DRC MARCH ECONOMIC REVIEW

UNCLAS SECTION 01 OF 03 KINSHASA 000566

SIPDIS

SIPDIS

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

E.O. 12958: N/A
TAGS: ECON EFIN ENRG ELAB EAGR EAIR ETRD PGOV CG
SUBJECT: DRC MARCH ECONOMIC REVIEW


1. (U) Summary
--------------

-The DRC?s IMF Poverty Reduction and Growth Facility
program lapsed March 31, without going to a sixth review.
-The GDRC widened its ban on the import of poultry
products.
-Employees of Lignes Aeriennes Congolaises (LAC) objected
to the parastatal?s new partnership with a Spanish airline,
Bravo Airlines.
-President Kabila replaced the Central Bank?s Vice Governor
and named new directors of two major national taxation
entities.
-President Kabila released USD 2 million to support
hydroelectric power plant construction in two provinces.
-Labor strife, including threatened strikes, continued in
various public sectors.
-The DRC?s Minister of Planning resigned March 16 from his
post and political party, following the release of a draft
Poverty Reduction Strategy Paper.
-Three DRC provinces are facing a corn meal scarcity.
-A World Bank?s audit team is investigating allegations of
corruption within two DRC agencies responsible for
administering donor-funded projects.
-According to Post?s market basket survey, March consumer
prices decreased by 0.6 percent, and the 12-month market
basket inflation average is 9.6 percent. End summary.

AVIAN INFLUENZA
--------------


2. (U) The GDRC has increased the number of countries from
which it bans the import of poultry products. The increase
is in step with the World Health Organization?s expansion
of the list of countries with confirmed outbreaks of the
highly pathogenic avian influenza (HPAI). In mid-March, the
GDRC sent samples from three suspected HPAI outbreaks in
the DRC to a lab in Pretoria, South Africa; two samples
were negative, but the GDRC has not received the results
from the third sample.

AVIATION
--------------


3. (U) The European Union has banned 50 Congolese
commercial airlines from taking off or landing passenger or
cargo airplanes in the EU or operating within EU airspace,
pursuant to a European Commission civil aviation panel?s
findings on air safety. The EU banned or restricted a total
of 92 airlines. Hewa Bora is the only Congolese airline
that is not subject to a complete ban; it is permitted to
operate one specific aircraft in Europe.


4. (U) Employees of the parastatal Lignes Aeriennes
Congolaises (formerly Air Zaire) are demanding that LAC
withdraw from its partnership with the Spanish company
Bravo. LAC, which has been essentially defunct since the
early 1990s, recently launched a partnership with Bravo,
which brought a Boeing 767 to the DRC. The employees,
through their union, object to the partnership?s agreement
to reduce LAC?s payroll, and they are claiming 13 years of
salary arrears, despite the fact that they have not worked
during this period.

FORESTRY
--------------


5. (U) The Central African Forests Commission (COMIFAC)
held a German-funded regional workshop in Kinshasa March
15-17 to discuss financing and implementation of its forest
conservation plans.

INFRASTRUCTURE
--------------


6. (U) DRC President Kabila released USD 2 million out of a
promised USD 15 million to fund the construction of hydro-
electric power plants in Katende, Western Kasai province
and Kakobola, Bandundu province. The total project cost
for the plants is estimated at USD 30 million. The GDRC
has pledged USD 15 million, while the South African firm
Clackson Power is to pay the other half.

LABOR
--------------

KINSHASA 00000566 002 OF 003




7. (U) The employees of ONATRA (the Congolese port and
western rail authority) are again threatening to strike
over nonpayment of wages. Employees have not received
their February and March wages.


8. (U) The employees of SNCC (the DRC?s eastern and
southern rail transporter) are on strike to protest at
least 14 months of salary arrears. Employees of CMDC (the
DRC?s nearly defunct sea transport parastatal) were on
strike for two days to claim their wage arrears of 15 to 30
months.

PUBLIC FINANCE AND TAXATION
--------------


9. The IMF allowed the DRC?s Poverty Reduction and Growth
Facility program to lapse on March 31, rather than
extending it through its latest possible date, June 11,

2006. The program?s end means that the DRC will not
receive a final USD 39 million disbursement to the
Congolese Central Bank (BCC). The program began June 2002
and successfully passed through five reviews, but the IMF
determined that the GDRC would not be able to meet all
program conditions in time to pass a sixth review. The DRC
and IMF are now in discussions for the setup of a staff-
monitored program (septel to follow).


10. (U) Alexis Thambwe Mwamba, the Minister of Planning,
resigned from his post and political party (MLC) March 16.
Before leaving office, the mixed commission that he chaired
released the first draft of its Poverty Reduction Strategy
Paper (PSRP),a necessary part of the GDRC?s efforts to
arrive at the Heavily Indebted Poor Country?s ?completion
point,? when a large lump-sum debt cancellation will occur.
This draft must still be vetted and revised, based upon
donors? group comments, and presented to the Council of
Ministers for final GDRC approval, before it can be given
to the IMF and the World Bank for approval. Initial
reactions by Congolese and international partners have
identified several major flaws in the draft strategy, and
at least for the time being, the draft has been ?withdrawn?
for further review and revision.


11. (U) President Kabila replaced the BCC Vice Governor and
named new directors of DGI (the DRC?s income tax collection
service),and DGRAD (the DRC?s administrative fees
collection service). The prior DGI and DGRAD directors
were removed in late 2005 for alleged corruption and
mismanagement, in the wake of a tax credit scandal. All
three appointees are members of the PPRD party; MLC members
previously held the DGI and DGRAD positions.


12. (U) A team from the World Bank?s Department of
Institutional Integrity was in Kinshasa to examine alleged
corruption and irregular practices at BCECO and UCOP, two
GDRC agencies responsible for administering donor-funded
anti-poverty projects. The Ministries of Finance and Budget
oversee these agencies.

TRADE
--------------


13. (U) The United Nations Conference on Trade and
Development (UNCTAD) held a workshop entitled ?The
Elimination of Service Sector Export Barriers? March 12-15
to promote multilateral trade and to discuss modernizing
the DRC?s economic and commercial compliance with WTO
accords.


14. (U) Reports from the southern and central DRC provinces
of Katanga, Western Kasai and Eastern Kasai indicate that
the price of cornmeal, a dietary staple, has risen
dramatically over the last month. This increase is due to
the Zambian government?s halt of maize exports ? Zambia is
a major supplier of cornmeal to the DRC - and the National
Railway Company?s (SNCC) inability to provide reliable
transport from Katanga to the Kasai provinces (see labor).
At the same time, thousands of tons of maize are rotting at
the DRC river port of Lisala, Equateur province, because of
insufficient Congo River transport.

INFLATION
--------------


KINSHASA 00000566 003 OF 003



15. (U) Post?s market basket survey recorded deflation of
0.6 percent. The inflation average for the last 12 months
now stands at 9.6 percent.

EXCHANGE RATE
--------------


16. (U) Week ending
02/28 03/1003/17 03/25
CENTRAL BANK RATE432 439438 439
PARALLEL MARKETS
-KINSHASA440 445445 445
-LUBUMBASHI450 450450 450
-MBUJIMAYI450 450450 450
-KISANGANI450 450450 450
-GOMA450 450450 480
-BUKAVU450 450450 450

MEECE

UKAVUQQQ450Q 450Q450Q 450

MEECE