Identifier
Created
Classification
Origin
09ABIDJAN239
2009-04-15 16:03:00
UNCLASSIFIED
Embassy Abidjan
Cable title:  

AUTOMATIC FUEL-PRICING REGIME HAS ITS FIRST IMPACT

Tags:  ENRG EFIN ECON PGOV IV 
pdf how-to read a cable
P 151603Z APR 09
FM AMEMBASSY ABIDJAN
TO SECSTATE WASHDC PRIORITY 5066
INFO ECOWAS COLLECTIVE PRIORITY
DEPT OF ENERGY WASHINGTON DC PRIORITY
DEPT OF TREASURY WASHDC PRIORITY
UNCLAS ABIDJAN 000239 


E.O. 12958: N/A
TAGS: ENRG EFIN ECON PGOV IV
SUBJECT: AUTOMATIC FUEL-PRICING REGIME HAS ITS FIRST IMPACT

REF: (A) 2008 ABIDJAN 452 (B) 2008 ABIDJAN 480


UNCLAS ABIDJAN 000239


E.O. 12958: N/A
TAGS: ENRG EFIN ECON PGOV IV
SUBJECT: AUTOMATIC FUEL-PRICING REGIME HAS ITS FIRST IMPACT

REF: (A) 2008 ABIDJAN 452 (B) 2008 ABIDJAN 480



1. Summary. On April 14, 2009, fuel prices at the pump in
Abidjan decreased approximately 4 to 7 percent in response to
a GOCI mandate. The decrease was the first change in prices
made in accordance with a fuel-pricing mechanism the GOCI
agreed to as part of its IMF program. End summary.


2. Until April 14, 2009, the GOCI set fuel-price caps through
a largely political process. When the GOCI needed more cash,
it raised fuel prices and kept them artificially high even
when world prices decreased; when political pressure mounted,
the GOCI lowered prices. For many months the IMF has pushed
the GOCI to adopt an automatic pricing mechanism that would
more closely reflect changes in world prices.


3. In its first IMF Emergency Post-Conflict Assistance (EPCA)
program, approved in August 2007, the GOCI agreed to
implement a proposed automatic pricing mechanism by December
31, 2007. It failed to do so. In its second EPCA, approved
in April 2008, the GOCI agreed to implement the mechanism in
July 2008. Once again, the GOCI failed to do so. However,
on July 7, 2008, the GOCI imposed significant price increases
on various fuels, in line with increases in world oil prices.
Unleaded gasoline prices rose 29 percent; diesel went up 44
percent; lamp oil rose 17 percent; and cooking gas rose 28.5
percent (ref A). In response to the ensuing strike by
transportation workers and members of the country's largest
federation of unions, on July 20, 2008, the GOCI reduced the
price of diesel (the primary fuel for public transportation,
taxis, and most drivers) and lamp oil by 12.7 percent and 10
percent, respectively (ref B).


4. The IMF continued to insist on an automatic pricing
mechanism. In February 2009, with its feet to the fire, the
GOCI agreed to implement the automatic pricing mechanism as a
pre-condition for an IMF Poverty Reduction and Growth
Facility (PRGF) and approval of the enhanced Heavily Indebted
Poor Countries (HIPC) decision point. However, the new
pricing formula had no effect at the pump until April 14,
when prices for unleaded gasoline fell 3.8 percent, from CFA
650 to CFA 625 (USD 1.30 to 1.25) per liter; diesel prices
decreased 6.1 percent, from CFA 575 to CFA 540 (USD 1.15 to
1.08) per liter; and lamp oil prices fell 6.7 percent, from
CFA 450 to 420 (USD 0.90 to 0.84) per liter.


5. Comment. The real test of the GOCI's commitment to the
pricing scheme will come when world oil prices increase
sharply and the formula requires a corresponding increase,
both at the pump and in the bus and taxi fares paid by those
who can least afford it. End comment.


NESBITT