Identifier
Created
Classification
Origin
06DAKAR831
2006-04-05 15:31:00
CONFIDENTIAL
Embassy Dakar
Cable title:
GUINEA-BISSU,S ECONOMY IS GROWING DESPITE WEIGHT
how-toVZCZCXRO3238 PP RUEHPA DE RUEHDK #0831/01 0951531 ZNY CCCCC ZZH P 051531Z APR 06 FM AMEMBASSY DAKAR TO RUEHC/SECSTATE WASHDC PRIORITY 4761 INFO RUEHZK/ECOWAS COLLECTIVE PRIORITY RUEHBR/AMEMBASSY BRASILIA PRIORITY 0168 RUEHLC/AMEMBASSY LIBREVILLE PRIORITY 0864 RUEHLI/AMEMBASSY LISBON PRIORITY 0717 RUEHLU/AMEMBASSY LUANDA PRIORITY 0371 RUEHTO/AMEMBASSY MAPUTO PRIORITY 0404 RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
C O N F I D E N T I A L SECTION 01 OF 02 DAKAR 000831
SIPDIS
SIPDIS
STATE FOR AF/EPS, EB/IFD/ODA AND AF/W
TREASURY FOR SONJA RENANDER
E.O. 12958: DECL: 04/05/2016
TAGS: ECON EFIN EAGR EINV MARR PU
SUBJECT: GUINEA-BISSU,S ECONOMY IS GROWING DESPITE WEIGHT
OF MILITAR AND CIVIL SERVANT SALARIES; WILL OIL TRANSFORM
T?
Classified By: CDA Robert P. Jackson for reaons 1.4 (b) and (d).
C O N F I D E N T I A L SECTION 01 OF 02 DAKAR 000831
SIPDIS
SIPDIS
STATE FOR AF/EPS, EB/IFD/ODA AND AF/W
TREASURY FOR SONJA RENANDER
E.O. 12958: DECL: 04/05/2016
TAGS: ECON EFIN EAGR EINV MARR PU
SUBJECT: GUINEA-BISSU,S ECONOMY IS GROWING DESPITE WEIGHT
OF MILITAR AND CIVIL SERVANT SALARIES; WILL OIL TRANSFORM
T?
Classified By: CDA Robert P. Jackson for reaons 1.4 (b) and (d).
1. (C) SUMMARY: American and British oil companies have
drilled two exploraory oil wells in shallow Bissau-Guinean
waters; wo more will be drilled by the end of 2006. If oi
is found, it could transform Guinea-Bissau,s agiculturally
based economy. The GOGB is optimistic, and President Vieira
asked Charge and PolOff for U.S. advice on managing potential
oil wealth. The IMF and World Bank project real GDP growth
of 4.2 percent in 2006, with cashew production reaching
120,000 tons. Two donors meetings are planned for 2006.
Investment in industry and tourism could have a significant
long-term impact, but continued political stability is
critical to Guinea-Bissau,s economic prospects. END
SUMMARY.
2. (C) On March 29, Charge and PolOff attended the joint
International Monetary Fund (IMF)/World Bank debrief on
Guinea-Bissau,s economy. The joint IFI team concluded that
the economy grew 3.5 percent in real terms in 2005,
principally due to growth in the agricultural sector. Growth
could reach 4.2 percent in 2006, but a lack of investment,
especially in industry and tourism, continues to restrain the
economy. Inflation was 3.4 percent in 2005, mainly due to
imports. Exports were up and receipts were up. IMF ResRep
Ousmane Dore expressed concern about government borrowing
from banks to pay salaries. The deficit declined from 15 to
12 percent of GDP in 2005. Internal debt amounted to about
14 billion CFA francs (CFAF) (USD 28 million),and external
debt, excluding debt to multilateral development banks
equaled 8.3 billion CFAF (USD 16 million). The team
concluded that accounting and customs collections require
strengthening. The team underscored concern about 75 percent
of the budget financing salaries, noting that 11 months of
salary arrears from 2002 and 2003 account for over 90 percent
of the 2006 financing gap of 14 billion CFAF (USD 28
million). (NOTE: The salaries pay 12,000 civil servants and
between 3,000 and 26,000 soldiers and sailors. A military
census is to be completed by June and is expected to show
that the armed forces currently have about 4,500 men under
arms. END NOTE.) The team was unable to estimate the
budgetary impact of the March/April Bissau-Guinean Armed
Forces attacks on Movement of Democratic Forces of the
Casamance bases in northern Guinea-Bissau. A mini-donors
roundtable on the financing gap and security sector reform is
set for May or June, and a major donors conference is planned
for late 2006.
3. (U) Cashew exporters anticipate a crop of 120,000 tons in
2006, but they worry about declining U.S. consumption, which
has caused the world price to fall. Other businesspeople we
met are similarly upbeat. All acknowledge that continued
political stability is essential for economic growth, and
they urged the United States to reopen its Embassy in Bissau
as a sign of confidence in the Government and the private
sector. The business community also hopes that debt relief
may be forthcoming.
4. (C) The big economic issue is oil exploration.
British-owned Premier Oil and U.S.-owned Occidental Petroleum
have drilled two exploratory off-shore wells and will drill
two more in 2006. They believe there is a &potential for
large prospects.8 They will know fairly quickly whether
they have a commercially viable project if they hit something
big. The big problems arise when they get a "tweener" well
which might be viable and might not. The area is fairly
prospective although not nearly as good as Nigeria/Angola.
The GOGB thinks the potential is great enough that President
Vieira requested that we provide model legislation and
regulations on how to manage new-found oil wealth and thus
avoid some of the mistakes that other countries have made.
The Embassy has requested information from the World Bank
Institute and would welcome the Department,s suggestions.
5. (C) COMMENT: Petroleum could have an enormous impact of
Guinea-Bissau,s economy )- just as it has had on Chad,
Cameroon, Equatorial Guinea and Sao Tome and Principe,s in
recent years. The good news is that it may not only be there
but that the GOGB is seriously thinking about how to manage
it. Before everyone starts jumping for joy, however, oil
experts tell us that following a viable offshore discovery,
DAKAR 00000831 002 OF 002
it can take four or more years to install production
facilities. In fact, in a place like Guinea-Bissau, it could
take a lot longer as there is no really usable infrastructure
to support a deepwater operation. END COMMENT.
JACKSON
SIPDIS
SIPDIS
STATE FOR AF/EPS, EB/IFD/ODA AND AF/W
TREASURY FOR SONJA RENANDER
E.O. 12958: DECL: 04/05/2016
TAGS: ECON EFIN EAGR EINV MARR PU
SUBJECT: GUINEA-BISSU,S ECONOMY IS GROWING DESPITE WEIGHT
OF MILITAR AND CIVIL SERVANT SALARIES; WILL OIL TRANSFORM
T?
Classified By: CDA Robert P. Jackson for reaons 1.4 (b) and (d).
1. (C) SUMMARY: American and British oil companies have
drilled two exploraory oil wells in shallow Bissau-Guinean
waters; wo more will be drilled by the end of 2006. If oi
is found, it could transform Guinea-Bissau,s agiculturally
based economy. The GOGB is optimistic, and President Vieira
asked Charge and PolOff for U.S. advice on managing potential
oil wealth. The IMF and World Bank project real GDP growth
of 4.2 percent in 2006, with cashew production reaching
120,000 tons. Two donors meetings are planned for 2006.
Investment in industry and tourism could have a significant
long-term impact, but continued political stability is
critical to Guinea-Bissau,s economic prospects. END
SUMMARY.
2. (C) On March 29, Charge and PolOff attended the joint
International Monetary Fund (IMF)/World Bank debrief on
Guinea-Bissau,s economy. The joint IFI team concluded that
the economy grew 3.5 percent in real terms in 2005,
principally due to growth in the agricultural sector. Growth
could reach 4.2 percent in 2006, but a lack of investment,
especially in industry and tourism, continues to restrain the
economy. Inflation was 3.4 percent in 2005, mainly due to
imports. Exports were up and receipts were up. IMF ResRep
Ousmane Dore expressed concern about government borrowing
from banks to pay salaries. The deficit declined from 15 to
12 percent of GDP in 2005. Internal debt amounted to about
14 billion CFA francs (CFAF) (USD 28 million),and external
debt, excluding debt to multilateral development banks
equaled 8.3 billion CFAF (USD 16 million). The team
concluded that accounting and customs collections require
strengthening. The team underscored concern about 75 percent
of the budget financing salaries, noting that 11 months of
salary arrears from 2002 and 2003 account for over 90 percent
of the 2006 financing gap of 14 billion CFAF (USD 28
million). (NOTE: The salaries pay 12,000 civil servants and
between 3,000 and 26,000 soldiers and sailors. A military
census is to be completed by June and is expected to show
that the armed forces currently have about 4,500 men under
arms. END NOTE.) The team was unable to estimate the
budgetary impact of the March/April Bissau-Guinean Armed
Forces attacks on Movement of Democratic Forces of the
Casamance bases in northern Guinea-Bissau. A mini-donors
roundtable on the financing gap and security sector reform is
set for May or June, and a major donors conference is planned
for late 2006.
3. (U) Cashew exporters anticipate a crop of 120,000 tons in
2006, but they worry about declining U.S. consumption, which
has caused the world price to fall. Other businesspeople we
met are similarly upbeat. All acknowledge that continued
political stability is essential for economic growth, and
they urged the United States to reopen its Embassy in Bissau
as a sign of confidence in the Government and the private
sector. The business community also hopes that debt relief
may be forthcoming.
4. (C) The big economic issue is oil exploration.
British-owned Premier Oil and U.S.-owned Occidental Petroleum
have drilled two exploratory off-shore wells and will drill
two more in 2006. They believe there is a &potential for
large prospects.8 They will know fairly quickly whether
they have a commercially viable project if they hit something
big. The big problems arise when they get a "tweener" well
which might be viable and might not. The area is fairly
prospective although not nearly as good as Nigeria/Angola.
The GOGB thinks the potential is great enough that President
Vieira requested that we provide model legislation and
regulations on how to manage new-found oil wealth and thus
avoid some of the mistakes that other countries have made.
The Embassy has requested information from the World Bank
Institute and would welcome the Department,s suggestions.
5. (C) COMMENT: Petroleum could have an enormous impact of
Guinea-Bissau,s economy )- just as it has had on Chad,
Cameroon, Equatorial Guinea and Sao Tome and Principe,s in
recent years. The good news is that it may not only be there
but that the GOGB is seriously thinking about how to manage
it. Before everyone starts jumping for joy, however, oil
experts tell us that following a viable offshore discovery,
DAKAR 00000831 002 OF 002
it can take four or more years to install production
facilities. In fact, in a place like Guinea-Bissau, it could
take a lot longer as there is no really usable infrastructure
to support a deepwater operation. END COMMENT.
JACKSON