wikileaks ico  Home papers ico  Cables mirror and Afghan War Diary privacy policy Privacy
Identifier
Created
Classification
Origin
07DAKAR1454
2007-07-11 12:50:00
SECRET//NOFORN
Embassy Dakar
Cable title:  

IMF RESREP ON SENEGALESE POLICIES AND GOVERNANCE

Tags:   EAID  EFIN  ECON  PREL  SG 
pdf how-to read a cable
VZCZCXRO9312
PP RUEHPA
DE RUEHDK #1454/01 1921250
ZNY SSSSS ZZH
P 111250Z JUL 07
FM AMEMBASSY DAKAR
TO RUEHC/SECSTATE WASHDC PRIORITY 8759
INFO RUEHZK/ECOWAS COLLECTIVE
RUEHLI/AMEMBASSY LISBON 0798
RUEATRS/DEPT OF TREASURY WASHDC
RUEAIIA/CIA WASHDC
RHEFDIA/DIA WASHDC
RUEHLMC/MCC WASHDC
RUCPDOC/USDOC WASHDC
RUEHBS/USEU BRUSSELS
RHEHNSC/NSC WASHDC
						S E C R E T SECTION 01 OF 05 DAKAR 001454 

SIPDIS

SIPDIS
NOFORN

STATE FOR AF, EEB/IFD/ODF, INR/AA, AF/EPS AND AF/W
NSC FOR AF SENIOR DIRECTOR PITTMAN
TREASURY FOR PETERS
PARIS ALSO FOR POL - D'ELIA
FROM AMBASSADOR

E.O. 12958: DECL: 07/05/2017
TAGS: EAID EFIN ECON PREL SG
SUBJECT: IMF RESREP ON SENEGALESE POLICIES AND GOVERNANCE

REF: DAKAR 1379

DAKAR 00001454 001.2 OF 005


Classified By: Ambassador Janice L. Jacobs for reasons 1.4 (b) and (d).

SUMMARY
-------
S E C R E T SECTION 01 OF 05 DAKAR 001454

SIPDIS

SIPDIS
NOFORN

STATE FOR AF, EEB/IFD/ODF, INR/AA, AF/EPS AND AF/W
NSC FOR AF SENIOR DIRECTOR PITTMAN
TREASURY FOR PETERS
PARIS ALSO FOR POL - D'ELIA
FROM AMBASSADOR

E.O. 12958: DECL: 07/05/2017
TAGS: EAID EFIN ECON PREL SG
SUBJECT: IMF RESREP ON SENEGALESE POLICIES AND GOVERNANCE

REF: DAKAR 1379

DAKAR 00001454 001.2 OF 005


Classified By: Ambassador Janice L. Jacobs for reasons 1.4 (b) and (d).

SUMMARY
--------------

1. (S/NF) Senegal is clearly at a political and economic
crossroads. Because we are friends, we should do what we can
to help Senegal through this difficult time. On June 29, IMF
ResRep Alex Segura sought out the Economic Counselor to
better understand the MCC decision to end its work on the
Diamniadio Platform. Segura also shared a range of
frustrations about the current economic policy climate in
Senegal, including:
-- Optimism about the economic team in the new cabinet is
already fading;
-- The GOS's commitment to poverty reduction continues to
deteriorate;
-- Apart from U.S. Mission, the donor community is unwilling
to deliver tough messages;
-- The World Bank Country Director is not always helpful;
-- IMF negotiations will be tough; and
-- Recently issued treasury bonds are only a short-term fix.
With inflation approaching its highest levels since the 1994
devaluation and government focused on infrastructure rather
than the investment climate or poverty reduction, Senegal
seems headed for another unspectacular economic performance
in 2007. END SUMMARY.

MCA/DIAMNIADIO PLATFORM
--------------

2. (C) Segura found the news that the Millennium Challenge
Corporation (MCC) was ending its work on the Diamniadio
Platform "very disappointing," and he had hoped there was
room for negotiation. He now understand that the MCC is not
going to go back. While he was glad that the MCC wants to
help with the toll road, he views it as a great loss that MCC
will not be able to work on a project of grand scope, at
least in the near future. EconCouns explained a bit more
about how the GOS had not been forthcoming on discussions
about the Special
Economic Zone, and that, frankly, the MCC
had lost confidence in negotiating with the GOS on the
matter. Given that certain parts of the Wade administration
clearly wanted to gain control of the Platform, Segura
thought the U.S. statement should have been stronger and more
direct.


3. (C) Segura thought that the Wade administration must be
feeling uncomfortable because so many other countries in the
region had managed to sign MCA Compacts. EconCouns agreed
with his doubts that the important players in the GOS
actually cared about the Platform and its ability to
alleviate poverty, and were more interested in just getting
into the club of countries that had signed a Compact.


4. (SBU) Segura was concerned that AMPMD Director General
Sogue Diarisso would be blamed for the failure. EconCouns
explained that the Embassy and the MCC have tried to press
the point that Diarisso and his team have been very good
partners and are now quite likely the most effective
Senegalese organization for managing and providing technical
assessments of big infrastructure projects, and that we hope
the GOS will continue to take advantage of that talent.
EconCouns asked Segura to reinforce this message in his
dealings with senior GOS officials.

NEW ECONOMIC TEAM STARTING TO LOOK LIKE THE OLD ONE
-------------- --------------

5. (C) Segura said he was initially very optimistic about
the new line-up of economic ministers. He thought that his
interview in Walfadjiri highlighting Senegal's budget deficit
may have helped convince President Wade to put knowledgeable
technocrats in place. Segura understood that Senior Economy
and Finance Minister Abdoulaye Diop was strongly considered
for the Prime Minister,s job, but the Karim Wade faction
convinced the President not to appoint him.


DAKAR 00001454 002.2 OF 005



6. (C) Segura has already seen signs that the new Prime,
Budget, and Commerce Ministers view their job as supporting
President Wade's wishes rather than providing sound advice or
words of caution. It seems that once again only the Finance
Minister is willing to raise objections. In one example,
Segura said Wade has decided to subsidize the price of bread
and rice to address spiraling inflation and both the Budget
and Commerce Ministers asked Segura how to do that -- and
they did not want to hear about the negative economic
consequences. Segura expects to have a much clearer idea of
the new team after the July IMF mission comes to Dakar to
begin negotiating a new program.

NOT MEETING SOCIAL/PRO-POOR NEEDS
--------------

7. (C) Segura explained that his office informally follows
MDG trends and the picture is not good. Overall, the
social/development budget is shrinking, with money going
instead to the growing top-end wage bill, projects like the
Corniche, as well as the huge payments to Senelec, the
electricity parastatal, and SAR, the oil refinery. He was
told by UNICEF that the Ministry of Health is in arrears on
payments for vaccines and that vaccination rates will fall in
the coming months. He has heard that many school districts
are not able to purchase teaching materials. President
Wade's proposed subsidies for bread, rice, and gasoline are
not really pro-poor, but rather pro-low-middle-high income
since those are items that the majority of the population
already cannot afford to purchase. One policy to help the
poor would be to end the tax protections on cooking oil (for
Soneur) and sugar (for local producers), which actually make
people pay more than in neighboring countries. Segura agreed
that given Senegal's income level, the amount of donor
assistance, and its relatively advanced infrastructure, there
is no reason the country is failing MCC indicators.


8. (C) New Minister of Commerce A. Habibou Ndiaye told
Segura that the new subsidies are necessary because the
political opposition is making such noise about rising
prices. Segura had replied that the opposition will also use
to its advantage the news of Senegal's dangerous budget
deficit; so if the Government cannot address both issues, it
would be better to come up with an effective strategy to
explain why the Government needs to take difficult steps to
get the economy back on track. Segura agreed that would be
quite a public relations effort while an increasing number of
senior officials and others close to the Presidency are
driving new Mercedes. The GOS' current thinking is to keep
prices from rising by decreasing taxes on specific
commodities, which, according to Segura, will establish a
poor precedent. It could also cost Senegal's treasury USD
45-50 million in lost revenue (approximately 0.05 percent of
GDP) at a time when the country is facing an expanding budget
deficit.

DISAPPOINTMENT WITH THE DONOR COMMUNITY
--------------

9. (C) Apart from the United States, Segura is disappointed
that the donor community often complains to him about
government economic/budget policy and implementation but is
unwilling to deliver important, but tough messages to the
President, either in person or via public statements. He
speculated that many donors are intimidated by Wade. He
agreed that some G8 missions may be under pressure from
capitals to not make waves since the countries have made such
huge commitments on aid to Africa. The worst culprits are
the UN agencies, which want to talk and organize coordination
meetings, but don't want to raise difficult issues on
implementation. He is also frustrated that they do not let
him use examples of the difficulties they face to help
negotiate useful benchmarks for the new IMF program.


10. (S/NF) Segura expressed disappointment that the
Ambassador and DCM are both leaving. He said he very much
appreciates that we have been one of the few missions willing
to raise difficult issues with President Wade and others --
doing so publicly on occasion. He added that the Ambassador

DAKAR 00001454 003.2 OF 005


has a very high reputation among donors and is well respected
by the ministers he works with. The Senior Minister of
Economy and Finance told Segura that shortly after the
Ambassador,s presentation of credentials, President Wade
confided that he was "a bit scared of the new Ambassador.8

THE ROLE OF THE WORLD BANK COUNTRY DIRECTOR
--------------

11. (S/NF) In strict confidence, Segura (protect) wanted us
to know that he has some concerns about the role World Bank
Operations Director Madani Tall is playing in Senegal. He
views Tall as wanting to be close to President Wade and to be
a trusted advisor. However, this may not be always in the
best interests of the broader donor community. Segura said
that the new Budget Minister, whom Segura views as a close
ally of Karim Wade, has confided that Segura's "sister IFI
Director" has reported to President Wade "criticisms" that
Segura supposedly made about Wade or Karim. This happens in
the context of Tall saying something critical of presidential
policy or of Karim's role, and then &reporting back" when
there is agreement. In general, Segura is a bit concerned
that Tall is keeping himself "outside" of intensive but
useful donor discussions.


12. (S/NF) Segura also said that he is growing more
concerned about possible monitoring on behalf of the GOS. He
said that somebody told him that the Government can monitor
cell phone conversations. EconCouns replied that he was no
expert and has no information on such GOS activity, but that
monitoring specific phone numbers is probably not too
difficult and that he assumes that anything he says over a
landline or cell phone can be monitored.

IMF NEGOTIATIONS WILL BE DIFFICULT
--------------

13. (C) According to Segura, it is "common knowledge" that
President Wade does not like the IMF, and most of Wade's
advisors do not want a new program. APIX Director Aminata
Niane has been particularly critical of the IMF. Only Senior
Economy and Finance Minister Diop was able to convince Wade
of the importance of a new program as a requirement to get
much needed budget support from other donors. However, the
upcoming IMF team (scheduled to arrive July 11) will be
willing to allow Senegal to not have a program if the
negotiations prove too difficult. The Mission lead will not
be interested in granting Senegal special considerations such
as those already raised, i.e., allowing the National Agency
for the Organization of the Islamic Conference (ANOCI) to
participate in the negotiations and permit the financing of
the new airport to remain off-budget.


14. (C) Segura, in a July 9 brief for incoming DCM Jay Smith
indicated that Senegal is still interested in pursuing a
Policy Support Instrument (PSI), rather than a traditional
PRGF, but that he is not convinced that the GOS is prepared
tackle necessary "Commonly Agreed Reform Measures" or to
respond to the stricter reporting requirements incumbent with
a PSI.

SENEGAL'S TREASURY BONDS ISSUANCE
--------------

15. (SBU) We briefly touched on the subject of the recently
issued government bonds (Reftel), and Segura confirmed that
it was "sort of" a good measure, being an easy way for the
Government to catch-up on current arrears for salaries and
payments to suppliers, but that it is not part of a broader
strategy to improve public finances. He confirmed that
Senegal would do second round, likely for CFAF 75 billion
(USD 150 million), in the coming months. In Segura's view,
there is not enough demand within the regional market for
more than these two issuances, at least not without either
expanding the pool of subscribers to include insurance
companies and private parties or to significantly increase
the rate of return for the bonds.

AMBASSADOR'S COMMENT
--------------

DAKAR 00001454 004.2 OF 005



16. (C) I will take this opportunity to offer some departing
thoughts on U.S.-Senegal relations. Promoting economic
growth and development continues to the cornerstone of our
bilateral relationship, one solidly based on shared values
and interests. President Wade genuinely likes the United
States, particularly its diversity, creativity and
entrepreneurial spirit. He is especially proud of his
friendship with President Bush and was flattered that Senegal
was the first stop in the First Lady,s recent trip to
Africa. He highly values USG efforts to strengthen
Senegal,s basic education and health care systems. Our
views count with President Wade.


17. (C) At the same time, President Wade is a proud,
pragmatic and impatient man jealous of his power and image.
As he famously wrote to the Government of Taiwan in October
2005 when reestablishing relations with the PRC, &countries
have interests and not friends.8 Those interests more and
more revolve around what we would describe as dollar
diplomacy. Assistance is sought and received from both
traditional and non-traditional sources with the latter
playing an increasingly dominant role, particularly China,
India, and Gulf States such as the United Arab Emirates.
Wade told the press three years ago that he was taken with
the UAE and other emerging states as models for development.
Senegal,s selection of Dubai Ports International over
France,s Bollore to develop its container port, Jafza
International to build a special Free Trade Zone, the
Saudi-based Bin-Laden group to build Senegal,s new
international airport, and Kuwaiti development funds to build
Dakar,s new Corniche road is not surprising. Wade has grown
impatient with the conditionality attached to traditional
western assistance when he can get quicker results elsewhere.
He is convinced that large infrastructure projects are the
path to accelerated growth and job creation whereas the
western donors push (mostly unsuccessfully) for increased
investment through an improved business climate.


18. (C) Returning to our priority, economic growth and
development, the situation is worening as outlined in this
cable. Government payents prior to presidential and
legislative electons, an expanded National Assembly and
re-creatio of the Senate are all financial drains. A 2 - 3
percent growth rate and 6 - 8 percent fiscal defiit do
nothing to win donor confidence or to helpSenegal meet its
Millenium Development Goals. Uemployment remains high and
young men continue torisk their lives in attempts to reach
Europe by ea. Adding to Senegal,s economic woes, President
Wade continues to resist engaging in dialogue with key
opposition parties whose leaders are now challenging the
President and his policies on a daily basis. There is
widespread belief among the opposition and some civil society
groups that the President is laying the groundwork to have
his son, Karim, take over the Presidency. Some believe that
President Wade will step down in two years in order to speed
up the process. Many of the new government appointees
reportedly have ties to Karim, who is increasingly visible in
the press and political discussions.


19. (C) Senegal is clearly at a crossroads economically and
politically. Because we are friends, we should do what we
can to help Senegal through this difficult time. This needs
to be done discreetly because President Wade can react badly
to bad news or unwanted advice. Getting the country,s
economic house in order is crucial to maintaining the
confidence and support of donor countries. Senegal,s
stability could be threatened over the long run without
significant economic gains that translate into job and wealth
creation. Senegal continues to be a model within the region
for its peaceful, tolerant, and democratic traditions.
President Wade is fiercely proud of this image and we should
do what we can to help maintain it. One of the key
challenges the U.S. will face not just in Senegal but in
other developing nations is the growing availability of
unconditional assistance. We may have less leverage in our
efforts to improve governance, fight corruption and increase
transparency. Our ability to encourage reform will depend

DAKAR 00001454 005.2 OF 005


more on the power of persuasion than the pocketbook should
current trends continue. END AMBASSADOR'S COMMENT.


20. (U) Visit Embassy Dakar's SIPRNet Web site at
http://www.state.sgov.gov/p/af/dakar.
JACOBS