IMF TEAM CONCLUDES GUINEA IS FARTHER THAN BEFORE FROM A

UNCLAS CONAKRY 001718 SIPDIS SENSITIVE SIPDIS TREASURY FOR OFFICE OF AFRICAN NATIONS TREASURY FOR USED IMF AND USED WORLD BANK E.O. 12598: N/A TAGS: EFIN ECON IMF PGOV GV SUBJECT: IMF TEAM CONCLUDES GUINEA IS FARTHER THAN BEFORE FROM A FUNDED PROGRAM REF: CONAKRY 297 ¶1. (SBU) The November 18-21 visit by an IMF technical team ended with the team leader, Israel de la Piedra, expressing disappointment that Guinea's microeconomic performance had worsened since the IMF's last examination in March of this year (reftel). The three-person team was dispatched to examine Guinea's 2007 budget and budget process, but lingering political issues loomed. At a November 21 debriefing for the donor community, de la Piedra cited misappropriations and persistent lack of accountability at the Central Bank as major flaws. He questioned whether the current Guinean government had a coherent plan to implement reforms. While conceding that Guinea's Staff Monitored Program (SMP) had achieved some successes, de la Peidra was adamant that Guinea must show concrete examples of reform if it is to return to a funded program. The Guineans are saying the right things, he concluded, but their concrete actions are insufficient. Guinea's next IMF team visit is scheduled for March or April of 2007. ¶2. (SBU) In a meeting with members of donor community and the World Bank, IMF team leader Israel de la Piedra offered a frank assessment of Guinea's macroeconomic performance and proposed 2007 budget. He acknowledged certain positive efforts, particularly in banking oversight. However, Mr. de la Piedra expressed disappointment that Guinea's economic situation had deteriorated since the team's last visit in March of this year. ¶3. (SBU) De la Peidra praised the financial controls suggested by the World Bank and, to some extent, followed by the Guinean Budget Office. He also applauded the new budget review and accountability process. De la Piedra acknowledged the detrimental effects of the two general strikes on Guinea's economy but rejected Guinea's general monetary policy (i.e., the 'managed float') as "ineffective." He outlined broad, interrelated areas for macroeconomic improvement. -- Guinea should request technical assistance and work with those partners to develop action plans to implement the IMF's preconditions for return to a funded program. -- Guinea should commission a full audit of the government's 2006 expenditures and receipts. This would be a regular annual audit. -- Guinea should establish a better mechanism to determine gasoline prices while aggressively paying down its arrears to petroleum companies. -- Guinea should review and reconcile its receipts, taxes and concessions in the mining sector. ¶4. (SBU) Comment. The IMF's assessment is both a denunciation of Guinea's fiscal and monetary policies and insufficient government reforms. After the firing of former Prime Minister Diallo, the IMF waited to see the "identity" of the new administration. During this visit, the team concluded the numbers, the economic situation, and overall governance have declined. The IMF's technical team was in country to examine the 2007 budget, but also focused on governance issues -- the Central Bank's dueling audits of Futurlec remain unresolved, there is still no clear plan to resolve Guinea's petroleum issues, and ministers are too busy jockeying for power to form an effective team. MCDONALD