DRC NEARS COMPLETION OF POVERTY REDUCTION STRATEGY

UNCLAS SECTION 01 OF 02 KINSHASA 000977

SIPDIS

SENSITIVE
SIPDIS

TREASURY FOR LKOHLER

E.O. 12958: N/A
TAGS: EAID ECON CG
SUBJECT: DRC NEARS COMPLETION OF POVERTY REDUCTION STRATEGY
PAPER

REF: KINSHASA 968


1. (U) Summary: The DRC Minister of Planning unveiled what is
nearly the final draft of the DRC's Poverty Reduction
Strategy Paper (PRSP) the week of June 5. The 104-page
document, the fruit of months of work by a committee composed
of GDRC, civil society, and non-governmental organization
representatives, sets out the DRC's poverty reduction plan
through 2008 and is a crucial roadmap of how the country will
aid its population of almost 60 million people. Donors and
international organization representatives met with the
committee and the Minister of Planning on June 13 to share
their recommendations. The final document will then be
approved by the GDRC before being given to the IMF and World
Bank, probably by the end of June. Implementation, albeit
under the transition government in place, could begin in
July. End summary.

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Son of IPRSP
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2. (U) The new PRSP, once adopted, will replace the interim
PRSP (IPRSP) of March 2002, which is in need of revision.
When the IPRSP was written, the population was estimated at
52 million, foreign armies still occupied part of Congolese
territory, per capita GDP was at USD 80 (it is now around USD
110),annual economic growth rate was negative 4.6 percent
(it is now projected at 6.5 percent for 2006),and annual
inflation was at 787 percent (versus less than 13.0 percent
now). In addition to the goal of macroeconomic stability,
largely accomplished, the 2002 IPRSP noted the need for
greater control of GDRC spending, the strengthening of GDRC
revenue generation, and the more effective use of GDRC funds
in pro-poor sectors. These latter three objectives have not
been completely achieved.

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The Final "Final Draft"?
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3. (SBU) The PRSP was first presented to the donors for
comment in March of this year by then-Minister of Planning,
Thambwe Mwamba. Weaknesses in the macroeconomic framework,
budgetary framework, follow-up/evaluation strategy, and in
certain socioeconomic sector strategies prevented the
adoption of the PRSP at that time. Now, more than two months
later, a "final draft" has again been presented to the DRC's
international partners by Thambwe's successor, Minister
Sesanga Hipungu. In a June 13 meeting presided over by
Sesanga, the donors presented their reactions to the latest
draft. Donor recommendations included calls for further
macroeconomic framework revisions, changes to the
follow-up/evaluation strategy, and the addition of two
ministries to those which will make up the interministerial
commission that will oversee implementation of the PRSP.

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Macroeconomic Framework
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4. (SBU) The main donor objection to the draft PRSP
macroeconomic framework is its overly-optimistic assumptions
of the economic and financial status of the DRC for the next
three years. The donors suggested that an "alternative"
scenario be presented as an annex, with exterior assistance
figures and economic growth rates reduced slightly to reflect
current and possible future circumstances. The IMF
recommended that the PRSP state the need for public
enterprise reform, for reforms to increase GDRC revenues, and
for the need to match expenditures with poverty reduction
objectives. Donors also recommended that the PRSP indicate a
higher objective for Central Bank international reserve
levels, and that the document call for an analysis of
expected increased international assistance and for
expenditures currently used to service debt that will be
freed up by debt forgiveness.

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Follow-Up and Evaluation
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5. (SBU) The PRSP, as written, has very specific and detailed
descriptions of the offices that will provide implementation,
evaluation, and follow-up of the strategies outlined in the
document. The donors felt that this level of specificity,
down to the provincial (of which there will be 26) and local
levels is too restrictive and should be decided instead by
the Interministerial Commission for the National Strategy
Against Poverty, led by the Prime Minister of the new
government. The Minister of Plan, backed up by the World Bank
PRSP expert, contended that these provincial and local-level
committees already exist and had participated in the drafting
of the PRSP.


6. (SBU) The donors recommended the inclusion of the Minister
of the Interior, who oversees the important National
Statistics Institute, and the Minister of Women and Family
Affairs, for gender balance, on the Interministerial
Commission. This commission, as envisioned by the PRSP, is
already composed of the Ministers of Planning, Finance,
Budget, Education, Health, Environment, Agriculture, Energy,
Infrastructure, Social Affairs, Commerce, Industry, and
Mines.

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What's Next?
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7. (U) The donors indicated, in a letter addressed to the
Minister of Planning, that they would approve the PRSP with
the recommended changes. The Draft PRSP must also now be
vetted by other DRC partners, including civil society and
non-governmental organizations. Once that is accomplished,
it must go back to the ECOFIN Commission for review before
being submitted for final approval to the DRC Council of
Ministers. It is expected that this will happen before the
end of June, although no Council of Ministers meeting has yet
been scheduled or announced. Only after being accepted by
the DRC Council of Ministers can the PRSP be handed to the
IMF and World Bank and begin being implemented.


8. (SBU) Comment: It has taken a long time to get the PRSP
ready for primetime. Despite the fact that a new government
might not be seated until late 2006, it is important to have
the PRSP approved and in place by July so that the clock can
start ticking on the one year of implementation necessary
before HIPC Completion Point can be achieved. With large
multilateral debt payments looming in the third quarter of
2007, it is in the best interests of the country to finally
accomplish this task. End comment.
MEECE