IMF REP'S PRIMARILY POSITIVE READOUT

C O N F I D E N T I A L SECTION 01 OF 02 ACCRA 000611

SIPDIS

E.O. 12958: DECL: 03/21/2013
TAGS: EAID GH
SUBJECT: IMF REP'S PRIMARILY POSITIVE READOUT


Classified By: Ambassador Mary Carlin Yates for reasons 1.5 (b)
and (d)


1. (SBU) Summary: Ambassador Mary Carlin Yates and econoff
visited Enrique de la Piedra, the IMF Resident Representative
on March 20. De la Piedra offered a positive readout of the
Budget now under Parliamentary review and Multiple Donor
Budget Support. The Resident Representative finds affinity
with his working level colleagues and leadership in the Bank
of Ghana and the Ministry of Economic Planning and Regional
Cooperation, finds it occasionally difficult to work with the
Ministry of Finance and is wary of the messages put out by
the Minister of Trade and Industry. End Summary.

--------------
The Budget
--------------


2. (U) Despite the surprise tariff increases, de la Piedra
was very positive about the Budget (septel). The IMF was
looking for adequate revenue mobilization (i.e. taxes) effort
and zero domestic debt financing. The IMF also is seeking
better expenditure controls. There are revenue enhancement
measures in the budget that please the IMF. He also noted
that the government understands that it cannot encourage
investment if banks realize bigger gains assuming government
debt instead of lending to local businesses. The GoG's
spending will have to come under control. De la Piedra was
slightly concerned about timing, as control of domestic debt
and expenditure and revenue mobilization are usually more
difficult in an election year.

--------------
Multi Donor Budget Support
--------------


3. (U) The Ambassador asked about Multi Donor Budget Support
(MDBS) in Ghana and pointed out that better coordination
between donors is a logical step. The Resident
Representative sees Multi Donor Budget Support as an overall
plus for both sides. The Government of Ghana saves on
transaction costs for financing projects and the donors
increase their clout in Ghana and the region. De la Piedra
cautioned that the only way MDBS will work is if the GoG uses
the funds adequately to address the needs of the Ghanaian
people. The money will not be available in the future if the
funds are misused now. The Ambassador did not share the
current position of USAID that the USG will not be able to
sign this framework agreement but this was stated at the
March 24 Mini-CG held in Accra.

--------------
Bank of Ghana
--------------


4. (U) De la Piedra, The International Monetary Fund Resident
Representative, described himself as a link between the IMF
team in Washington, the Government of Ghana and the donor
partners. He has good relations with his interlocutors at the
Bank of Ghana (BOG),noting that Bank Governor Paul Acquah
and his special assistant, Mahamadou Bawumia speak the same
language as the IMF. He commented that the Bank Governor is
doing well in a difficult job. De la Piedra noted how the
tables have turned for Acquah, a 20-year veteran of the IMF,
now answering to Ghana's market and political pressures as
well as the donor community. Overall, de la Piedra believes
the BOG is on the right track. It is keeping monetary policy
under tight control and working to improve the financial
market (i.e., Acquah's work to improve the FOREX market).


5. (U) The more difficult issue, according to de la Piedra,
is restructuring the Bank of Ghana itself. Ambassador Yates
noted Acquah's concern about capturing more of the funds that
are currently outside the banking system. De la Piedra
responded, saying that the primary concern should be the
market itself, i.e., what is in the banking sector, not what
is not. The Bank needs to create incentives for people to
bring their money into the formal banking sector.

-------------- --------------
Ministry of Economic Planning and Regional Cooperation
-------------- --------------


6. (C) De la Piedra's primary concern is the linking of the
Ghana Poverty Reduction Strategy to the Budget, a difficult
task due to the internal wrangling between Minister of
Economic Planning and Regional Cooperation Paa Kwesi Nduom
and the Minister of Finance, Yaw Osafo-Maafo. De la Piedra
also confided that there is some suspicion that Nduom, a
minority party candidate (Convention People's Party) from
Cape Coast, was awarded his position because he was "robbed"
of the Parliamentary seat. Nevertheless, Nduom is doing well
with a small but talented staff. De la Piedra also weighed in
the Cabinet shake-up rumors that have plagued the Kufuor
Administration for the last year and half by noting that
Nduom has been mentioned as a replacement Minister of Finance
should Osafo-Maafo stumble.

--------------
Ministry of Finance
--------------


7. (SBU) While he found the BOG pragmatic, he observed the
Minister of Finance Osafo-Maafo and his Special Assistant
Tony Osei to be primarily politically motivated. De la Piedra
noted that during the rocky period between the IMF and the
GoG last fall, it was difficult to get on the same page as
the Finance Minister regarding the problems with the budget
overruns.
--------------
Ministry of Trade and Industry
--------------

8. (C) Most worrying to de la Piedra is the Minister of Trade
and Industry Kofi Konadu Apraku. De la Piedra sees a trend in
Apraku's public speeches and comments that is not good. De la
Piedra saw the rice and chicken tariff increases in the
budget as the handiwork of Minister Apraku. De la Piedra
warned that we (the international donor community) need to
apply more pressure on the tariff issue to ensure that Ghana
does not go that route. (Note: The Ambassador raised the
issue and our concerns about the augmented tariffs on rice
and poultry with the Minister of Agriculture on March 26, but
with little satisfaction.) The domestic content bill is
another example of Apraku's artful vilification of trade
liberalization policies. While the bill will conform in
language to Ghana's bi- and multi- lateral contractual
obligations, domestic firms will be given more help
(unspecified).
YATES