AMBASSADOR MEETS WITH MIN OF FINANCE ON GAS SUBSIDY AND

UNCLAS SECTION 01 OF 02 CONAKRY 001267 SIPDIS SIPDIS SENSITIVE E.O. 12598: N/A TAGS: ECIN EFIN ECON GV SUBJECT: AMBASSADOR MEETS WITH MIN OF FINANCE ON GAS SUBSIDY AND PROGRAM BUDGETING ¶1. (SBU) SUMMARY. On November 16, the Ambassador met with the Minister of Finance. The Minister discussed the budget for the CENI, ongoing difficulties with implementation of program budgeting without a supportive budget director, the profoundly negative effects of the gasoline subsidy, and the obstacles to reform he is facing within his own ministry. END SUMARY. ¶2. (SBU) On November 16, the Ambassador, Econoff, and Treasury Budget Advisor Cheryl Hayes, met with Minister of Finance, Dr. Ousmane Dore. The Ambassador's purpose was to make a courtesy call on the Minister and to highlight issues of importance to the United States. The discussions were frank, open, and friendly, with the Minister being very candid with his responses. -------------- BIOGRAPHICAL NOTES -------------- ¶3. (U) Dr. Dore was born in 1957 in Mamou, Republic of Guinea. He holds a Bachelor's degree in Geology from the Institute of Mines and Geology in Boke, a Master's degree in Mining Economy from the University of Arizona, and a PhD in Economics from the University of Minnesota. He was a visiting scholar at Duke University in North Carolina in 1991 and an assistant professor in the Economics Department at the University of Minnesota from 1988 to 1992. ¶4. (U) Minister Dore held several positions at the International Monetary Fund (IMF) between 1993 and 2007, including Desk Economist: Iceland and Norway; International Civil Servant; and Senior Desk Economist for Cote d'Ivoire. He also served as Resident Representative to Senegal, Guinea Bissau and Chief of Mission to Guinea Bissau. Prior to his appointment as Minister in 2007, he was serving as Senior Desk Officer on Ethiopia in Washington, DC. -------------- CHALLENGES FACING THE MINISTER -------------- ¶5. (SBU) The Minister constantly referred to the underlying challenges he is facing as Minister of Finance. He confided that not only is the country quickly running out of cash, but many of the cabinet members and division-level authorities in his own ministry are working against him. This takes the form of doing nothing rather than challenging him directly; nevertheless, it slows down progress, and makes reform difficult. -------------- INDEPENDENT ELECTIONS COMMITTEE -------------- ¶6. (SBU) When asked about budgeting for the independent elections committee (CENI) for the next legislative elections, Dr. Dore stated that a budget was in place, and that it was approximately USD 3.5 million. He confided that more would be needed, and that he would be raising the issue through the informal G8 group meeting here in December, as well as with the IMF and World Bank. -------------- PROGRAM BUDGETING -------------- ¶7. (SBU) The Ambassador was very frank about the need for better resource allocation and budget reform, particularly ongoing efforts to implement program budgeting in Guinea. While substantial progress has been made in the five pilot ministries chosen to implement program budgeting in 2008, the Ambassador clearly expressed his desire to see follow-through, such as having those ministries who have already completed program budgets, inserted into the final budget document. The Minister acknowledged the importance of the project, and that there were difficulties with implementation of program budgeting. In addition, he admitted that they had not taken full advantage of the Treasury Budget Advisor. However, the Minister was clear that his door was always open to the Budget Advisor, and that if further obstacles arose from other members of the Ministry, she should come to him directly for action. The Treasury Budget Advisor was critical of the apathy shown by Budget Director Mohamed Diare, who has slowed implementation of the program budgeting by not taking affirmative implementation actions. -------------- SHADOW CABINET -------------- ¶8. (SBU) The Finance Minister then went on to reveal his deep frustration with the current finance ministry bureaucracy. He reported that the members of his ministry work against him to such a degree that he spoke openly of creating a 'shadow' cabinet of loyalists to get things done. CONAKRY 00001267 002 OF 002 -------------- GASOLINE SUBSIDY -------------- ¶9. (SBU) Currently, the Government of Guinea subsidizes gasoline for domestic consumption. This has meant a street price of about USD 1.34 per liter of gasoline. Dr. Dore said that this has resulted in two large problems for Guinea. First, the cost of the subsidy has increased dramatically in lock step with the increase in the price of oil on world markets. The Minister confided that last month alone the cost of the subsidy was USD 3.6 million, while this month it will reach approximately USD 6.5 million. ¶10. (SBU) The second problem is that the subsidized street cost is lower than the price for gas in other countries of West Africa, resulting in large scale gasoline smuggling. Dr. Dore claimed that Guinea is supplying all of West Africa with subsidized gas. ¶11. (SBU) The Minister acknowledged that the Government of Guinea must increase the subsidized price, and eventually eliminate the subsidy altogether. He revealed that the first increase in the street price for gasoline was planned for January 2008, and that it would be a large jump-up in the price. He further confided that the subsidy would be completely withdrawn by June 2008, and the market would set the price of gasoline afterwards; a critical factor for a prospective IMF adjustment program. ¶12. (SBU) Dr. Dore was frank that if the subsidy was not ended very soon, he did not see how he could continue as Minister of Finance. The Minister requested the aid of the Embassy in sensitizing the public to the coming price increases. He said that by educating the public, they could minimize any discontent caused by the price increases. -------------- PHANTOM SOLDIERS/WORKERS -------------- ¶13. (SBU) The Minister said that the recent use of civilian paymasters for paying the military had resulted in the discovery of phantom soldiers. NOTE: Unconfirmed rumors put the figure as high as 60% of enlisted payroll. END NOTE. He stated that the same mechanism would be tried in other ministries in order to address the problem in those ministries as well. He said they were sure to find other phantoms throughout the government. Such monies could then be used to increase salaries of government workers. -------------- COMMENT -------------- ¶14. (SBU) Dr. Dore is very impressive in person. He speaks with authority and confidence rooted in his many years of experience in the fields of international and domestic finance, economics, and budgeting. He clearly wants Guinea to move away from its statist past and current crony-driven economy. He is desperate for allies in his effort to get the Guinea economy on a sustainable growth path. His respect for the Ambassador, in particular, quickly became apparent from his warm welcome and open manner. The contrast between his welcome and his mood when he discussed his current work was also obvious. Visibly frustrated as he discussed the difficulties he faced from members of his own ministry, it appears that the daily challenges of his office are taking their toll. How long he can hold up against this pressure is uncertain. END COMMENT. CARTER