VZCZCXRO0527
RR RUEHMA RUEHPA
DE RUEHRY #0838 0061413
ZNR UUUUU ZZH
R 061413Z JAN 09
FM AMEMBASSY CONAKRY
TO RUEHC/SECSTATE WASHDC 3316
INFO RUEHZK/ECOWAS COLLECTIVE
RUEAIIA/CIA WASHDC
RHEFDIA/DIA WASHINGTON DC
RHMFISS/HQ USAFRICOM STUTTGART GE
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHINGTON DC

UNCLAS CONAKRY 000838 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EPET EFIN ECON PGOV GV
SUBJECT: GOVERNMENT LOWERS GAS PRICES; EXCHANGE RATE SOARS 
 
¶1.  SUMMARY.  According to the acting Minister of Commerce, 
the GoG will no longer subsidize fuel prices, though the 
government will continue to fix these prices monthly in 
concert with the two oil companies in Guinea.  The Minister 
blamed a one-week, 32% appreciation in the Guinean franc on 
speculation and an uncertain business climate. END SUMMARY. 
 
---------------- 
FUEL PRICES FALL 
---------------- 
 
¶2. (U) The GoG announced on 3 January a 12.7% reduction in 
fuel prices, from GNF 5,500 to GNF 4,800 per liter (from 
$4.80 to $4.19 per gallon).  Acting Minister of Commerce 
Falilou Barry told Econ LES that, barring a crisis, the GoG 
would no longer subsidize fuel.  From this point forward, 
Barry said that a committee composed of representatives from 
the Ministries of Commerce, Finance, and Customs, along with 
the two oil companies in Guinea, Royal Dutch Shell and Total, 
would review worldwide conditions once per month and readjust 
the price accordingly.  He asserted that these fixed prices 
would be as close to a 'market price' as possible.  Barry 
said that the government was actually earning revenue off a 
small amount of import tax and VAT revenue on each liter 
sold, even after the recent price drop. 
 
--------------- 
THE FRANC RISES 
--------------- 
 
¶3.  (U) Turning to the exchange rate, Barry blamed 
speculators for the franc's 32% appreciation, which went from 
GNF 5,200 and GNF 3,500 per dollar between 23 December and 2 
January.  He stated that rumors of drastic price cuts for 
fuel and rice caused many businesses to put dollar purchases 
of imports on hold.  Further, a source told Econ LES that the 
widespread expectation that the government might peg the 
Guinea franc to a more stable currency such as the dollar or 
the euro prompted many people to stop hoarding dollars. 
Taken together, these two beliefs significantly curbed demand 
for other currencies, prompting the franc to soar. 
 
¶4. (U) However, after the government squelched a rumor on 
January 2 about a possible drop in gasoline prices to GNF 
3,000 per liter, Barry noted that the franc fell back to 
roughly 4,000 versus the dollar.  As of 5 January, $1 was 
worth GNF 4,259, a level roughly where it was in early 2008. 
 
 
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COMMENT 
------- 
 
¶5. (U) The new GoG fuel price policy may represent a step in 
the direction of full liberalization.  However, it could also 
simply be a quick fix economic measure to show the population 
that the new government is responding to their demands.  The 
GoG is likely only able to do this because world oil prices 
have plummeted.  If oil prices increase again, the GoG will 
be under significant political pressure to maintain what 
would quickly become the old fuel subsidy program, which is 
financially untenable.  Despite the minister's claims that 
the GoG has eliminated the subsidy program, the fact that 
they are still adjusting the price on a monthly basis means 
that they are still controlling the market.  END COMMENT. 
RASPOLIC