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Viewing cable 06KINSHASA1239, DRC GOVERNMENT RAISES FUEL PRICES AGAIN

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Reference ID Created Released Classification Origin
06KINSHASA1239 2006-08-04 14:48 2011-08-25 00:00 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Kinshasa
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