Leaving the grey list lifts a hidden tax on the DRC's economy
DRC's finance minister says four years of reform should lower the cost of doing business and give investors new reasons to look at the DRC.
On Friday, the Financial Action Task Force (FATF) removed the Democratic Republic of Congo (DRC) from its grey list, signaling the end of increased monitoring. This decision marks the culmination of four years of efforts to bring the DRC's defenses against money laundering, terrorism financing, and weapons proliferation up to international standards.
The grey list, while not a classic sanctions regime, imposes significant costs on targeted countries in the form of additional controls, cumbersome documentation, and higher administrative fees from foreign banks. These costs can reduce a country's capital inflows by an average of 7.6 percent of GDP. In the DRC, about 87 percent of bank deposits and over 97 percent of loans are in foreign currency, making international relationships crucial for trade and economic activity.
The DRC's government prioritized addressing the FATF's action plan, implementing a modern anti-money-laundering law, completing a national risk assessment, and adopting a national strategy. Supervision became risk-based, leading to numerous inspections and prosecutions. The FATF's decision acknowledges the effectiveness of these reforms and is expected to result in cheaper and faster cross-border payments, more affordable trade finance, and faster remittances for families.
The improvements will be particularly beneficial for the mining sector, which contributes significantly to the DRC's GDP and exports, as well as other sectors such as insurers, mobile-money providers, and agricultural exporters. The nation's new status could also enhance its creditworthiness, as seen with S&P Global's revised positive outlook.
The DRC's Minister of Finance, Doudou Fwamba Likunde Li-Botay, expressed hope that the decision will strengthen the central bank's plan to move foreign-currency payments to electronic channels, further boosting economic activity.
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