DECEMBER ECONOMIC REVIEW

UNCLAS KINSHASA 000068 SIPDIS DEPT FOR DRL/IL-LHOLT AND AF/RSA-MHARPOLE TRANSPORTATION FOR FAA-EJONES E.O. 12958: N/A TAGS: ECON EFIN ELAB EMIN EAIR PGOV CG AID SUBJECT: DECEMBER ECONOMIC REVIEW REF: A. 05 KINSHASA 2079; B. 05 KINSHASA 2113 ¶1. (U) SUMMARY -------------- - USG debt relief for the DRC has been extended through March 2006. - The World Bank approved two grants totaling USD 215 million to support the implementation of the GDRC's economic program, reconstruction and rehabilitation. - A UN-organized audit of six Congolese airlines concluded in December, and the results are expected this month. - The GDRC is only partially honoring its 2005 strike- ending agreements with teachers and civil servants. At least one teachers' union is threatening to renew its strike after January 20 if the GDRC does not meet the union's demands. Police and military also continue to lodge compensation complaints. - The GDRC's official diamond exports and per carat value through November 2005 increased over the same 2004 period. - MIBA, the diamond mining parastatal, avoided a strike. - Parliament has neither promulgated the 2006 budget nor approved provisional spending. - The GDRC has completed one stage of its internal public debt settlement. - The GDRC authorities confiscated several tons of minerals that were allegedly being illegally exported at a Ugandan border crossing. - The DRC's main maritime port is facing simultaneous problems of a strike and a grossly exceeded container capacity. - The GDRC reported 23.1 percent year-end inflation. End summary. AVIATION -------------- ¶2. (U) The UN's Joint Logistics Center (UNJLC) aviation audit concluded in December. The audit team inspected six Congolese airlines to determine if they comply with IATA (International Air Transport Association) certification standards. A report of the findings may become public this month. ¶3. (U) A January 3 Congolese airline crash in Ituri District killed 3 passengers. LABOR -------------- ¶4. (U) The GDRC is only partially honoring its 2005 strike- ending agreements with teachers and civil servants. Teachers and their unions state that the government has not paid all teachers through December 2005, and that none have received promised raises. At least one union has announced that teachers will strike if they do not receive salary increases pursuant to the 2004 Mbudi accord, which set a minimum USD 208 monthly salary for government employees, but which the GDRC has never ratified. ¶5. (U) Kinshasa-based civil servants in all ministries received their salary and bonus payments through December, although some employees in the Finance, Budget, and Commerce Ministries told Econ FSNs that they had received larger bonuses than those in other ministries. Employees in other provinces await their November and December remuneration. Consequently, civil servants in at least one eastern city are striking. ¶6. (U) Police and military, at least in Kinshasa, received food allowances and salaries through December. ¶7. (U) Employees of ONATRA, the DRC's port authority, are on strike to protest a January 3 presidential decree declaring that OFIDA (DRC's customs body) is now the sole operator and collector of customs and excise taxes at all border posts. Thus, ONATRA loses direct control over its income stream and must wait for the GDRC to retrocede its share, thereby resulting in a reduced cash flow. Many ONATRA employees believe that they will lose jobs as a result. The strike has essentially shut down the port of Matadi, and thus no ships are docking. MINING -------------- ¶8. (U) According to GDRC statistics, diamond exports through November 2005 increased by 11 percent over the same 2004 period, despite a 13 percent one-month decrease in diamond exports from October to November. Total export volume through November was 29.6 million carats. Total evaluated price per carat (both gem and industrial quality) increased by 11.15 percent over the 2004 period with a total evaluated value of nearly USD 815 million. ¶9. (U) The GDRC is hosting a Kimberley Process Alluvial Mining Sub-group meeting January 30-31 in its capacity as the Central and South African Coordinator. ¶10. (U) MIBA, the GDRC's diamond mining parastatal, negotiated with labor representatives to avert a threatened late December strike. Through November, its official production, which consists primarily of industrial diamonds, had decreased by more than one-third over 2004 totals. ¶11. (U) DRC law enforcement authorities seized several tons of coltan and cassiterite that were allegedly being illegally exported December 5 at a major customs post on the Ugandan border (reftel A). PUBLIC FINANCE AND TAXATION -------------- ¶12. (U) November 30, the DRC agreed to amend the September 2005 debt relief agreement with the USG, extending through March 2006 the earlier period of forgiveness (from July 2003 through June 2005). ¶13. (U) December 8, the World Bank (WB) approved a USD 90 million grant to support the implementation of the GDRC's transitional economic programs and USD 125 million for the ongoing Emergency Multi-sector Rehabilitation and Reconstruction program. The USG abstained from the vote. ¶14. (U) The Council of Ministers approved the proposed USD 2.16 billion 2006 budget November 25, but the Parliament has not yet done so (reftel B). The lower house has approved the budget, but Senate approval is pending. Despite the resulting funding gap that began January 1, the GDRC has not yet approved interim funding. (Note: A January 11 presidential decree convoked an extraordinary session of Parliament, during which the budget issue is expected to be resolved. End note.) ¶15. (U) The GDRC completed the first stage of its World Bank-funded public commercial internal debt settlement, having paid all creditors entitled to USD 50,000 or less. The GDRC must next fund and schedule payments for creditors owed more than USD 50,000. ¶16. (U) The GDRC paid USD 11.5 million in World Bank- funded severance to employees of banks closed from 1999- 2001 and liquidated after 2003, under the WB's economic restructuring program. TRANSPORTATION -------------- ¶17. (U) The DRC's main maritime port, Matadi, has 2000 containers in excess of its 3500 container capacity, in part due to minimal rail service and a lack of functioning handling equipment. The railway system is now transporting only ten percent of Matadi's cargo, as a result of long-neglected maintenance of the rail and railcars. INFLATION -------------- ¶18. (U) 2005 Inflation, Post's Estimate: 23 percent 2005 inflation, Central Bank's Estimate: 22.1 percent EXCHANGE RATE DEVELOPMENTS -------------- ¶19. (U) Week ending 12/9 12/16 12/23 12/31 Central Bank Rate 438.69 436.75 431.03 431.28 Kinshasa 440-445 435-440 430-435 420-425 Lubumbashi 450-460 445-455 440-450 440-450 Mbujimayi 440-450 430-435 430-435 430-435 Kisangani 450-460 460-470 460-470 460-470 Goma 470-480 460-470 460-470 460-470 Bukavu 470-480 460-470 460-470 460-470 According to preliminary Central Bank figures, the 2005 average official rate was 474, and the parallel market average rate was 473. MEECE NNNN