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UPDATE 1-Congo cbank hikes interest rate in bid to contain inflation
September 29, 2016 / 2:07 PM / a year ago

UPDATE 1-Congo cbank hikes interest rate in bid to contain inflation

(Adds inflation, background)

KINSHASA, Sept 29 (Reuters) - Democratic Republic of Congo’s central bank has raised the main interest rate from 2 to 7 percent in a bid to contain quickening inflation, the bank said on Thursday, as low commodity prices continue to batter the economy of Africa’s top copper producer.

Congo’s government slashed its 2016 budget in June by 22 percent due to falling revenues from the mining and oil sectors, which account for some 95 percent of export earnings. It has also cut its growth estimate from 9 to 4.3 percent.

In Thursday’s statement, the bank increased its year-end inflation forecast to 4.13 percent, up from less than 1 percent last year.

The jump is largely due to exchange rate pressures caused by a shortage of dollars in the economy. Foreign exchange reserves have fallen by about a third this year to under $1 billion, enough to cover less than four-and-a-half weeks of imports.

The bank will also intervene in the foreign exchange market on Friday to ease pressure on the central African nation’s franc currency, spokesman Plante Kibadhi told Reuters.

The Congolese franc has depreciated more than 20 percent against the dollar this year on the parallel market.

Reporting by Aaron Ross; Editing by Joe Bavier

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