Economy

The economy is a mixture of village agriculture and handicrafts, an industrial sector based largely on petroleum, support services, and a government characterised by budget problems and overstaffing. Petroleum extraction has supplanted forestry as the mainstay of the economy, providing a major share of government revenues and exports.

In the early 1980s, rapidly rising oil revenues enabled the government to finance large-scale development projects with GDP growth averaging 5% annually, one of the highest rates in Africa. The government has mortgaged a substantial portion of its petroleum earnings, contributing to a shortage of revenues. The January 12, 1994 devaluation of Franc Zone currencies by 50% resulted in inflation of 61% in 1994, but inflation has subsided since.

Economic reform efforts continued with the support of international organisations, notably the World Bank and the IMF. However, the reform program came to a halt in June 1997 when civil war erupted. When Sassou-Nguesso returned to power at the end of the war in October 1997, he publicly expressed interest in moving forward on economic reforms and privatisation and in renewing cooperation with international financial institutions. However, economic progress was badly hurt by slumping oil prices and the resumption of armed conflict in December 1998, which worsened the republic's budget deficit. The current administration presides over an uneasy internal peace and faces difficult economic problems of stimulating recovery and reducing poverty. Natural gas and diamonds are also a recent major Congolese export.