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