ECONOMIC HARDSHIP INCREASES AS PRICES RISE

UNCLAS CONAKRY 000048

SIPDIS

DEPT FOR AF/W
DEPT FOR EB/IFD/OMA
DEPT FOR EB/ESC/IEC FOR PHAYMOND
DEPT PLEASE PASS TO USTR FOR LAURIE ANN AGAMA
DEPT PLEASE PASS TO COMMERCE FOR SALIHA LOUCIF
TREASURY FOR OFFICE OF AFRICAN NATIONS

SIPDIS
SENSITIVE

E.O. 12598: N/A
TAGS: ECON EPET PGOV GV
SUBJECT: ECONOMIC HARDSHIP INCREASES AS PRICES RISE

REF: A) CONAKRY 0164

B) CONAKRY 0158
C) CONAKRY 0207


1. (SBU) SUMMARY. Prices for basic necessities continue to rise in
Guinea, contributing to persistent economic hardship and increasing
desperation on the part of the average Guinean. Growing economic
frustration coupled with generally high political tensions create an
environment wherein the possibility for civil unrest is steadily
mounting. END SUMMARY.

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GASOLINE
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2. (SBU) On March 26, Econoff spoke with Elhadj Alpha Yaya Diallo,
the Bureau Chief for the gasoline depot in Conakry. Yaya Diallo
estimated that the gasoline subsidy has so far cost the GOG 32
billion GNF (about 7.1 million USD) in 2008. He emphasized that
Guinea cannot afford to keep subsidizing gasoline.


3. (SBU) The Bureau Chief confided that the gas depot only has
enough gasoline to last until Saturday, March 29. Making matters
worse, he said the next fuel tanker is not scheduled to arrive until
the middle of next week. He went on to say that he has recently
attended Ministry of Finance meetings about the termination of the
gasoline subsidy, and that the target date is March 31. He
estimated that the new price of gasoline will be 7,000 Gnf (about
1.50 USD) per liter. (COMMENT. This would be a 62% increase in the
cost of gasoline. END COMMENT)

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BASIC FOODSTUFFS
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4. (U) The Embassy has conducted an informal weekly food survey of
street vendors since August 2007. The negotiated tripartite
agreement that ended the strike in January/February 2007 called for
the price of rice to be set at 87,500 GnF (about 19 USD) for a 50 kg
bag. Today that same 50 kg bag of rice costs 175,000 (about 38
USD). Meanwhile, a 50 kg sack of imported flour has gone from
163,000 (about 35 USD) to 240,000 (about 53 USD).


5. (U) These significant price increases directly correspond to a
decrease in the general standard of living for most Guineans. For
example, Government workers' wages range from $42 to $78 per month.
With a 50 kg bag of rice feeding a family of four for about two
weeks, just buying rice for the household would take up most of a
government worker's monthly salary, at current prices.

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MARCH 31 LOOMS ON THE HORIZON
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6. (SBU) COMMENT. The agreement postponing the January 2008 strike
expires on March 31. In accordance with the Fuel Depot Bureau
Chief's comments, a Ministry of Finance contact also told econoff
that the gasoline subsidy will end on March 31 (REFTELS). The IMF
team is in Conakry until the first week in April to review progress
toward achieving the requirements of the Poverty Reduction and
Growth Facility, which means that the GoG is under significant
pressure to either reduce or eliminate the subsidy.


7. (SBU) Last week, Econoff witnessed teachers, who typically go
several months at a time without being paid, protesting outside the
Ministry of Finance over the failure of the government to pay their
salaries. Rising prices and stagnant salaries (when they can be
collected) translate into increasing economic hardship. As
background, in 2007, the unions used similar public discontent over
the falling standard of living to generate support for the
nationwide labor strike that led to widespread civil unrest. While
the average Guinean may not be willing to support a strike for
political reasons, increasing frustration over the economic
situation could lead to civil unrest. END COMMENT.

BROKENSHIRE