Identifier
Created
Classification
Origin
08FREETOWN196
2008-04-23 17:17:00
CONFIDENTIAL//NOFORN
Embassy Freetown
Cable title:  

SIERRA LEONE'S LIMITED REACTION TO PRICE INCREASES

Tags:  EAGR EAID ETRD ECON PGOV PREL SL 
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VZCZCXRO6062
PP RUEHPA
DE RUEHFN #0196/01 1141717
ZNY CCCCC ZZH
P 231717Z APR 08
FM AMEMBASSY FREETOWN
TO RUEHC/SECSTATE WASHDC PRIORITY 1874
INFO RUEHZK/ECOWAS COLLECTIVE PRIORITY
C O N F I D E N T I A L SECTION 01 OF 02 FREETOWN 000196 

SIPDIS

SENSITIVE
SIPDIS

DEPARTMENT FOR AF/W, EEB/TPP/ABT/ATP FOR JSPECK

E.O. 12958: DECL: 04/23/2018
TAGS: EAGR EAID ETRD ECON PGOV PREL SL
SUBJECT: SIERRA LEONE'S LIMITED REACTION TO PRICE INCREASES

REF: A. FREETOWN 44


B. FREETOWN 80

C. FREETOWN 184

D. STATE 39410

Classified By: Ambassador June Carter Perry for reasons 1.4 (b) and (d)

C O N F I D E N T I A L SECTION 01 OF 02 FREETOWN 000196

SIPDIS

SENSITIVE
SIPDIS

DEPARTMENT FOR AF/W, EEB/TPP/ABT/ATP FOR JSPECK

E.O. 12958: DECL: 04/23/2018
TAGS: EAGR EAID ETRD ECON PGOV PREL SL
SUBJECT: SIERRA LEONE'S LIMITED REACTION TO PRICE INCREASES

REF: A. FREETOWN 44


B. FREETOWN 80

C. FREETOWN 184

D. STATE 39410

Classified By: Ambassador June Carter Perry for reasons 1.4 (b) and (d)


1. (C) SUMMARY: Despite soaring prices of commodities, Sierra
Leone is stable relative to its sub-regional neighbors.
Though frequently reported in the media and discussed on the
streets, inflated prices of necessities like flour and rice
thus far have been met with public willingness to make ends
meet peacefully. The Government of Sierra Leone (GoSL)
regularly updates citizens on the global phenomenon
surrounding the increases, and while this message has yet to
trickle down to those outside major urban centers, it has
seemed to temper the potential for public outcry. However,
given the positive correlation between prices and anxiety,
once the increases are more sharply felt there could be
ramifications for peace and security in a nation already
struggling with financial hardship. END SUMMARY.

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CURRENT PRICES
--------------


2. (U) The current prices for basic necessities are as
follows, using a $1/Le 2940 exchange rate: 1 gallon of
gasoline ) $5.93 (Le 14,500); 50 kg. sack of potatoes -
$32.32 (Le 95,000); 50 kg. sack of domestically-produced rice
- $56.12 (Le 165,000); 50 kg. sack of imported rice - $40.82
(Le 120,000); 100 lb sack of domestically-produced flour -
$44.22 (Le 130,000); 100 lb sack of imported flour - $36.05
(Le 106,000). The price of foodstuffs has increased an
estimated 30 percent over the past six months, while fuel has
increased 5 percent in the same time period. Most Sierra
Leoneans live outside the formal economic sector and while
the official unemployment rate is currently unavailable,
unofficial figures place it between 70 and 80 percent. This
only exacerbates the impact of the price increases.


--------------
GOVERNMENT RESPONSE
--------------


3. (U) The GoSL response has been to convene a task force to
consider the issue and limited outreach efforts to educate
the public on the global nature of the price increases, and
to expound the importance of making Sierra Leone
self-sufficient in food production. Support from a variety of
donors is ultimately expected to revitalize the agricultural
sector, although there remains the impediment of bringing
goods to market using the country's appalling transportation
infrastructure. The GoSL rhetoric is focused on reducing any
media and public finger-pointing at the new APC-led
government for the inflation, but recent trips by Embassy
staff up-country reveal that little information is being
received at the village level. Many of those interviewed in
remote areas are only aware of economic strain, but not of
the global causes for that strain.


4. (C) Besides these limited efforts, no substantive policy
response has been issued by the GoSL. In January and February
2008, the Minister of Trade and Industry reportedly
established price ceilings on rice and flour (see reftel A).
Embassy officials were later told that the Minister's
announcement was misconstrued by the media, and that price
ceilings were never officially set. Market manipulation is
generally disallowed under the various agreements signed
between the GoSL and international financial institutions,
such as the International Monetary Fund.

--------------
RAMIFICATIONS: ACTUAL AND POTENTIAL
--------------


5. (U) Discussions with Embassy locally-engaged staff and
other citizens reveal they have grave concerns about their
livelihoods, especially given that some are now spending in
two weeks what they used to spend in a month on basic
necessities. The pinch is particularly felt in the price of
rice, fuel, and provisions like baby formula. Rumors of price
increases and possible shortages add to the anxiety,
especially since the public associates financial hardship
with the potential for increased crime and violence. Several
Embassy staff noted that they fear desperation will lead to
an increase in crime, both petty and violent.


6. (SBU) Beyond impacting the pocketbooks of consumers, the
increased costs of goods is affecting local business. As

FREETOWN 00000196 002 OF 002


noted in reftels B and C, the only flour mill in the country
nearly closed in March, partly due to an inability to
maintain competitive prices relative to importers because of
the high cost of wheat. Sources indicate that imported flour
is currently cheaper than domestic because traders are
selling off months-old stock. Price parity between domestic
and imported flour is expected at Le 130,000 ($44.22) once
the importers replenish their supply, which will more
accurately reflect the current global prices of wheat and
fuel.


7. (U) The cost of rice is also anticipated to increase in
the future. While GoSL statements are usually intended to
educate and prevent accusations and tension, the Deputy
Minister of Trade and Industry recently stated that rice is
expected to cost as much as Le 200,000 per 50 Kg bag ($68.03)
by 2010. Rice is such a staple here that a family of five or
six will use up a 50 kg bag in one month.


8. (SBU) The Lebanese community, heavily involved in commerce
and trade in Sierra Leone, is often resented by Sierra
Leoneans. The two major rice importers are Lebanese and
rumors have been circulating that they are manipulating the
cost and availability of rice for personal gain. Concepts of
the impact of the global market place and the rising food
prices are harder to grasp for some, and they thus revert to
blaming the usual suspects. Any backlash on the increase in
food prices, particularly the staple, rice, may be directed
at the Lebanese.

--------------
COMMENT: DAMP SPARKS ON A POWDER-KEG
--------------


9. (C) Price increases represent a significant challenge for
any government, but particularly for a ruling party still
adjusting to its new position and responsibilities. The
government must continue to maintain public outreach efforts
while also stemming potential panic and managing expectations
about the future. Though the situation is stable for the
moment, continued and rumored increases could be a catalyst
for violence and crime in a country where many already
struggle to survive on less than a dollar a day, face a 60-80
percent unemployment rate and support large extended
families. There are currently no absolute signs that Sierra
Leone is on the verge of a perhaps violent crisis, but it is
overly optimistic to assume that the potential for unrest as
conditions worsen does not exist. USAID, Regional Food for
Peace, our implementing partners and other government and
international stakeholders are working together to research
the situation and will be making recommendations on how to
address the situation as it unfolds. Post will continue to
monitor and report, per reftel D. END COMMENT.
PERRY