Abstract

The economy of the Democratic Republic of Congo (DRC) is characterized by an excessive degree of financial dollarization, with nearly 88.52% of bank deposits denominated in foreign currency (as of August 2026). This currency hypertrophy weakens monetary transmission mechanisms, renders the banking system vulnerable to exchange rate risk, and deprives the state of effective monetary sovereignty. This paper proposes an innovative monetary reform focused on reclaiming the store-of-value function of the Congolese Franc (CDF) through the establishment of the “Sovereign Savings Account in Congolese Francs” (SSA-CDF). Far from being a mere commercial designation or an administrative coercive measure, the SSA-CDF is designed as a standardized institutional instrument offering a positive real return, staggered maturities (6 to 60 months), and a reinforced prudential framework under the supervision of the Central Bank of Congo (BCC). Through a theoretical model of money demand, a rigorous quantitative diagnosis of the Congolese banking balance sheet, and simulations of de-dollarization trajectories, the study demonstrates that a gradual financial incentive strategy can increase the share of CDF deposits from 11.48% to 40%, thereby mobilizing over 13,284 billion CDF in stable savings. However, the success of this reform requires strict coordination between fiscal discipline, price stability, and productive financial intermediation.

Keywords

Financial Dollarization, Congolese Franc, Central Bank of Congo, Monetary Sovereignty, National Savings, Sovereign Savings Account, Monetary Policy, Banking Intermediation.

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1. Introduction

1.1. General Framework

The monetary issue in developing and emerging economies extends far beyond mechanical considerations regarding the volume of money supply or short-term nominal exchange rate fluctuations. It strikes at the core of institutional architecture, economic agents’ confidence, and the macroeconomic levers of development. In the Democratic Republic of Congo (DRC), an in-depth diagnosis of monetary dynamics reveals a major structural pathology: the severe atrophy of the national currency in its store-of-value function, materialized by the near-total dollarization of bank savings (Mubake, 2018; Tshilombo, 2024).

In a monetary system where confidence has been historically eroded by episodes of hyperinflation, recurring currency depreciation, and poorly conceived reforms (Ndele, 2019), the Congolese Franc (CDF) has been progressively relegated to the minimum functions of an official unit of account and a medium for low-value daily transactions (Kambana & Ngongo Makelele, 2025). The sovereign function of wealth preservation and long-term capital accumulation has been usurped by foreign currency, primarily the US Dollar (USD). This reality creates a vicious circle: the scarcity of local currency deposits limits commercial banks’ ability to extend loans in CDF, which sustains foreign currency dependence, paralyzes the transmission channels of the Central Bank of Congo’s (BCC) monetary policy (Kabwe, 2021), and increases the economy’s overall vulnerability to external shocks (Ntangu, 2022).

Faced with this challenge, traditional public policies have too often focused on money supply (credit controls, liquidity sterilization, ad-hoc interventions in the foreign exchange market) or attempts at administrative regulation of dollarization. This scientific study starts from a different paradigm: the reconquest of monetary sovereignty cannot be achieved through coercion or simple modifications of currency signs, but rather through direct and incentive-based action targeting the demand for money as a financial asset (Kabuya Kalala & Tshiunza Mbiye, 1999).

The fundamental prospective contribution of this research lies in the theoretical, empirical, and operational formulation of a breakthrough reform: the creation of the Sovereign Savings Account in Congolese Francs (SSA-CDF). This mechanism aims to institute a standardized bank savings product, regulated by the BCC, offering high real yields and protected by a high-level prudential framework. The ultimate objective is to progressively redirect the portfolio choices of households, enterprises, and Congolese institutions in favor of the national currency (Tease et al., 1991).

This analysis is theoretical and scenario-based unless an estimated econometric model, variables, sample period, and estimation method are included. The current manuscript presents accounting simulations rather than econometric results.

1.2. Theoretical Framework and Literature Review

1.2.1. The Functions of Money and the Asset Substitution Phenomenon

According to classical monetary theory (Menger, 1892; Keynes, 1936), money fulfills three fundamental functions: medium of exchange, unit of account, and store of value. In economies afflicted by financial dollarization or monetary hysteresis (Calvo & Végh, 1992; Reinhart, Rogoff, & Savastano, 2014), a process of functional asymmetry takes hold. The national currency retains its role as legal tender for routine transactions, but loses its capacity to preserve value over time to currencies perceived as stable (Gurley & Shaw, 1960; McKinnon, 1973; Shaw, 1973).

The literature distinguishes between currency substitution (using foreign currency for transactions) and asset substitution (holding foreign currency securities or deposits to protect wealth). In the DRC, asset substitution is predominant. As shown by Cuddington & Cuddington (1983) and Ize & Levy Yeyati (2003) in their minimum variance portfolio (MVP) model, the degree of financial dollarization depends directly on the relative variance of inflation compared to that of the real exchange rate. When domestic inflation volatility surpasses exchange rate volatility, rational agents minimize portfolio risk by holding their financial assets in foreign currency (Obstfeld & Rogoff, 1996).

1.2.2. Unilateral Dollarization and the Coercive Impasse

The works of Reinhart, Rogoff, and Savastano (2014) emphasize that dollarization is a highly persistent phenomenon (“hysteresis”). Attempts at forced or coercive de-dollarization (such as the authoritarian conversions of deposits applied in Latin America in the 1980s) have systematically led to capital flight, banking disintermediation, and the massive expansion of the informal financial sector (Savastano, 1996). Conversely, successful experiences of de-dollarization (notably in Peru, Poland, and Uruguay) rely on market-based strategies combining inflation targeting (Taylor, 1993), the development of attractive financial instruments in local currency, and prudential differentiation (Garcia-Escribano & Sosa, 2011; Catão & Terrones, 2016).

1.2.3. Monetary Transmission in a Bi-Monetary Economy

In a context of high dollarization, the effectiveness of the Central Bank’s policy rate is considerably eroded (Mishkin, 1995; Stiglitz & Weiss, 1981). The credit and interest rate channels operate only on the marginal component of the money supply denominated in national currency. As demonstrated by Kokenyne et al. (2010), restoring monetary sovereignty requires re-expanding the bank balance sheet in local currency to restore depth to the interbank market and amplify the sensitivity of consumption and investment decisions to Central Bank impulses (Catão & Terrones, 2016).

Rather than relying on ex-post econometric estimation requiring high-frequency historical data that are not available, this research adopts an accounting simulation and deterministic scenario analysis approach (Isaac, 1989). In the absence of formal econometric regression models (such as VAR or error-correction models) and formal statistical validation tests, this study is positioned as a theoretical and prospective financial engineering exercise. It aims to simulate the macro-financial and balance-sheet impact of a targeted transition in the deposit structure (aiming for de-dollarization thresholds of 20% to 40%), by explicitly stating agents’ behavioral assumptions and accounting transmission mechanisms. The results derived from these scenarios must therefore be interpreted as normative projections designed to inform strategic decision-making, rather than as empirically measured econometric findings.

2. Methodology and Data Section

The quantitative data used in this study are based on official publications and time series from the Central Bank of Congo (BCC).

• BCC Series and Extraction: The extraction of monetary aggregates relies on the consolidated situation of deposit-taking institutions, covering all commercial banks operating in the Democratic Republic of Congo.

• Currency Conversion: To enable the aggregation and comparison of monetary masses, items denominated in foreign currencies (primarily USD) are converted into Congolese Francs (CDF) using the end-of-period exchange rate communicated by the issuing institute.

• Definition and Calculation of the CDF Deposit Share (11.48%): This ratio is calculated by dividing the total outstanding deposits in national currency (including demand and time deposits in CDF) by total deposits in the banking system (CDF deposits plus converted foreign currency deposits):

$$ \mathrm{P}\mathrm{a}\mathrm{r}\mathrm{t}\mathrm{s}\mathrm{ }\mathrm{d}\mathrm{e}\mathrm{s}\mathrm{ }\mathrm{d}\mathrm{é}\mathrm{p}\mathrm{o}\mathrm{t}\mathrm{s}\mathrm{ }\mathrm{e}\mathrm{n}\mathrm{ }\mathrm{C}\mathrm{D}\mathrm{F}= \left(\frac{\mathrm{T}\mathrm{o}\mathrm{t}\mathrm{a}\mathrm{l}\mathrm{ }\mathrm{d}\mathrm{e}\mathrm{s}\mathrm{ }\mathrm{d}\mathrm{é}\mathrm{p}\mathrm{ô}\mathrm{t}\mathrm{s}\mathrm{ }\mathrm{e}\mathrm{n}\mathrm{ }\mathrm{C}\mathrm{D}\mathrm{F}}{\mathrm{T}\mathrm{o}\mathrm{t}\mathrm{a}\mathrm{l}\mathrm{ }\mathrm{d}\mathrm{e}\mathrm{s}\mathrm{ }\mathrm{d}\mathrm{é}\mathrm{p}\mathrm{ô}\mathrm{t}\mathrm{s}\mathrm{ }\mathrm{e}\mathrm{n}\mathrm{ }\mathrm{C}\mathrm{D}\mathrm{F}+\mathrm{T}\mathrm{o}\mathrm{t}\mathrm{a}\mathrm{l}\mathrm{ }\mathrm{d}\mathrm{e}\mathrm{s}\mathrm{ }\mathrm{d}\mathrm{é}\mathrm{p}\mathrm{ô}\mathrm{t}\mathrm{s}\mathrm{ }\mathrm{e}\mathrm{n}\mathrm{ }\mathrm{d}\mathrm{é}\mathrm{v}\mathrm{i}\mathrm{s}\mathrm{e}\mathrm{s}}\right)\times 100$$

• Clarifications on Table 1 and Deposit Nature: Table 1 presents deposit aggregates broken down strictly by currency due to the lack of detailed maturity breakdowns available in the BCC’s aggregated macroeconomic publications. Consequently, statements indicating that CDF deposits are “primarily transactional” and that “long-term savings are almost entirely in USD” represent a structural working hypothesis deduced from the observed behavior of the public under conditions of high dollarization, rather than micro-founded empirical observations by type of deposit.

3. Quantitative Diagnosis: The Structure of Deposits in the DRC (August 2026)

The empirical analysis of the monetary situation in the Democratic Republic of Congo is based on the most recent official statistics published by the Central Bank of Congo for August 2026 (Banque Centrale du Congo, 2026). Statistical data reveal a profound structural imbalance within the commercial banking system.

In August 2026, total customer deposits in commercial banks stood at 46,582.810 billion CDF. However, the breakdown by currency highlights the extreme marginality of the Congolese Franc in building bank savings:

• National Currency Deposits (CDF): 5348.680 billion CDF (i.e., 11.48% of the total).

• Foreign Currency Deposits (FX): 41234.130 billion CDF (i.e., 88.52% of the total).

Table 1. The macroeconomic trilemma: fixed exchange rate, capital mobility, and monetary policy.

This quantitative diagnosis shows to a certain extent that the Congolese Franc is currently rejected as a medium-to-long-term wealth conservation instrument (Banque mondiale, 2023). The 11.48% share in local currency mainly consists of demand deposits used by enterprises to pay wages, taxes, and current expenses. True savings (time deposits, remunerated savings accounts) are almost entirely denominated in US dollars (Fonds Monétaire International, 2024). So That, Table 1 presents deposit aggregates broken down strictly by currency due to the lack of detailed maturity breakdowns available in the BCC’s aggregated macroeconomic publications. Consequently, statements indicating that CDF deposits are “primarily transactional” and that “long-term savings are almost entirely in USD” represent a structural working hypothesis deduced from the observed behavior of the public under conditions of high dollarization.

This financial structure generates three major macroeconomic vulnerabilities:

• Increased transformation and liquidity risk for banks: Foreign currency resources are predominantly on demand or very short-term, preventing the financing of long-term infrastructure or industrial investments (De Nicoló, Honohan, & Ize, 2005).

• Systemic exchange rate risk: Any sudden depreciation of the CDF weakens the balance sheets of unhedged borrowers whose incomes are in CDF but debts in USD (Yeyati, 2006).

• Monetary powerlessness of the BCC: Since the national currency money supply is marginal, changes in the BCC’s policy rate exert only a marginal effect on the overall economy (Mundell, 1963).

4. Concept and Architecture of the Sovereign Savings Account (SSA-CDF)

4.1. Definition and Institutional Philosophy

The Sovereign Savings Account in Congolese Francs (SSA-CDF) is defined as a standardized bank savings product in national currency, governed by a specific regulatory statute from the Central Bank of Congo, distributed by all authorized commercial banks, and designed to mobilize domestic savings over the medium and long term.

The qualification “sovereign” does not mean the State undertakes to directly finance the account or substitute its guarantee for the private management of banks. It expresses the fact that this product constitutes a trusted public asset, benefiting from a privileged institutional architecture: ad hoc prudential regulation, total transparency, enhanced depositor protection, and targeted tax exemptions.

4.2. Technical Characteristics and Maturity Grid

To break away from the practice of volatile demand deposits, the SSA-CDF is designed as a restricted-availability account offering an escalating remuneration grid according to the duration of funds commitment (Tables 2-3).

Table 2. De-dollarization strategy: SSA-CDF key components and macro objectives.

Table 3. SSA-CDF growth simulation table.

5. Strategic and Operational Role of the Central Bank of Congo

The Central Bank of Congo must not substitute itself for commercial banks by becoming a direct collector of public deposits. Its role is to act as an architect, regulator, supervisor, and guarantor of the system. As of August 2026, the DRC’s macro-monetary framework is characterized by an M2 money supply of 51794.468 billion CDF, credit to the private sector of 29378.811 billion CDF, a policy rate of 12.5%, and outstanding BCC Bills of 2330.25 billion CDF (Banque Centrale du Congo, 2024, 2025, 2026).

6. Mathematical and Econometric Modeling of Remuneration and Trajectory Simulation

6.1. Formulation of the Attractive Remuneration Rate

To modify economic agents trade-offs in favor of the Congolese Franc, the nominal interest rate offered on the sovereign account (SSA) must be designed to guarantee a net positive real return while incorporating risk premiums. We formulate the following decision-making rate model:

$r \left(SSA\right)={\pi }^e+\rho +p-s$

where:

• ${\pi }^e$ represents anticipated inflation over the account’s maturity period;

• $\rho$ is the real yield premium required to encourage domestic savings;

• $p$ is the maturity premium (increasing with the time horizon: 6 to 60 months);

• $s$ is a macro-prudential prudence coefficient preventing intermediation overcosts for the banking system.

Alternatively, within an international rate arbitrage logic (Uncovered Interest Rate Parity), the rate must satisfy the condition:

$r \left(SSA\right)\ge r_{USD}+{\widehat{E}}^e+\gamma$

Where $r_{USD}$ is the interest rate on dollar deposits, ${\widehat{E}}^e$ is the anticipated depreciation rate of the CDF against the USD, and $\gamma$ represents the sovereign/country risk premium.

6.2. Modeling the Future Value of an SSA-CDF Deposit

Consider the capitalization dynamics of an initial capital $C_0$ placed in an SSA-CDF account over a duration of $n$ years at an annual nominal rate $r$ . Using the compound interest formula:

$VF=C_0{\left(1+r\right)}^n$

To illustrate this financial mechanism, let us apply an example based on a capital of 1,000,000 CDF placed at a hypothetical nominal rate of 12% per year:

6.3. Macroeconomic Scenarios for Savings De-Dollarization

Based on total deposits observed in August 2026 (46582.810 billion CDF), we model three scenarios for reclaiming the national currency under a constant stock assumption (Table 4):

Table 4. Macroeconomic scenarios for Congolese franc recovery and liquidity gap.

Analysis of Scenario C demonstrates that achieving a 40% share of CDF deposits implies the conversion or net collection of over 13,284 billion CDF. Such a volume would fundamentally alter the country’s financial landscape, creating a domestic liquidity base capable of fueling domestic bank credit. It’s interesting to consider transmission Mechanisms in constant-total scenarios. In fact, in simulations where total bank deposits are held constant, it is essential to rigorously distinguish between two distinct channels of increase in CDF deposits:

• Portfolio Conversion (Reverse Currency Substitution): Economic agents decide, voluntarily or through regulatory incentives, to exchange part of their foreign currency holdings (USD) for Congolese Francs (CDF). This mechanism alters the structure of bank liabilities without injecting new liquidity: USD deposits decrease in proportion to the increase in CDF deposits, at the prevailing exchange rate.

• Injection of Net New Deposits: This mechanism assumes the inflow of fresh savings or the repatriation of external liquidity (or monetized credit expansion).

In our prospective scenarios of targeted de-dollarization (raising the CDF share from 11.48% to thresholds of 20% to 40%), the default mechanism relies primarily on portfolio reallocation within the existing bank balance sheet, requiring careful foreign exchange risk management by commercial banks.

7. Impacts on Banking Intermediation and Monetary Transmission

The successful implementation of the SSA-CDF generates major spillover effects across the entire economic system:

• Extension of bank resource maturity: Congolese banks currently hold extremely short-term resources. By locking in savings over maturities of 12 to 60 months, the SSA-CDF reduces liquidity risk and enables banks to grant longer-term investment loans.

• Expansion of credit in national currency: The increase in CDF resources solves the currency mismatch problem. Banks can lend in CDF to SMEs, farmers, and households whose incomes are in CDF, thereby eliminating exchange rate risk for borrowers.

• Restoration of monetary transmission channels: With the share of CDF deposits raised to 30% or 40%, changes in the BCC’s policy rate will directly influence SSA-CDF account rates, subsequently affecting the cost of bank credit and aggregate demand, thereby restoring monetary policy effectiveness.

8. Specification and Limits of the SSA-CDF Contract (Synthetic Structured Agreement)

The use of SSA-CDF type instruments to protect depositors during monetary transition raises fundamental contractual questions that must be formalized (Mishkin, 2011; Ngonga Nzinga, 2008):

• Allocation of Inflation and Foreign Exchange Risk: The SSA-CDF contract includes a value indexation or guarantee clause relative to a reference basket (usually pegged to the USD/CDF exchange rate or a price index). The foreign exchange and depreciation risk is thus, by design, transferred from the depositing agent to the issuer of the guarantee mechanism (covered commercial bank or public authority/BCC), unless there is an explicit loss-sharing arrangement.

• Interest Rate Revisions: For fixed-term accounts, rate revision clauses must specify whether the nominal yield is fixed over the entire duration or indexed to a BCC policy rate, in order to preserve the depositor’s real yield against inflationary shocks.

• Scope and Limits of Protection: The viability of this type of contract relies entirely on the credibility of the guaranteeing signature and the availability of foreign exchange liquidity or reserve assets in the event of a systemic shock. In the absence of a sovereign guarantee fund endowed with sufficient resources, the protection offered to depositors is bounded by the state’s fiscal sustainability or the issuing bank’s solvency.

9. Operational Roadmap and Governance Dashboard

To guarantee the success of the reform and prevent any systemic drift, the implementation of the SSA-CDF must follow a sequential 60-month trajectory (Table 5).

Table 5. Implementation roadmap and phased operational timeline.

To ensure strategic steering, the BCC and the Ministry of Finance must monitor a dashboard of key indicators (Table 6):

Table 6. Strategic monitoring framework and key performance indicators (KPIs).

10. Prerequisites and Risk Management Matrix

The creation of the SSA-CDF is not an isolated panacea. Its success depends on the rigorous fulfillment of several macroeconomic prerequisites (Table 7):

• Macroeconomic stability and fiscal discipline: The State must renounce monetary financing of public deficits (strict compliance with the operating agreement with the BCC).

• Credibility and independence of the BCC: Monetary policy must maintain inflation on a low and predictable trajectory.

• Targeted tax incentives: Exemption from the Property/Mobilier Tax (IPM) for interest generated by SSA-CDF accounts held for more than 12 months.

• Bank risk management: Prevention of illiquidity risk by maintaining liquidity safety cushions with the BCC.

Table 7. De-dollarization strategy: from challenges to expected outcomes.

11. Conclusion and Research Perspectives

Monetary reform in the Democratic Republic of Congo can no longer be limited to cosmetic adjustments or passive interventions in the foreign exchange market. The persistence of deposit dollarization at 88.52% constitutes a major impediment to economic development and national sovereignty. The Sovereign Savings Account in Congolese Francs (SSA-CDF) provides a structured, pragmatic, and incentive-based response to this historical challenge.

By shifting the center of gravity of monetary policy from mere supply regulation to stimulating the demand for national currency savings, the SSA-CDF lays the foundations for a modern, autonomous, and resilient financial system. Combined with strict fiscal discipline, rigorous prudential supervision, and advanced digitization, this product offers a realistic trajectory to bring the share of the Congolese Franc back to over 40% of bank savings, thereby mobilizing over 13,000 billion CDF to finance national development.

Scientifically, this study opens promising perspectives for Congolese econometric research. The implementation of the SSA-CDF will generate rich time series to empirically test the price-elasticity of local currency demand, the currency crowding-out effect, and credit transmission channels within an economy undergoing voluntary de-dollarization.

Conflicts of Interest

The authors declare no conflicts of interest regarding the publication of this paper.

References