US embassy cable - 05RANGOON1203

C O N F I D E N T I A L SECTION 01 OF 02 RANGOON 001203 
 
SIPDIS 
 
STATE FOR EAP/MLS, EB/TPP 
TREASURY FOR OASIA:AJEWELL 
 
E.O. 12958: DECL: 10/24/2015 
TAGS: ECON, ETRD, PGOV, ASEC, BM, Economy 
SUBJECT: BURMA'S SOARING FUEL PRICES HIT THE POOREST FIRST 
 
REF: A. RANGOON 1179 
     B. RANGOON 1139 
 
Classified By: Econoff Teresa L. Manlowe for Reason 1.4 (b,d) 
 
1. (C) Summary:  Without prior or public notice, the GOB 
decreased its significant fuel subsidies on October 20, 
boosting diesel prices by a whopping 750 percent overnight. 
Consumers at the pumps will now pay $1.20/gal. and be held to 
an existing 60/gal. per month limit, with many expected to 
sell their excess allowance on the black market for about 
$2.80/gal.  As the rising prices of public transport and 
agricultural products begin to reflect the fuel price hike, 
economic hardship will fall even harder on Burmese citizens, 
especially the already stretched lower class, who is still 
dealing with the effects of recent currency depreciations. 
Although the regime does not concern itself with political 
fallout for the change, the economic strain will make life 
even tougher for the poorest of the poor.  They cannot demand 
relief, and do not expect any.  End summary. 
 
PRICE INCREASES ACROSS THE BOARD 
-------------------------------- 
2. (C) On October 20, the official market price of diesel in 
Burma was raised over 750 percent to $1.20/gallon, after 
holding steady at the heavily subsidized rate of $.14/gal. 
for over eight years.  Government officials contacted filling 
station owners in the early hours of October 20, telling them 
to raise prices immediately.  The public learned about the 
new prices only from notices posted at the gas stations. 
Consumers are still limited to a ration of 60 gal/month, and 
many now resell their subsidized fuel on the black market. 
The current black market rate is about $2.82/gal.  By October 
21, bus fares had soared by up to 1000%.  Taxi charges rose 
20-30 percent overnight and the price of some food items 
increased by up to 15 percent. 
 
3. (C) The fuel price increase comes on the heels of other 
inflationary pressures, which have greatly raised prices of 
consumer goods in Burma.  Costs of imported and domestic 
goods rose with the sharp currency depreciation in 
September-October (ref B).  New regulations in early October 
have also hampered cross border trade (ref A).  The price of 
rice, the staple food, increased between 6% and 9%, depending 
on the quality, over the last four months.  In Rangoon, 
municipal authorities raised taxes between 500 and 1000 
percent for water and garbage services in September.  The 
black market price of diesel jumped 60 percent in October 
because the GOB arrested some key black marketeers, 
restricting fuel supply and increasing public demand.  The 
current rate is slightly lower than the record high, but 
sellers say they will raise prices once the attention of the 
authorities diminishes. 
 
GOVERNMENT DOESN'T EXPECT PROBLEMS 
---------------------------------- 
4. (U) In an October 23 "press conference", the Minister of 
Information and a senior official from the Ministry of 
Defense said they expected commodity prices to remain stable, 
since the official fuel prices are now closer to the "street" 
(black market) prices that many are already using.  People 
will have to pay higher prices only if they want to buy high 
quality goods, they claimed. 
 
5. (C)  Monthly government salaries range from about $2.40 to 
$13.00, (with Director-level employees and above receiving 
other non-salary benefits).  Although there are few reliable 
statistics, it is believed that the majority of Burmese 
workers earn, on average, $24 to $36 per month, with some 
earning as little as $12 per month.  Food and transport make 
up the largest portion of household expenses.  Typical bus 
transportation costs in the Rangoon area have now risen to 
about 14 to 20 percent of total monthly wages.  The majority 
of urban workers commute by bus.  This price hike will take a 
larger bite from their low wages, and some may no longer be 
able to afford to take the bus to work.  Also, farmers 
bringing agricultural goods into cities must pay more for 
transport and will pass along the increase in higher food 
prices. 
COMMENT: POOR MUST ADAPT TO EVEN LOWER STANDARD OF LIVING 
--------------------------------------------- ------------ 
6. (C) GOB press conference statements that official fuel 
prices are now closer to the black market rates, and 
therefore the changes would have minimal effect on the 
economy, and will put pressure on "street" sellers to keep 
their informal prices steady.  It is certainly true that the 
price hike will have a reduced impact on the upper class, who 
own their vehicles and are already paying the higher black 
market rate for gas (though taxi fares have also jumped). 
The poor, however, will find it extremely difficult to make 
ends meet between rising bus fares and higher food prices. 
 
7. (C) Comment continued:   In typical style, the GOB did not 
give the population any time to prepare, nor did it feel 
obliged to ameliorate the impact on low salaried civil 
servants or the poorest citizens.  After the October 20 fuel 
price hike went into effect, police and other security 
officials went on high alert and increased their presence at 
local gas stations.  In this potentially volatile situation, 
however, there is further grumbling and dissatisfaction with 
the regime's haphazard policies, but no opportunities, as 
usual, for public protest in Burma.  End comment. 
STOLTZ