OFFICIAL INFORMAL NUMBER 054 (04/07/04)

S E C R E T SECTION 01 OF 02 COLOMBO 000606

SIPDIS

NOFORN

OFFICIAL INFORMAL

FOR SA/INS

E.O. 12958: DECL: 04/07/14
TAGS: AMGT CE MV LTTE
SUBJECT: OFFICIAL INFORMAL NUMBER 054 (04/07/04)

Classified by Ambassador Jeffrey J. Lunstead for reasons
1.5 (b) and (d).

CONTENTS: NEW PRIME MINISTER
- CODEL DREIER
- DCM OUT
- CO-CHAIR/IFI MEETING
- HELGESEN CONTACT
- POST-ELECTION TIDBITS


NEW PRIME MINISTER
--------------


1. (C) The Ambassador will call on new Prime Minister
Mahinda Rajapakse at 9 am Thurday morning. We assume
that the POTUS-Prime Minister congratulatory letter
referred to in the D memo you e-mailed us is in the
works? Let us know if you need language from us.
Depending on how long the meeting goes, we'll sound out
Rajapakse on peace process, economic policy, etc. Ops
Center called POL yesterday to get Rajapakse's telephone
coordinates. Is an S call to either the PM or the
President in the works? (DCM)

CODEL DREIER
--------------


2. (SBU) Seems to be falling into place. We have
indications the new PM may receive them. No word yet on
a CBK meeting for them. (DCM)

DCM OUT
--------------


3. (U) Jim will be down in Embilipitya all day
Thursday carrying the flag at a graduation ceremony for
U.S.-funded deminers. (DCM)

CO-CHAIR/IFI MEETING
--------------


4. (C) Ambassador lunched today with other Co-chair Chiefs
of Mission (Norway, EU, Netherlands for EU Presidency,
Japan) plus international financial institution heads (World
Bank, IMF, ADB) to discuss post-election scenario. On
financial/economic issues, IMF said there are many decisions
to be made, but no specific choke points. One of the steps
needed in order for the next tranche in the IMF's PRGF to be
released would be for the government to pass a number of
pieces of fiscal legislation that stalled in the last
parliament. More broadly, however, the new Government will
need to enunciate an economic/fiscal policy. The current
PRGF is predicated on the last government's "Regaining Sri
Lanka" (RSL) program. The new government will either have
to reconfirm RSL (unlikely) or come up with a program of its
own. An IMF team will probably come out in mid-May to assess
the situation.


5. (C) This has a follow-on effect, as World Bank budgetary
support (though not project financing) is based on an
approved IMF PRGF. So, no PRGF means no budgetary support.
World Bank head noted that Government will also need to
decide if it wants to go ahead with Consultative Group
meeting June. If it wanted to do so, the government would
need to come up with a statement of its fiscal and economic
strategy. It was noted also that in election campaign UPFA
promised a number of expensive items: increased fertilizer
subsidy, employment for 35,000 recent graduates, and 70
percent raise for military and government workers.
Implementing all of these could mean increased interest
rates, decline in value of rupee, and decrease in
remittances. BOTTOM LINE: New government needs to make some
decisions quickly on financial issues.


6. (C) On the political side, all agreed that the new
government would need to make clear what its attitude was
toward the Tokyo Process and the Co-chair's role. This was
particularly so in light of comments new PM Rajapakse made
yesterday that India should take on larger role in peace
process. Ambassador will raise issue with Rajapakse in his
call on Wednesday (para 1 above.)

Helgesen Message, Co-chairs Meeting
--------------


7. (C) Later that day Norwegian Ambassador Brattsker called
to say that he had spoken to Helgesen, who said that he
wanted to talk to Deputy Secretary Armitage and other co-
chairs in coming days, but that he thought it would be best
to do this in a series of bilateral calls, not in a
conference call, to avoid the appearance that the Co-chairs
were colluding. Brattsker also said that Helgesen is in
Sweden making preparations for his wedding, but that he can
be contacted on his cell phone. With regard to a possible Co-
chairs meeting, Japanese Ambassador Suda said at the meeting
mentioned above that the proposed date of May 18 for a
meeting was not good for Mr. Akashi.

POST-ELECTION TIDBITS
--------------


8. (C) FYI. We want to flag the following post-election
tidbits:

-- We have heard that the formation of the new cabinet
has been delayed and that it may be announced late this
week. (See below re news about a possible FM-designate,
Lakshman Kadirgamar.)

-- There continues to be little definitive word on which
parties the UPFA political grouping might be able to
link up with in order to form a majority in Parliament.
(The UPFA can count on 106 seats now, but needs to get
to 113.) Reports indicate that the UPFA continues to
sound out the all-monk Janatha Hela Urumaya (JHU) party,
with its nine seats, and there are conflicting reports
regarding UPFA overtures to the tea estate Tamil Ceylon
Worker's Congress (CWC),which has seven seats.

-- There are also press reports that we have been unable
to confirm indicating that President Kumaratunga is
scheduled to meet later today with UNP leader Ranil
Wickremesinghe.


9. (S/NF) Also, the DCM met April 7 with Indian DCM
Mohan Kumar, who noted that Indian High Commissioner
Nirupam Sen had called on presidential adviser Lakshman
Kadirgamar earlier today. According to Kumar,
Kadirgamar had referred to himself as the "foreign
minister-designate" in front of a crowd of journalists.
Kumar also noted that PM Rajapakse's remarks after his
swearing-in regarding increased Indian involvement in
the peace process were "nothing new" and that it did not
mean "boots on the ground." Turning to the Indians'
opinion of Rajapakse, Kumar said that the GoI thought
highly of Rajapakse but did not see him as globally-
focused, rather as "rustic" and totally focused on
domestic issues. (POL)

LUNSTEAD