AMBASSADOR MEETS WITH NEW MINISTER OF FINANCE

UNCLAS FREETOWN 000675

SIPDIS

SENSITIVE
SIPDIS

DEPARTMENT FOR AF/W

E.O. 12958: N/A
TAGS: PREL EFIN PGOV EAID SL
SUBJECT: AMBASSADOR MEETS WITH NEW MINISTER OF FINANCE

REF: A) FREETOWN 0665


1. (U) Summary: During an introductory call the newly
appointed Minister of Finance and Ambassador Perry discussed
a wide range of topics including: the strike by workers at
the Central Bank, the urgent need to provide electricity to
Freetown, the high rate of interest, weakness in revenue
collection, the MCC and, in response to the Minister's
suggestion, the possibility of a trade mission to promote
trade between the U.S. and Sierra Leone. End Summary.

New Minister Faces Urgent Demands
--------------


2. (SBU) Ambassador Perry paid an introductory call on the
newly appointed Minister of Finance, David Carew, on November

6. After introductions, the conversation quickly turned to
substantive topics. The Minister noted that the workers at
the Central Bank of Sierra Leone had gone out on a one-day
strike on November 5 (reftel). Carew said that he had become
involved in the negotiations and that the government had
agreed to an arrangement on rent allowances, allowing the
workers to return while talks continue. The strike came just
as an IMF team was scheduled to visit Freetown.


3. (SBU) The Minister then elaborated his government's
efforts to deal with another urgent issue - providing
electricity to Freetown. The electric generating system
effectively collapsed in 2006 and restoration of power was a
key election issue. The high cost of running generators is
an impediment to economic recovery. The Minister said the
government intends to restore basic power by December 20 of
this year, by establishing an Independent Power Provider
(IPP). This would provide electricity until the Bumbuna
hydroelectric plant could be brought on line in the third
quarter of 2008, claimed the Minister. The cost of the IPP
is projected at about $37 million for a year, of this amount
$7 million would be rental of the generators and $30 million
for fuel costs. The Minister said he is exploring the
possibility of using funding from debt relief to help defray
the costs of the project. This would entail justifying to
the IMF that the generation of electricity could be counted
as a poverty reduction measure. As part of the reform of the
electricity sector, the Minister said that system of
prepayment using new meters is being considered.

Interest Rate Reflects Risk
--------------


4. (SBU) The Minister said that the prime rate of interest in
Sierra Leone is now 25 percent. Banks charge up to 5 percent
over prime on loans, leaving customers facing an interest
rate of 30 percent. With a relatively low inflation rate and
the stability of the Leone/dollar exchange rate, one would
have expected the interest rate to come down over the past
three years, said the Minister. However, the high risk of
doing business in Sierra Leone and the shortage of capital
has kept the interest rate high. The Minister said that in an
effort to address this situation, the government plans to
require the ten banks in operation in the country to increase
their capital by the end of the year.


5. (SBU) The Minister briefly noted that the National Revenue
Administration (NRA) suffers from structural weaknesses which
inhibit the collection of taxes. He said that the operations
of mining companies may be reviewed. The Minister noted that
the energy shortage has reduced profits of many companies. He
reaffirmed that Sierra Leone needs to be seen as an
attractive place to do business.

Trade Mission and MCC of Interest
-------------- --


6. (SBU) The Ambassador presented a copy of the MCC scorecard
to the Minister. He responded that the information was
'timely' coming as it did at the beginning of his tenure as
Minister. The Minister said he is interested in expanding
trade between Sierra Leone and the U.S. and suggested that a
trade mission might be organized in the near future. He
noted also that there are possible privatization projects
that may attract foreign investment. The Ambassador
suggested that it might be useful to work with the Corporate
Council on Africa to set up a trade mission in 2008, after
the new government has settled into place.



PERRY