ECONOMIC REPORT - SEPT 11 THROUGH SEPT 17

UNCLAS SECTION 01 OF 03 KINSHASA 001742

SIPDIS

E.O. 12958: N/A
TAGS: ECON EAID EFIN EIND ELAB ELTN EMIN CG
SUBJECT: ECONOMIC REPORT - SEPT 11 THROUGH SEPT 17


1. Sensitive but unclassified. Protect accordingly.


2. (U) Summary. Prices decreased slightly, bringing
monthly inflation to -1.1 percent. Exchange rates rose
to rates above FC 400 to the USD. Diamond exports
decreased from 2.79 million carats in July to 1.92
million carats in August. Angola has resumed the
forced repatriation of illegal Congolese diamond
miners. The central bank announced its plans to issue
new larger denomination bank notes in 2005.
Chanimetal, a metalworking firm based in Kinshasa,
agreed to negotiate a labor dispute with union
representatives. DGI (tax authority) announced
revenues of USD 110 million for the first seven months
of 2004. Belgium granted 20 million euros in aid to
the DRC. A measles outbreak due to low vaccination
rates was reported in Equateur province. End Summary.

MONETARY AND PRICE UPDATE


3. (U) Both food and non-food prices decreased
slightly, partially due to the decrease in demand for
school-related supplies now that classes have begun.
Overall, prices decreased 1 percent, bringing monthly
inflation to -1.1 percent.


4. (U) The exchange rate has depreciated slightly over
the past month. A combination of low diamond prices in
Antwerp and high international oil prices has increased
hard currency demands in the DRC. The IMF reported
that delayed effects of speculation on political
stability (post-Gatumba massacre) and seasonal demand
for USD to pay school fees also contributed to the
fluctuation. However, the IMF noted that the
fluctuations are minor considering that exchange rates
were at FC 420 to the USD less than a year ago and was
slightly overvalued at FC 380 to the USD. The IMF
expects rates to stabilize shortly.

TRANSPORTATION

PUBLIC TRANSPORTATION COSTS RISE IN MBUJI-MAYI


5. (U) Local press reported that the cost of public
transportation rose sharply in Mbuji-Mayi, from FC 100
to FC 150. Rising fuel costs due to market pressures
and tax increases contributed to the increase in fare
prices.

MINING

DIAMOND EXPORTS DECREASE IN AUGUST


6. (U) The Ministry of Mines recorded diamond exports
of 1.92 million carats for a value of USD 64 million
for the month of August, 2004. This is a significant
decrease from July's exports of 2.79 million carats.
(Comment: This is an indication that the DRC diamond
dealers are holding their supply off the market until
prices recover in Antwerp. Prices have decreased 10
percent over the past few months. End Comment.)

MORE EXPULSIONS FROM ANGOLA


7. (U) Local press reports that the expulsion and
forced repatriation of Congolese miners from Angolan
diamond mining sites has resumed, with approximately
600 Congolese being repatriated each week. (Note:
Angola had previously halted the politically sensitive
expulsion of Congolese miners after ministerial-level
dialogue between the two countries. End Note.)

BANKING

BCC ANNOUNCES NEW BANK NOTES FOR 2005


8. (SBU) The BCC (central bank) announced plans to
issue new bank notes in denominations of FC 1,000
(approximately USD 2.50),FC 5,000 (approximately USD
12.50),FC 10,000 (approximately USD 25),FC 20,000
(approximately USD 50),and FC 50,000 (approximately
USD 125) beginning in 2005. (Comment: This could also
play a role in speculative activities. The IMF is not
in favor of releasing notes in the 10,000s range, as it
feels the market is not yet prepared to handle such
large denominations. End Comment.)

LABOR

CHANIMETAL AGREES TO UNION NEGOTIATIONS


9. (SBU) Local press reported that Chanimetal, a
metalworking firm based in Kinshasa (note: Chanimetal
is also the local representative of Motorola in the
DRC),agreed to meet with union representatives to
negotiate a labor dispute that has frozen the company's
operations since September 8, 2004. Workers allege
that Chanimetal has not fully paid salaries and bonuses
as prescribed by an inter-professional minimum salary
agreement (SMIG). (Comment: Chanimetal executives
alleged that press accounts were misleading, and that
the dispute arose from an illegal wildcat strike.
Chanimetal executives agreed to meet with union heads,
but had already threatened to terminate workers'
contracts if the strike continued. End Comment.)
PUBLIC SECTOR
DGI REVENUES TOP USD 110 MILLION FOR 2004


10. (U) DGI (tax authority) reported revenues of over
USD 110 million for the first seven months of 2004.
This is compared to total revenues for 2003 of USD 124
million. DGI representatives credited strict
application of IMF and GDRC structural reform
initiatives as contributing to the revenue increase.

GDRC ADOPTS PROPOSALS FOR PUBLIC SECTOR REFORM


11. (U) International press reported that the cabinet
of the GDRC has adopted Ministry of Public Affairs
proposals for reform of the DRC's public sector. The
proposal calls for the reform of state procurement
practices, establishment of a direct deposit payroll
system for managers, payment of some salary arrears for
state workers, and the creation of an inter-ministerial
committee to monitor public administration.

AID

BELGIUM FUNDS 20 MILLION EUROS OF ASSISTANCE PROJECTS


12. (U) Belgian Minister of Cooperation and Development
Armand de Decker announced that Belgium has granted the
DRC 20 million euros in aid to improve education,
health, and food security in the DRC. In addition, 8
million euros of the aid will be used to rehabilitate
rural roads linking important agricultural areas in Bas-
Congo province.

2 MILLION EUROS IN AID FROM FRANCE


13. (U) OFIDA (customs and tax agency) Deputy Director
Albert Kasongo Mukonzo reported that the French
government has donated 2 million euros in aid for the
construction of two food warehouses and the
rehabilitation of part of the Kasumbalesa road in
Katanga province.

HEALTH

4000 CASES OF MEASLES REPORTED IN EQUATEUR


14. (U) Local health authorities and WHO
representatives in Equateur province reported a sharp
increase in cases of measles in children aged 6 months
to 15 years. Approximately 4000 cases have been
registered since January 2004. WHO representatives
blame the outbreak on poor vaccine distribution, and
plan to begin combining measles vaccinations with polio
and tetanus vaccinations to increase coverage of the
youth population.


15. (U) INFLATION BY CATEGORY (IN PERCENT)

WEEK ENDING 8/20 8/27 9/03 9/10
FOOD 0 7 0 -3
BEVERAGE 0 0 0 0
NON-FOOD -1 0 -1 -2
CLOTHING 0 0 0 0
RENT 0 0 0 0
TRANSPORT 0 0 0 0
SCHOOL COSTS 0 0 0 0
UTILITIES 0 0 0 0
COMBINED FIGURES
WEEKLY INFLATION 0.0 2.6 0 -1
MONTHLY INFLATION -0.8 1.7 0 -1.1

16. (U) EXCHANGE RATE DEVELOPMENTS

8/20 8/27 9/03 9/10
CENTRAL BANK RATE 390.594 392.045 396.014 401.688
PARALLEL MARKET
-KINSHASA 385-390 390-395 390-395 400-405
-LUBUMBASHI 380-390 380-390 380-385 400-405
-MBUJI MAYI 385-390 385-395 385-390 400-405
-KISANGANI 380-390 380-390 380-390 400-410
-GOMA 400-410 400-410 400-410 410-415
-BUKAVU 400-410 400-410 400-410 410-415


MEECE