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