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Soutenabilité du compte courant de la R.D Congo: risques et perspectives
[Sustainability of D.R. Congo Current Account: Risks and Outlook]

Author

Listed:
  • Muya, Jonathan
  • Malata, Alain

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.

Suggested Citation

  • Muya, Jonathan & Malata, Alain, 2024. "Soutenabilité du compte courant de la R.D Congo: risques et perspectives [Sustainability of D.R. Congo Current Account: Risks and Outlook]," MPRA Paper 122709, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:122709
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    References listed on IDEAS

    as
    1. Gian Maria Milesi-Ferretti & Assaf Razin, 1996. "Sustainability of Persistent Current Account Deficits," NBER Working Papers 5467, National Bureau of Economic Research, Inc.
    2. Georgeta Ilie, 2014. "Positive Versus Negative Effects of Foreign Direct Investments on Host Countries," Knowledge Horizons - Economics, Faculty of Finance, Banking and Accountancy Bucharest,"Dimitrie Cantemir" Christian University Bucharest, vol. 6(4), pages 162-166, December.
    3. Luiz Carlos Bresser-Pereira & Paulo Gala, 2008. "Foreign savings, insufficiency of demand, and low growth," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 30(3), pages 315-334, April.
    4. Milesi-Ferretti, G-M & Razin, A, 1996. "Current-Account Sustainability," Princeton Studies in International Economics 81, International Economics Section, Departement of Economics Princeton University,.
    5. repec:dau:papers:123456789/1964 is not listed on IDEAS
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    Keywords

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    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

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