Identifier
Created
Classification
Origin
07CONAKRY709
2007-06-22 12:52:00
CONFIDENTIAL
Embassy Conakry
Cable title:  

CENTRAL BANK WOES; AS GUINEA'S STORY GOES

Tags:  ECON PGOV EFIN GV 
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PP RUEHPA
DE RUEHRY #0709/01 1731252
ZNY CCCCC ZZH
P 221252Z JUN 07 ZDK
FM AMEMBASSY CONAKRY
TO RUEHC/SECSTATE WASHDC PRIORITY 1277
INFO RUEHZK/ECOWAS COLLECTIVE PRIORITY
RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY
C O N F I D E N T I A L SECTION 01 OF 02 CONAKRY 000709 

SIPDIS

SIPDIS

TREASURY FOR OFFICE OF AFRICAN NATIONS

E.O. 12958: DECL: 06/22/2017
TAGS: ECON PGOV EFIN GV
SUBJECT: CENTRAL BANK WOES; AS GUINEA'S STORY GOES


Classified By: Economic Officer Kim Jordan. Reasons 1.4 (b) and (d).

C O N F I D E N T I A L SECTION 01 OF 02 CONAKRY 000709

SIPDIS

SIPDIS

TREASURY FOR OFFICE OF AFRICAN NATIONS

E.O. 12958: DECL: 06/22/2017
TAGS: ECON PGOV EFIN GV
SUBJECT: CENTRAL BANK WOES; AS GUINEA'S STORY GOES


Classified By: Economic Officer Kim Jordan. Reasons 1.4 (b) and (d).


1. (SBU) SUMMARY. The problems facing Guinea as a whole are
the same problems facing its Central Bank. Cronyism and
corruption have been endemic at the Central Bank, as in the
government. Prime Minister Kouyate promised reform and to
clean up the Bank as a key institution of Guinea's
government. However, the appointment of the new Central Bank
Governor and questions about the Governor's independence cast
doubts about the promised reforms. With recent price
increases, many believe that inflationary pressures will
continue unless the Prime Minister is able to demonstrate
more stringent controls on key government institutions. END
SUMMARY.

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THE PROMISES ARE FAR FROM REALITY
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2. (SBU) After being appointed, Prime Minister Lansana
Kouyate promised to clean up the government, including the
Central Bank. The IMF also specified reforms at the Central
Bank as a requirement for a funded program. Kouyate promised
to accomplish several goals: to bring in new leadership,
untainted by past corruption; to stop allowing the Central
Bank to be used as President Lansana Conte's personal
checking account; and, in order to control inflation, stop
the practice of "loans" to the Guinean Treasury to finance
the budget.


3. (C) While President Conte initially agreed to give
Kouyate the power to clean house at the Central Bank, Conte's
people remain on the inside to service the Head of State's
needs. On May 18, Conte named Daouda Bangoura as the new
Bank Governor. Many believe the appointment was just
replacing one Conte loyalist with another, confirming the
widespread sentiment that nothing has really changed.


4. (C) Cronyism and corruption at the Bank not only result
in opaque banking operations, but impact the public through
increased inflationary pressures. Recent price increases
significantly effect the population. Over the last few
weeks, there has been a tripling of the cost of a liter of
water in the interior and a 65% increase in the cost of

sugar. Furthermore, while the official exchange rate is
currently set at 3270 GNF to the dollar, the informal rate
has climbed back to 4000 GNF to the dollar (last month, the
parallel rate was the same or lower than the official rate).
Fatoumata Drame, President of the Money Exchangers
Association told Econoff that she is pessimistic about
Kouyate's chances. Drame told us that the exchange rate, and
therefore inflation, will go higher unless Kouyate fulfills
his promises to clean house at the Bank.

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BANK APPOINTMENT AN "INSULT AND A VIOLATION"
--------------


5. (SBU) The January 28 tripartite agreement ending the
general strike provided for Kouyate to nominate civilian
employees and heads of the government agencies, such as the
Governor of the Central Bank. However it was President Conte
who appointed then Vice Governor Daouda Bangoura as the new
Governor of the Central Bank. Conte's action caused a storm
in the independent Guinean press and outrage from the labor
unions. The labor unions called the appointment "an insult
and a violation of the agreements."


6. (C) Governor Bangoura stated that the economic
development of Guinea was his top priority and that
restoration of the authority and independence of the Central
Bank was the first step. He said the right things and,
towards that end, he has reportedly instituted limits on the
amounts the Central Bank can loan to the Guinean Treasury to
fund government expenditures. The problem is that Governor
Bangoura is seen as part of the old guard. His detractors
allege that he is close to Conte, part of the old system and,
thus, part of the problem. They further allege that as Vice
Governor, he allowed Conte to use the bank as his personal
piggy bank, instead of upholding the independence of the
institution. With a history of serving Conte, many believe
Bangoura will be ineffective in limiting the Head of State's
access to Bank coffers.


7. (C) Bangoura's supporters believe the real problem at the
Central Bank was former Governor Daffe. The current General
Director of Credit at the Central Bank, Tidiane Sylla, told
Econoff "the reason for the previous problems at the Bank was
that the Governor and the Vice Governor did not work well
together," implying that there was a personal animosity

CONAKRY 00000709 002 OF 002


between the two. Bangoura's supporters go on to say that
Daffe was ill and weak and thus easy to manipulate. They
claim that Bangoura actually tried to prevent illicit
activities at the Central Bank, but was limited by Daffe.
They also allege that Bangoura cannot be close to Conte since
it was he who led the legal attack on Mamadou Sylla and
Futurelec over overdrafts at the Central Bank.

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COMMENT
--------------


8. (C) The situation at the Central Bank is a reflection of
Guinea's current political landscape and inter-group
struggles. Kouyate promised reform and to fight corruption,
beginning at the Central Bank. It remains to be seen if the
new directives are actually being followed and whether the
Central Bank can control and document its transactions. The
appointment of the Bank's Governor was supposed to have been
a strong signal that Kouyate was in a position to effectuate
his reform agenda. While the jury may still out on Bangoura,
the appointments cast doubt on the Prime Minister's ability
to implement real reforms. At the Central Bank, Conte still
has "his people" in positions that count. Conte recently
stated in a press interview, "I am Guinea" -- Guinea's
institutions continue to behave as if this is the reality.
MCDONALD