Identifier
Created
Classification
Origin
09CONAKRY317
2009-06-05 14:30:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Conakry
Cable title:
CNDD PLANS TO FIX FOREIGN EXCHANGE RATE, OVERVALUE
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UNCLAS CONAKRY 000317
SIPDIS
SENSITIVE
E.O. 12958: N/A
TAGS: ECON EFIN PGOV PREL ASEC GV
SUBJECT: CNDD PLANS TO FIX FOREIGN EXCHANGE RATE, OVERVALUE
CURRENCY
UNCLAS CONAKRY 000317
SIPDIS
SENSITIVE
E.O. 12958: N/A
TAGS: ECON EFIN PGOV PREL ASEC GV
SUBJECT: CNDD PLANS TO FIX FOREIGN EXCHANGE RATE, OVERVALUE
CURRENCY
1. (SBU) According to several independent sources, the
CNDD-led Government of Guinea is planning to fix the exchange
rate of the Guinean franc (GNF) to 3500 to the dollar. The
current exchange rate has been hovering between 4900 to 4975
since the December coup. The President of the Guinean Bureau
of Exchange told Pol LES that key government ministries will
meet the afternoon of June 5 at the People's Palace to
"finalize" the plan. He expected the new exchange rate to go
into effect within a few days.
2. (SBU) However, during a donor meeting on assistance
yesterday with the Minister of Finance, the UNHCR
representative asked the Minister about the new policy. The
Minister reportedly refused to comment, saying that he had
"no official information" on that decision.
3. (SBU) In a related decision, the CNDD closed down all
currency transfer operations (such as Western Union) in
Guinea until further notice. The President of the Guinean
Bureau of Exchange explained that CNDD President Dadis is
insisting that these companies accept Guinean francs rather
than foreign currency.
--------------
COMMENT
--------------
4. (SBU) If the policy goes through, there may be a short
term boost to the Guinean economy through the increase in
relative purchasing power, but a fixed, artificially inflated
exchange rate is likely to hurt the country in the long run.
This is particularly true in light of the global decline in
bauxite prices since an overvalued currency against the
dollar ultimately increases the cost of exports. When
bauxite prices start to increase again, Guinea will be at a
significant disadvantage. There does not seem to be any
discussion of how the decision would affect other foreign
exchange, such as the GNF versus the Euro. Contacts at the
Ministry of Finance and the Central Bank seem largely unaware
of the details of the decision, which suggests that the
policy may be a CNDD initiative. END COMMENT.
RASPOLIC
SIPDIS
SENSITIVE
E.O. 12958: N/A
TAGS: ECON EFIN PGOV PREL ASEC GV
SUBJECT: CNDD PLANS TO FIX FOREIGN EXCHANGE RATE, OVERVALUE
CURRENCY
1. (SBU) According to several independent sources, the
CNDD-led Government of Guinea is planning to fix the exchange
rate of the Guinean franc (GNF) to 3500 to the dollar. The
current exchange rate has been hovering between 4900 to 4975
since the December coup. The President of the Guinean Bureau
of Exchange told Pol LES that key government ministries will
meet the afternoon of June 5 at the People's Palace to
"finalize" the plan. He expected the new exchange rate to go
into effect within a few days.
2. (SBU) However, during a donor meeting on assistance
yesterday with the Minister of Finance, the UNHCR
representative asked the Minister about the new policy. The
Minister reportedly refused to comment, saying that he had
"no official information" on that decision.
3. (SBU) In a related decision, the CNDD closed down all
currency transfer operations (such as Western Union) in
Guinea until further notice. The President of the Guinean
Bureau of Exchange explained that CNDD President Dadis is
insisting that these companies accept Guinean francs rather
than foreign currency.
--------------
COMMENT
--------------
4. (SBU) If the policy goes through, there may be a short
term boost to the Guinean economy through the increase in
relative purchasing power, but a fixed, artificially inflated
exchange rate is likely to hurt the country in the long run.
This is particularly true in light of the global decline in
bauxite prices since an overvalued currency against the
dollar ultimately increases the cost of exports. When
bauxite prices start to increase again, Guinea will be at a
significant disadvantage. There does not seem to be any
discussion of how the decision would affect other foreign
exchange, such as the GNF versus the Euro. Contacts at the
Ministry of Finance and the Central Bank seem largely unaware
of the details of the decision, which suggests that the
policy may be a CNDD initiative. END COMMENT.
RASPOLIC