Cablegate: Drc October Monthly Economic Review

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RR RUEHBZ RUEHDU RUEHGI RUEHJO RUEHMR RUEHRN
DE RUEHKI #1704/01 3071213
ZNR UUUUU ZZH
R 031213Z NOV 06
FM AMEMBASSY KINSHASA
TO RUEHC/SECSTATE WASHDC 5108
INFO RUEHXR/RWANDA COLLECTIVE
RUCNSAD/SOUTHERN AFRICAN DEVELOPMENT COMMUNITY
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEHC/DEPT OF LABOR WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RHMFISS/HQ USEUCOM VAIHINGEN GE
RUFOADA/JAC MOLESWORTH RAF MOLESWORTH UK
RUEAIIA/CIA WASHDC

UNCLAS SECTION 01 OF 02 KINSHASA 001704

SIPDIS

SIPDIS

DEPT FOR DRL/IL-LHOST AND AF/RSA-MHARPOLE

E.O. 12958: N/A
TAGS: EFIN ELAB EMIN EAIR ECON PGOV CG
SUBJECT: DRC OCTOBER MONTHLY ECONOMIC REVIEW

REF: A) KINSHASA 1608

B) KINSHASA 1632
C) KINSHASA 1688

Summary
-------

1. (U)
- During an October visit, an IMF team noted the DRC's growing
inflation and Central Bank-financed budgetary overspending.

- The Belgian government will cancel the GDRC's remaining debt once
it achieves Highly Indebted Poor Country (HIPC) completion point.

- The employees of the RVA (DRC's airport operating agency) ended
their strike, but employees of the SNCC (the DRC's railway
authority) remain on strike.

- Gecamines (a DRC mining parastatal) continues its dispute with two
foreign mining companies over copper/zinc concession rights in
Katanga province.

- According to Post's market basket survey, October consumer prices
increased by 5.3 percent over September, with year-to-date
cumulative inflation now at 20 percent.

- The Congolese Franc (CF) continues to depreciate, losing 5 percent
against the USD in October. End summary.

Aviation
----------

2. (U) Competition from the Spanish/Congolese-owned Bravo Air Congo
has driven down passenger airfare prices by 50 percent on several
domestic DRC routes. Bravo has not yet started its planned
international service.

3. (U) Employees of the RVA (the DRC's airport operator) suspended
their strike October 9.

Finance
-------

4. (U) During its October informal Staff-Monitored Program review,
the IMF team said it is very concerned about the DRC's worsening
macroeconomic situation, noting high GDRC Central Bank-financed
over-spending for September and growing inflation, which the team
said could reach 30 percent by year's end (reftel A).

5. (U) Prior to the October IMF visit, the GDRC took some measures
to attempt to slow the DRC's macroeconomic slide. The Central Bank
increased interest rates on bank credit and auctioned USD 5 million
of foreign exchange. Pursuant to IMF advice, Vice President
Jean-Pierre Bemba, who heads the Economic and Financial Commission,
reportedly directed the Ministries of Finance and Budget to limit
GDRC expenditures to recurrent costs for the remainder of the year.

6. (U) The government of Belgium announced it will cancel DRC's
remaining USD 400 million in debt owed to Belgium, but that it will
not cancel USD 300 million of this amount until the DRC reaches the
HIPC completion point (reftel B).

Labor
-----

7. (U) The SNCC (DRC's railway parastatal) railway workers' strike
that began in July continues, and teachers in SNCC-supported schools
have been on strike since August. As a result, food and petroleum
product prices continue to increase in the two Kasai provinces of
central DRC.

8. (U) The DRC's Ministry of Public Administration has suspended
paying World Bank-funded severance packages to civil servants who
retired between 1985 and 2003, reportedly because the list of payees
wrongly includes some active employees and lists some retirees more
than once. Further, many retirees are refusing to cash the checks
that were issued, in protest over what they say is insufficient
compensation. Many expected payments between USD 2000 and 6000 but
instead received between USD 200 and 600.

Mining
------

KINSHASA 00001704 002 OF 002

9. (U) Gecamines' (the DRC's copper/cobalt/zinc mining parastatal)
dispute continues with South African company Kumba Resources and
Canadian company First Quantum (FQ) over rights to the Kipushi
zinc-copper mine in Katanga (reftel C). In October, a Belgian court
issued an order prohibiting Gecamines from sharing with third
parties any confidential information it obtained about Kipushi from
FQ.

10. (U) Several more diamond miners died in mine cave-ins during
October (reftel C).

11. (U) The DRC's Ministry of Mines has reportedly licensed a new
gold trading-house. The trading-house will be based in Butembo,
North Kivu and will have branches in Kinshasa, Beni and Goma, North
Kivu, Nairobi and Kampala.

Consumer Inflation Rate
-----------------------

12. (U) Post's market-basket survey indicates a 5.3 percent October
consumer inflation rate and year-to-date cumulative inflation of 20
percent. Significant increases are in rent, which is paid in USD,
clothing, most of which is imported, and locally-produced products
such as charcoal and firewood, in part due to the current
prohibition on kerosene imports from Angola.

Exchange Rates
--------------

13. (U) The Congolese Franc (CF) depreciated by nearly 5 percent in
October, from 504 to 527 CF/USD, and 22 percent since January,
according to the Central Bank's official exchange rate.

Week ending 10/7 10/14 10/21 10/28

Central Bank Rates: 510 513 524 530
Parallel Rates
Kinshasa 515 525 530 540
Lubumbashi 510 520 525 530
Mbuji-Mayi 512 515 525 530
Bukavu/Goma 515 520 530 535
Kisangani 510 515 515 525
Matadi/Boma 485 495 505 525

MEECE

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