COTE D'IVOIRE: FINANCE MINISTRY OFFICIALS SIGNAL

C O N F I D E N T I A L SECTION 01 OF 02 ABIDJAN 001345

SIPDIS

SIPDIS

STATE PASS TO USTR

E.O. 12958: DECL: 12/04/2016
TAGS: ECON EFIN IMF IV PGOV PREF
SUBJECT: COTE D'IVOIRE: FINANCE MINISTRY OFFICIALS SIGNAL
THAT THE GOVERNMENT WILL NOT PAY WORLD BANK ARREARS

REF: A. A) ABIDJAN 1099

B. B) MASSINGA-DESK UNCLASS EMAILS

Classified By: EconChief EMassinga, Reasons 1.4 (b, d)


1. (C) Summary. Finance Ministry officials are telling us
that Cote d'Ivoire does not intend to pay the balance of the
arrears Cote d'Ivoire owes the World Bank. Bank staff tell
us the Bank would be willing to accept partial repayment, but
will not resume normal assistance until it receives the full
amount. However, Ministry officials pretend not to be aware
of this, and tell us that instead, the government expects the
Bank to either forgive or reschedule the rest of the arrears.
Bank staff believe the problem lies with senior Ministry
officials still loyal to the former Minister, a Gbagbo crony
who insisted that the World Bank and the IMF must give Cote
d'Ivoire the money up front to pay off the arrears. Prime
Minister Banny himself recently told the International
Working Group (IWG) that he is confident he can cut the
"Gordian knot" of the arrears problem. This may be one more
issue on which the Gbagbo camp is working to thwart the Prime
Minister. End Summary.


1. (C) Econ Chief met with Ministry of Finance Cabinet
Director Koffi Ahoutou on November 30 to discuss ongoing
negotiations with shareholders of Cora de Comstar (ref B) at
the request of Ahoutou. At the meeting, Econ Chief raised
the issue of Cote d'Ivoire's arrears to the World Bank.


2. (C) Ahoutou said that Cote d'Ivoire is unable to pay the
arrears beyond the approximately $160m it raised in its
May-June 2006 borrowing (vice the $225m mentioned in reftel
A). The total arrears owned on Cote d'Ivoire's debt to the
World Bank is rapidly approaching $400m, a total that
Ahoutoun said the Ministry of Finance has no plans at this
point to pay. In response to a query concerning how the
government will address this question, Ahoutou said that it
will ask the World Bank to either accept the money raised and
waive the rest, or find some mechanism to reschedule the
debt. Ahoutou asked if the United States would be willing to
support Cote d'Ivoire's request to the WB in this regard,
noting that Cote d'Ivoire is now in a negative cash position
vis a vis the IFIs. Econ Chief said he doubted that
Washington would look favorably upon such a request.


3. (C) When Econ Chief asked Ahoutou directly why the
Ministry hasn't paid the WB what it had raised in the
mid-2006 borrowing, the Ministry official said the Bank
refused to accept partial payment. When Econ Chief asked if
perhaps the Bank had communicated to the Ivorian government a
change in its position on that score (ref A),Ahoutou said it
had not, according to his information (Note: this
contradicts what Bank staff told Econ Chief in September.
End Note).


4. (C) Ahoutou explained the government refusal to pay the
arrears by saying its fiscal position is so dire that it has
no capability to use cash on hand, future receipts or
additional borrowing to close the gap. Pointing to a French
corporate creditor waiting in his lobby, Ahoutou said the
government cannot pay the $60m owed to the company hurriedly
contracted by the Prime Minister's Office in September to
clean up the toxic wastes dumped at sites throughout Abidjan
(the creditor told Econ Chief after the latter's meeting with
Ahoutou that he has been in Abidjan fruitlessly pursuing
payment for two months).


5. (C) In a December 1 meeting with World Bank officials on
the margins of the IWG meeting (septel),local WB officials
told Pol/Econ Chief that they believed that the unwillingness
to pay the arrears lies with some senior officials in the
Ministry who remain loyal to the former minister, Bouabre
Bouhoun, a Gbagbo crony who steadfastly insisted that the
World Bank and the IMF must give Cote d'Ivoire the money up
front to pay off the arrears, and who refused even to discuss
Cote d'Ivoire paying them off itself. At the same IWG, Prime
Minister Banny, who is also the Finance Minister, himself
acknowledged that the arrears are a serious obstacle
preventing Cote d'Ivoire from receiving the donor support it
desperately needs to go forward with disarmament,
reunification and elections. Banny said he was confident he
could cut this "Gordian knot" because of his years of
experience as a central banker.


6. (C) Comment. The arrears question exasperates World
Bank staff, who are anxious to move forward with support for
disarmament, although that process itself remains stalled
along with the overall peace process. And as with the peace

ABIDJAN 00001345 002 OF 002


process, the arrears impasse poses a tough and growing
challenge to the international community. This appears to be
yet another issue on which the Gbagbo camp is seeking to
thwart the Prime Minister. End Comment.
Hooks