US embassy cable - 00KINSHASA8558

UNCLAS SECTION 01 OF 02 KINSHASA 008558 
 
SIPDIS 
 
 
E.O. 12958: N/A 
TAGS: ECON, EFIN, EPET, EMIN, KSAC, AMGT, PREL, CG 
SUBJECT: WEEKLY ECONOMIC REPORT - WEEK OF DECEMBER 18 - 
DECEMBER 24 
 
1. (U) SUMMARY: Gasoline and diesel supplies were 
adequate in Kinshasa, though reports that current 
supplies are noxious persisted. The Congolese franc 
weakened on the parallel market to about 142 Congolese 
francs per US dollar.  The GDRC held a week-long 
workshop on the conditions of state-owned companies. 
The governments of the RDC and Congo-Brazzaville agreed 
that debt payments from Congo-B for electricity would 
go toward construction of a new high voltage line from 
the Inga Dam.  The press continued to report that 
diamond markets are depressed because the company with 
an exclusive export license is not interested in buying 
industrial diamonds and not capable of buying all gem- 
quality stones.  The Honorary Consul of Cyprus was 
caught with a packet of rough diamonds in her hand 
luggage as she waited in the diplomatic lounge at 
Kinshasa's airport for a flight to Brussels.  Inflation 
slowed from last week's torrid pace, although merchants 
raised clothing prices in advance of the holidays. END 
SUMMARY. 
 
 
MOTOR FUEL 
 
 
2. (U) Fuel supplies were adequate and no long lines 
formed at service stations.  Stations were once again 
closed on Sunday to reduce fuel consumption, but 
reopened on Monday, despite the Christmas holiday. 
 
 
3. (U) Rumors that current fuel stocks are substandard 
continued to circulate, and the press reported that 
noxious fumes from fuel tanks sickened many people. 
 
 
MONETARY UPDATE/EXCHANGE RATE 
 
 
4. (U) The Congolese franc weakened on the parallel 
market to about 142 Congolese francs per US dollar. 
This surprised many observers who are accustomed to see 
the franc strengthen at the end of the year because 
employers need francs to pay the traditional bonus of 
one month's salary.  The official exchange rate remains 
50 francs per dollar. 
 
 
MINING NEWS 
 
 
5. (U) Diamond sector representatives continued to 
complain about the exclusive export license granted to 
Israeli firm IDI diamonds.  The press reported that 
diamond markets are depressed because IDI is not 
interested in buying industrial diamonds and not 
capable of buying all gem-quality stones. 
 
 
6. (U) The Honorary Consul of Cyprus was caught with a 
packet of rough diamonds in her hand luggage as she 
waited in the diplomatic lounge at Kinshasa's airport 
for a flight to Brussels.  The incident recalled the 
uproar when the Ambassador of Togo was caught smuggling 
Congolese francs to Brazzaville. 
 
 
LOCAL ECONOMIC NEWS 
 
 
7. (U) The GDRC held a week-long workshop on the 
country's state-owned companies.  In his opening 
remarks, the Minister for State Enterprise said the 
goal of the exercise was threefold: to prepare a 
diagnosis of the state of the parastatals; to identify 
the current and more remote causes of the problems 
identified; and to propose solutions that would permit 
the state-owned sector to play the key role in 
development that it played during the colonial era. 
Officials from one of the companies represented at the 
workshop, the Kisenge manganese mine, noted that their 
mine had produced nothing since the railroad serving 
the mine closed 25 years ago.  Individual state 
enterprises estimated the investment that would be 
required to rehabilitate their facilities.  The post 
office/national phone company reported it needed a 
relatively modest USD 38 million.  By contrast, 
Kinshasa's International Fairgrounds claims it requires 
a whopping USD 92 million. 
 
 
8. (U) The governments of the two Congos announced they 
had reached an agreement on the repayment of USD 28 
million that Congo-Brazzaville owes the DRC for 
electricity.  The funds will be set aside to construct 
a second high voltage line from the Inga dam.  The head 
of the DRC's electricity parastatal told the press 
that, with funding for over half of the line's USD 50 
million cost already identified, the rest of the 
necessary financing would be easy to obtain. 
 
 
 
 
9. (U) INFLATION FOR THE WEEK OF DECEMBER 18 
 
 
INFLATION BY CATEGORY  (IN PERCENT) 
WEEK ENDING          12/08      12/15      12/21 
FOOD                   9          13         3 
BEVERAGES              0           4         4 
NON-FOOD               9           2         0 
CLOTHING               0           0       127 
RENTS                  0           0         0 
TRANSPORTATION         0          50         0 
SCHOOL COSTS           0           0         0 
UTILITIES              0           0         0 
COMBINED FIGURES 
WEEKLY                 3.6        18.1       4.1 
MONTH TO DATE          3.5        22.0      27.0 
Clothing cost increases reflect lagged exchange rate 
effects, as merchants restocked for the Christmas 
holiday. 
 
 
November inflation: 8.6 percent 
Year to date (end November) 487 percent 
Last 12 months inflation (end November ): 605 percent 
1999 Inflation: 333 percent 
 
 
10. (U) ADJUSTMENT TO INFLATION FIGURES 
 
 
Comparison of Embassy inflation statistics with 
statistics from the Congolese Central Bank and the 
Institute for Social and Economic Research show 
discrepancies; the Embassy's estimate was significantly 
lower for 1999 and has been consistently higher in 
2000.  Examination of the methodology used in Embassy 
estimates reveals that weightings in the market basket 
have not been altered for almost ten years.  As a 
result of changes in relative prices over the years, 
the Embassy estimate has evolved to place an 
increasingly heavy weight on some factors (notably 
transportation) and an increasingly light weight on 
other factors (notably food).  Starting in January, the 
Embassy will adjust its weighting scheme to return to 
the relative weights used in 1991. 
 
 
13.  (U) EXCHANGE RATE DEVELOPMENTS 
 
 
Exchange rates in Congo francs per US dollar 
                       12/08     12/15     12/22 
CENTRAL BANK RATE        50        50        50 
PARALLEL MARKET 
-KINSHASA              120-125  127-132    140-145 
-LUBUMBASHI            118-121  128-131    135-138 
-MBUJI MAYI            119-122  127-130    130-132 
 
 
SWING