CNDD PLANS TO FIX FOREIGN EXHANGE RATE

UNCLAS CONAKRY 000566 SIPDIS SENSITIVE E.O. 12958: N/A TAGS: EFIN ECON PGOV PREL GV SUBJECT: CNDD PLANS TO FIX FOREIGN EXHANGE RATE ¶1. (U) An Interministerial Commission which includes; the Ministries of Defense, Finance, Commerce, Mines, Justice, High Crimes and Banditry, the Central Bank, and the Office of the President, have reportedly proposed to peg the Guinean Franc to the US dollar. The new exchange rate would be valued at 4800 Guinean Franc (GNF) to the dollar. The current floating exchange rate has been hovering around 4900 GF. According to sources, the CNDD plans to initiate this exchange rate peg in order to renew confidence in the weakening Guinean currency. A similar initiative was considered in June 2009 (reftel) but never came to fruition. At that time, the proposed rate was 3500 GF to the dollar, an amount that caused consternation among the business community and the foreign exchange commission. -------------- COMMENTS -------------- ¶2. (SBU) The government,s attempt to set the rate may be an ill-advised attempt to improve confidence in Guinea,s economy. The GoG does not have sufficient foreign exchange reserves to effectively guarantee the exchange rate. The population may turn to the black market, to exchange foreign currency. The speculative informal market is already creating a parallel exchange rate at the current value of 5800 GF to the dollar. Coupled with the practice of conducting business using a much more fluid system of connections and influence, the effort could serve to further damage an already suffering economy. END COMMENT. BROKENSHIRE