FINANCE MINISTER PLANS REFORMS, BUT CAN HE DELIVER?

C O N F I D E N T I A L SECTION 01 OF 02 KINSHASA 008647

SIPDIS


E.O. 12958: DECL: 12/28/2010
TAGS: EFIN ECON PGOV CG
SUBJECT: FINANCE MINISTER PLANS REFORMS, BUT CAN HE DELIVER?


REF: STATE 24316


Classified by Economic Officer Katherine Simonds. Reason:
1.5(d).



1. (C) Summary: On December 28 Finance Minister Amisi told
the Ambassador that he hopes to have Presidential approval
for both an interim economic reform program and a new budget
by mid-January. He said his program would include market
liberalization, deficit reduction and policies to encourage
local food production. He said the IFIs have agreed to
review GDRC performance after three months. The Ambassador
gave Amisi information on requirements for USG debt
forgiveness, including military transparency. Amisi appears
more committed than his predecessor to doing the right thing,
but his ability to put his plans into practice is
questionable. End summary.


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Critical Time Ahead
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2. (C) During a visit from the Ambassador on December 28,
Minister of Finance Jean Amisi Kalondaya said he had two key
programs he would present to the President for approval by
mid-January. One is a draft budget, which he expects to
complete within two weeks. The other is an interim economic
reform program. Amisi said that he expects a World Bank/IMF
team to visit Kinshasa around January 15, and implied that he
hopes to have government approval for the reform program
before they arrive. (At their meeting on December 29
(septel),recalling his talk with Amisi the previous day,
Ambassador Swing encouraged President Kabila to give full
support to the World Bank/IMF mission when it comes here in
January.)


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Pleased with International Support
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3. (C) Amisi told the Ambassador he recently spoke by phone
with World Bank President Wolfensohn and IMF Managing
Director Kohler, and he said that both expressed support.
Amisi said the IFIs had agreed to review the DRC's
performance three months after his reform program is
implemented and to consider a negotiated program at that
time. He acknowledged that past recommendations from Bank
and Fund experts had not been followed, but noted that
despite this the World Bank is moving ahead to activate the
Emergency Stabilization Fund. Amisi told the Ambassador that
he hoped to use most of the $5 million in the Stabilization
Fund for road-building projects. He also expressed
satisfaction with the African Development Bank's plan to
begin a major capacity building project for the GDRC.
Finally, he said the European Community will release 200
million euro in credits for the DRC as soon as the GDRC pays
a $500 thousand membership fee, something he hopes to achieve
in the next week.


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The Reform Program
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4. (C) Amisi gave only a broad overview of his reform
program. He said he plans to liberalize diamond, petroleum
and foreign exchange markets, but noted that foreign exchange
liberalization will need to be staged. He admitted that
current policy includes a large subsidy for fuels that the
government can ill afford. He told the Ambassador he is
confident that he can increase government revenues
dramatically and thereby reduce the budget deficit, which
will allow the GDRC to reduce money supply growth and control
inflation.



5. (C) Amisi was enthusiastic about plans to reduce the
demand for hard currency by increasing local production and
limiting imports. He told the Ambassador that restrictions
on the DRC's imports of salted fish will quickly lead to a
resurgent fishing industry. Similarly, he said, local
production of pork, chicken, corn and manioc must be
encouraged.


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The Importance of Getting It Right
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6. (C) The Ambassador told Amisi that he was wise to make
relations with the IFIs one of his top priorities, since
their participation will help the DRC design the right
program, will open the way to multilateral financing, and is
a prerequisite for bilateral debt relief. He gave the
Minister information on the HIPC program and noted that the
USG is committed to providing debt relief to countries
meeting requirements. He also described for Amisi U.S.
legislation relating to military budget transparency and left
him a copy of the demarche delivered to former-Minister
Mawampanga in March (Reftel). The Ambassador recommended
that the GDRC focus efforts on reform of the parastatal
sector as well. He explained USG restrictions on assistance
to the GDRC to Amisi, but noted that we still had the
opportunity to be helpful in promoting reform, such as when
we sponsored the Public-Private Partnership Forum in October.


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Comment
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7. (C) It was a refreshing change to discuss economic issues
with the Finance Minister, instead of listening to an
emotional diatribe about the war. Amisi said all the right
things about market liberalization, and about fiscal and
monetary restraint. However, his belief that food imports
can quickly be replaced appears naive, and his estimate of
the amount and speed of international support the GDRC can
expect appears overly optimistic. More importantly, his
success will hinge on his ability to secure the support of
President Kabila in the face of opposition from some of those
closest to the President. Nothing we know about him or saw
during our call inspires confidence that he will be able to
deliver where others have failed.
SWING