Cablegate: Drc Government Raises Fuel Prices Again

VZCZCXRO0875
RR RUEHDU RUEHGI RUEHJO RUEHMR RUEHRN
DE RUEHKI #1239 2161448
ZNR UUUUU ZZH
R 041448Z AUG 06
FM AMEMBASSY KINSHASA
TO RUEHC/SECSTATE WASHDC 4542
INFO RUEHXR/RWANDA COLLECTIVE
RUCNSAD/SOUTHERN AFRICAN DEVELOPMENT COMMUNITY
RUEAIIA/CIA WASHDC
RUFOADA/JAC MOLESWORTH RAF MOLESWORTH UK
RHMFISS/HQ USEUCOM VAIHINGEN GE
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS KINSHASA 001239

SIPDIS

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: EPET ETRD ECON PGOV CG
SUBJECT: DRC GOVERNMENT RAISES FUEL PRICES AGAIN

REF: 05 KINSHASA 1222

1. (U) The GDRC has raised fuel prices twice since May, following
increases in the world market's oil price and a decline in the
Congolese Franc's (CF) value. On August 3, the GDRC Ministries of
Economy, Finance and Energy and members of the DRC Chamber of
Commerce (FEC), agreed to increase the price of gasoline from 460 CF
per liter (CF/L) to 490 CF/L and diesel fuel from 458 CF/L to 488
CF/L. On May 19, the same committee increased the gasoline price
from 445 CF/L to 460 CF/L, a 30 percent increase since July 2005
(reftel). The official exchange rate was 462 CF/USD August 3 and 450
CF/USD May 30.

2. (U) IMF pressure has also likely been a cause of the increase.
The Minister of Economy told EconCouns in May that the GDRC intended
to increase fuel prices incrementally so that consumers did not
suffer a price shock. The Minister acknowledged that the GDRC's
fixed fuel prices had not kept pace with the world market but said
that, in order to afford commercial distributors a marginal profit,
the GDRC had been imposing fewer taxes. However, the IMF pressed the
GDRC to increase fuel prices, since the subsidized price resulted in
less government revenue.

3. (U) The price change immediately impacted local transportation in
Kinshasa, although a local Shell distributor told EconOff that he
does not expect supply or demand to change. On the first day of the
August price increase, there were reports that more Congolese
commuters left their cars at home and took a "taxi" to work.
Essentially no public transportation exists in the DRC, so commuters
must use privately-operated cars, vans and buses that are usually
packed well beyond capacity and that travel a route the driver often
pre-determines. (Note: The city of Kinshasa has begun a small-scale
public service, using dozens of new TATA buses, some donated and
some purchased, from India. End note.) The GDRC fixes the fare that
private vehicle operators may charge (currently 150 CF per trip),
but it does not set the distance that the drivers must travel. The
GDRC has not yet increased the maximum fare in step with the
increased fuel cost. Thus, to avoid revenue loss, drivers are
transporting their passengers shorter distances, forcing travelers
to take several taxis and thus pay an increased commuting price.

4. (SBU) Comment: It is no coincidence that the price change did not
occur until after elections, as ministries likely feared the
political impact of an increase. The larger August increase may
impact the consumer inflation rate by increasing both direct
transportation costs and indirect costs such as food prices. Post's
market survey indicates that inflation has been moderate to date,
with a projected annual inflation rate of 12 percent. End comment.

MEECE

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