THE GAMBIA: TOUR D'HORIZON WITH FINANCE

C O N F I D E N T I A L SECTION 01 OF 02 BANJUL 000147

SIPDIS

SIPDIS

SECSTATE PASS EXIMBANK, OPIC, AND USTDA; TREASURY FOR
OFFICE OF AFRICAN NATIONS

E.O. 12958: DECL: 03/19/2017
TAGS: ECON EAID ETRD EFIN PREL KMCA PTER IMF GA
SUBJECT: THE GAMBIA: TOUR D'HORIZON WITH FINANCE
MINISTER,CENTRAL BANK GOVERNOR

REF: BANJUL 101

BANJUL 00000147 001.2 OF 002


Classified By: AMBASSADOR JOSEPH STAFFORD, REASON 1.4 (B AND D)

SUMMARY
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1. (C) Finance and Economy Minister Bala Gaye and Central
Bank Governor Jatta were predictably upbeat on the GOTG's
success in getting back on track with the IMF and were
optimistic that The Gambia would perform satisfactorily under
the new PRGF so as to qualify for debt relief as early as
mid-2007. However, both officials acknowledged the need for
reform of the country's troubled groundnut sector. Central
Bank Governor Jatta asserted that the GOTG needed to overcome
suspicions about Senegal and do more to promote economic
cooperation, citing the long-delayed Gambia River bridge
project. Jatta also revealed plans to establish a Financial
Intelligence Unit at the Central Bank so as to strengthen the
GOTG's capacity to monitor and interdict money-laundering and
other illicit financial activities; he said he would approach
us in due course about possible technical assistance for the
Unit's capacity-building efforts. END SUMMARY.

BACK ON TRACK WITH IMF
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2. (SBU) Ambassador and Pol/econoff recently met with Finance
and Economy Minister Musa Bala Gaye and Central Bank Governor
Famara Jatta for a review of economic issues. In separate
meetings, the two officials were predictably upbeat on the
IMF's recognition of the GOTG's progress on economic reform
in deciding to implement a new Poverty Reduction and Growth
Facility (PRGF) here (reftel). They made clear their
satisfaction at the GOTG's success in normalizing ties with
the IMF following a rupture in 2002 due in part to
irregularities at the Central Bank. Bala Gaye acknowledged
the need for the GOTG to maintain economic reforms and meet
benchmarks under the PRGF, saying he had established a "PRGF
monitoring committee," composed of officials from his and
other ministries, to monitor compliance with the PRGF's
terms.

PROSPECTS FOR DEBT RELIEF
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3. (SBU) The two officials also indicated optimism about The
Gambia's prospects of achieving HIPC Completion Point as
early as mid-2007 so as to qualify for debt relief under
MDRI. They asserted that the GOTG was on course to comply
with all HIPC "triggers" for achievement of Completion Point,
with the exception of that related to privatization of the
Gambian Groundnut Corporation (GGC),the parastatal operating
in the country's strategic groundnut sector. Bala Gaye
expressed doubt that the GOTG could move quickly enough on
privatization to comply with this HIPC "trigger" this year,
but stated that he expected the IMF to grant a waiver whereby
the GOTG would be deemed to have registered sufficent
progress to achieve Completion Point. He added that the
European Union had agreed to fund a study designed to devise
a viable strategy for GGC's privatization.

GROUNDNUT SECTOR'S WOES
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4. (SBU) There was a general discussion of the troubled
groundnut sector, with Bala Gaye noting that the stagnation
in recent years in exports of the country's leading cash crop
was continuing. He said that while the sector was no longer
among leading sources of foreign exchange for the country,
many Gambians -- sixty percent of rural households, he
claimed -- continued to rely heavily on groundnuts for their
livelihood. Central Bank Governor Jatta noted that in recent
years both the private sector and GGC had had difficulty in
coming up with funds to purchase an adequate supply of
groundnuts for processing and export; the result was that
some farmers were unable to sell their crop or were paid only
after lengthy delays. Jatta remarked that farmers' plight
had eased somewhat during the current harvest season, due to
increased sales to Senegalese buyers. He went on to observe
that the genuine solution to the sector's woes lay in getting
farmers to ease their dependence on groundnuts by cultivating
other varieties of cash crops, but noted that convincing them
to do so would take time.

ECONOMIC RELATIONSHIP WITH SENEGAL

BANJUL 00000147 002.2 OF 002


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5. (C) Central Bank Governor Jatta said he fully shared IMF's
stated concern about The Gambian economy's "vulnerability to
exogenous shocks" (reftel),and recalled that one such
"shock" was Senegal's August/October 2005 closure of its
border with The Gambia due to a bilateral dispute over
transportation issues. Recalling the considerable damage
caused the Gambia's economy by the action of its far more
powerful neighbor, Jatta called for greater efforts by the
GOTG to promote economic cooperation with Senegal. He
lamented what he saw as some Gambian officials' tendency to
adopt a negative posture toward such cooperation out of
concern for "preserving Gambian sovereignty" toward "big
brother Senegal." Jatta cited the endlessly-delayed project
with the Senegalese to construct a bridge across the Gambia
River as illustrative, citing Gambian footdragging on the
project -- which would facilitate overland travel between
northern Senegal and the southern Casamance region -- as due
in no small part to a concern in some GOTG circles of
"Senegalese domination" manifested in a steady stream of
Senegalese transporters using the bridge. Instead of
worrying about "Senegalese domination," he concluded, the
GOTG should view the bridge as clearly serving Gambian
economic interests and offering numerous opportunities for
establishment of Senegalese/Gambian joint ventures associated
with the bridge operation.

FINANCIAL INTELLIGENCE UNIT
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6. (SBU) Jatta said that, as part of the GOTG's effort to
combat money-laundering and other financial crimes, the
Central Bank was working with the UN and others to establish
a Financial Intelligence Unit to monitor banking
transactions. Jatta said that once the Unit was operational
-- by June, he hoped -- he would contact us to request
technical assistance for the Unit's capacity-building
efforts.

COMMENT
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7. (C) Finance Minister Bala Gaye and Central Bank Governor
Jatta spearheaded the GOTG's successful effort to get back on
track with the IMF, and their clear sense of satisfaction
over the new PRGF -- and prospect of debt relief in 2007 --
is understandable. The two officials also made clear their
recognition that reform of the country's groundnut sector is
essential. Noteworthy was Jatta's implicit rebuke of his
government for failing to overcome wariness toward Senegal so
as to move forward on the Gambia River bridge project and
economic cooperation generally. Jatta's plan to establish a
Financial Intelligence Unit at the Central Bank to strengthen
the GOTG's ability to monitor and crack down on illicit
financial activity through banking channels is good news.
We will report further as the Unit is established and will
also advise of any technical assistance requests. END
COMMENT
STAFFORD