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Cablegate: Food Price Increases Cause Consternation in the Afghan

VZCZCXRO5853
PP RUEHIK RUEHPOD RUEHPW RUEHYG
DE RUEHBUL #4007 3410411
ZNR UUUUU ZZH
P 070411Z DEC 07
FM AMEMBASSY KABUL
TO RUEHC/SECSTATE WASHDC PRIORITY 1657
INFO RUEATRS/DEPT OF TREASURY WASHINGTON DC 0574
RUCNAFG/AFGHANISTAN COLLECTIVE
RUEHZG/NATO EU COLLECTIVE
RUEKJCS/OSD WASHINGTON DC
RUEKJCS/JOINT STAFF WASHINGTON DC
RUEKJCS/SECDEF WASHINGTON DC
RUEABND/DEA HQS WASHINGTON DC
RHMFIUU/HQ USCENTCOM MACDILL AFB FL
RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC
RUEAIIA/CIA WASHINGTON DC
RHEFDIA/DIA WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUCNDT/USMISSION USUN NEW YORK 4306

UNCLAS KABUL 004007

SIPDIS

DEPT FOR SCA/FO, SCA/RA, AND SCA/A
DEPT PASS AID/ANE
DEPT PASS USTR FOR GERBER AND KLEIN
DEPT PASS OPIC FOR ZAHNISER
DEPT PASS TDA FOR STEIN AND GREENIP
CENTCOM FOR CSTC-A
NSC FOR JWOOD
TREASURY FOR LMCDONALD, ABAUKOL, BDAHL, AND MNUGENT
OSD FOR SHIVERS
COMMERCE FOR DEES, CHOPPIN, AND FONOVICH

SIPDIS

E.O. 12958 N/A
TAGS: ECON EAID EFIN AF
SUBJECT: FOOD PRICE INCREASES CAUSE CONSTERNATION IN THE AFGHAN
GENERAL PUBLIC


1. Summary. Prices for household staples have risen across
Afghanistan, driven primarily by worldwide increases in prices of
key commodities. Even Afghans with "good" jobs have found
themselves caught between rising food prices and flat salaries.
Price increases are having a negative effect on popular satisfaction
with the government. End summary.

2. Official Afghan Central Bank statistics, based upon figures for
Kabul, show that the end-of-period, year-on-year overall Consumer
Price Index rose 9.5 percent between October 2006 and October 2007.
Prices of non-food items, such as housing (including rents),
electricity and fuels, transportation, health care, and education
increased only 2.4 percent in the similar period, suggesting that,
while Afghans are feeling the pinch, the country as a whole is not
facing significant monetary inflation[O1].

3. The price increases in Afghanistan reflect worldwide trends:
global wheat prices are double what they were last year.
Additionally, in regard to price indices, the World Bank reports
that for the July-September 2007 quarter, compared to the same
quarter in 2006, energy rose 7 percent on average, agriculture rose
17 percent, food price rose 27 percent, and the grains price index
rose 24 percent.

4. Although Cabinet officials regularly try to talk down prices and
threaten price controls, the free market is a fact of life in
Afghanistan. This is not widely viewed as a universal good;
newspaper editorials decry price rises and criticize Ministers for
"permitting" price increases to occur. On November 28 a number of
MPs called on the Minister of Commerce and Industry to impose price
controls and demanded that he appear to answer questions. For his
part the Minister has told the embassy that he opposes price
controls on key staples, but he has also been widely quoted as
saying that food prices should be controlled. (Note: In September,
the Charge sent a letter to the Minster of Finance urging the
government not to institute price controls.)

5. Market basket surveys conducted by Provincial Reconstruction
Teams suggest that prices of some consumer staples have risen
sharply in the past month. Reporting for the September through
November 2007 period from Kunduz and Laghman provinces shows that
the price of rice rose 14% in Laghman and the price of sugar there
rose almost 75%. Some key prices, however, such as propane and
firewood have not changed over the survey period, although all
energy prices are high, compared to average incomes.

6. In a recent conversation with the Political Counselor, the
Governor of Ghazni compared the cost of a market basket of household
staples to the average salary of a policeman or soldier, noting that
even those with relatively good wage-paying jobs have no margin.
Even a modest increase in the price of essentials means some items
are no longer affordable. The burden is even heavier on those who
do not receive regular wage payments.

7. What we hear on the street is that price rises are increasingly
hard for Afghans to bear. The difficult fact is that as food prices
rise and median incomes remain flat, Afghans will feel increasingly
squeezed. This will both increase pressure on the government, while
also leading to more popular complaints about the relative
invisibility of the billions of dollars in assistance provided by
the international community.
DELL

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