (DRC) since 1986. It has lent €110 million to the DRC government to benefit the Société Nationale d'Electricité (SNEL) for the rehabilitation and expansion of existing facilities at and around the Inga hydropower plants. The EIB has also agreed to clear the arrears of the former debt of Gécamines (Générale des Carrières et des Mines), the last DRC borrower to receive an EIB loan for the rehabilitation of the company's copper and cobalt production facilities. Such EIB projects, the Bank explains in a press release, “clearly illustrate the European Union's commitment to support the DRC government's efforts to establish political stability and encourage economic development, especially during the current international financial crisis”.
The Inga plants are at the heart of the DRC's energy generation capacity and the rehabilitation project will allow for the provision of reliable and cost-efficient electricity in the DRC and surrounding countries. This will satisfy both local and regional needs, bringing electricity to first-time customers in the poorest areas of Kinshasa and strengthening the capacity of the South African Power Pool (SAPP). The EIB loan will finance the construction of the second transmission line between Inga and Kinshasa and the rehabilitation of three substations in the Katanga region. The DRC government and its financial partners are currently working on a series of measures to reform the utility company SNEL to introduce international best practices. In the meantime, the country has urgent energy needs which should be addressed in part thanks to the Inga project. The EIB counts on the commitment of the DRC to ensure the organisation's good management during the reform period. In addition to the €110 million, SNEL will benefit from a 2% interest rate subsidy from the EIB in line with the recommendations of the Highly Indebted Poor Country (HIPC) initiative. The HIPC initiative of the IMF and the World Bank provides for coordinated action by the international financial community to ensure that no poor country faces a debt burden it cannot manage.
By deciding to clear outstanding debt to Gécamines, the EIB is honouring its commitment to the DRC under the HIPC initiative. The Bank has proposed an arrears clearance mechanism which comprises a gradual reduction of that debt by the Bank through its HIPC contribution. This arrears recovery plan will enable the EIB to lend again to the DRC public sector, such as SNEL, which is a key step in the Bank's commitment to reduce poverty and promote economic growth in the country. (O.L./transl.jl)