The deal, signed last year, gives China’s state-owned Sinohydro Corp. and China Railway Engineering Corp. rights over more than 10 million tons of copper and 600,000 tons of cobalt. In exchange, they will help President Joseph Kabila deliver on his 2006 election pledges by building roads, railways, hospitals, schools and universities worth $6 billion and investing a further $3 billion in the mining project.

IMF Managing Director Dominique Strauss-Kahn said last week Congo wouldn’t receive $10 billion in debt relief and a further $500 million in financial support until the agreement is changed. The deal currently adds to Congo’s national debt, the Washington-based lender says.

The Central African nation, which is the size of Western Europe, needs financial aid to help rebuild an economy destroyed by two civil wars between 1996 and 2003. The country has 4 percent of the world’s copper reserves and the largest cobalt deposits.

Last year, the price of copper dropped 55 percent, the most since 1987, as recessions in the US, Europe and Asia reduced demand for industrial metals. The price has risen 64 percent so far this year and was trading at $5,044 a metric ton by 12:41 p.m. on the London Metal Exchange Tuesday.

Mines closed

Mining accounts for 14 percent of Congo’s economic output, according to the African Development Bank’s website. Last year, the industry lost 300,000 jobs after 40 mining companies closed their doors in the southeastern Katanga province.

Economic growth in Congo is expected to slow to 2.7 percent this year, from 6 percent in 2008, according to the IMF. The government also plans to reduce this year’s budget from 2.9 trillion Congolese francs ($3.6 billion), Prime Minister Adolphe Muzito said on May 25, without saying by how much.

International donors, including the IMF, have committed $500 million this year to help the country of 62 million combat the effects of the global financial crisis, Muzito said.

Congo will benefit from a further $600 million in so-called special drawing rights, agreed on by the Group of 20 nations at its London summit in April, Strauss-Kahn said during his three-day trip to the country.

Source: Bloomberg