GUINEA'S 2008 BUDGET

UNCLAS CONAKRY 001161 SIPDIS SIPDIS SENSITIVE E.O. 12598: N/A TAGS: ECIN EFIN ECON EMIN PGOV GV SUBJECT: GUINEA'S 2008 BUDGET REFTEL: CONAKRY 1138 ¶1. (SBU) SUMMARY. On October 11, Prime Minister Lansana Kouyate submitted his administration's FY2008 budget to the National Assembly. The budget was submitted on-time, and forecasts significant growth in revenue and spending; however, the projections are based upon best-case assumptions. The budget document also provides a snapshot of the performance of the FY2007 budget. END SUMMARY. ¶2. (SBU) Last week, Guinea's FY2008 budget was submitted to the National Assembly in a timely manner this year. (NOTE: This contrasts with the FY2007 budget which was not submitted until halfway through its fiscal year. END NOTE.) ¶3. (SBU) FY2008 receipts are projected at US$637,783,538, an increase of 25% over FY2007. FY2008 spending is projected at US$942,848,906, an increase of 28% over FY2007. Based upon these projections, the budget deficit is estimated to be US$305,065,368. As in FY2007, the budget authorizes the Minister of Finance to close the deficit in various ways, including soliciting donations, borrowing from foreign lenders, and negotiating a rescheduling of the exterior debt. NOTE: The just concluded IMF inspection team leader, Jean Le Dem, expressed skepticism that the spending and receipts figures were realistic. END NOTE. ¶4. (SBU) The budget makes the following assumptions for its projections; GDP growth: 4.9%; Inflation: 10%; USD exchange rate: 5,200 GnF to 1 USD; external debt service: $167 million. The current official exchange rate is approximately 4,200 to 1, while the informal rate is 4,500 to 1. The use of the 5,200 figure assumes a 23% fall in the value of the Guinea Franc for 2008. NOTE: The Guinea Franc slid 7.5% in one day earlier this week. END NOTE ¶5. (SBU) An example of an unrealistic assumption is the GDP growth rate. The actual GDP growth figure for 2006 was 2.2%, and for 2007 is estimated at 1.7%. The projected rate of FY2008 GDP growth at 4.9% is over 180% of 2007. ¶6. (SBU) The budget document also provided a report, as of August 31, on the status of FY2007 receipts and spending. FY2007 receipts are above projections by 8.13%. A breakdown of this figure shows that receipts for the mining sector are 8.84% under projections, while the projected receipts for the non-mining sector are 14.4% above projections. As for spending projections, total FY2007 spending is 4.5% under the budgeted amount. ¶7. (SBU) For FY2008, the mining sector is projected to contribute approximately 23% of all government receipts, (US$146,000,000),with 75% of that figure coming from just one bauxite mining company, Companie de Bauxite de Guinee (CBG). ¶8. (SBU) As for the allocation of budgeted funds among ministries, the Presidency increased 4.9%; Prime Minister +160% (NOTE: but still 68% less than the Presidency. END NOTE.) The budget for the Ministry of Defense has been cut by 18%, lending support to the reports of transition by the army to a peace-time footing. The Ministry with the largest piece of the FY2008 budget is the Ministry of Education, with approximately 12% of the budget. ¶9. (SBU) The Minister of Finance, Dr. Ousmane Dore, submitted a report to the National Assembly along with the budget. He reported that the FY2008 budget is linked to the IMF Poverty Reduction Strategy for Guinea so that the government will have a coherent method of evaluating budget performance by measuring progress towards the strategic objectives. ¶10. (SBU) Prime Minister Lansana Kouyat gave a speech while submitting the budget emphasizing that the fight for justice and against corruption was a top priority of his government. In addition, he outlined plans to increase employment of youth, pursue educational reform, and restore the authority of the government. Kouyat also stressed the focus of his government on improving access to potable water, and providing uninterrupted electricity to the country. BROKENSHIRE