BURMA'S SOARING FUEL PRICES HIT THE POOREST FIRST

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
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
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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
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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
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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