Identifier
Created
Classification
Origin
08ABIDJAN346
2008-05-29 16:34:00
CONFIDENTIAL
Embassy Abidjan
Cable title:  

AF/W DIRECTOR DOUGHERTY DISCUSSES FINANCING THE

Tags:  PGOV AFDB EAID ECON IMF IBRD IV PREL 
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VZCZCXRO6173
PP RUEHPA
DE RUEHAB #0346/01 1501634
ZNY CCCCC ZZH
P 291634Z MAY 08
FM AMEMBASSY ABIDJAN
TO RUEHC/SECSTATE WASHDC PRIORITY 4262
INFO RUEHZK/ECOWAS COLLECTIVE
RUEHTU/AMEMBASSY TUNIS 0050
RUEATRS/DEPT OF TREASURY WASHDC
C O N F I D E N T I A L SECTION 01 OF 03 ABIDJAN 000346 

SIPDIS

EEB FOR K.DIZOGLIO, AF/EPS FOR E.REPKO, AF/W FOR E.PLUMB
TREASURY FOR R.HALL, D.PETERS
AMEMBASSY TUNIS FOR R.ADKINS
USAID/AFR/WA FOR S.SWIFT

E.O. 12958: DECL: 05/29/2018
TAGS: PGOV PRELAFDB AFDB EAID ECON IMF IBRD IV
SUBJECT: AF/W DIRECTOR DOUGHERTY DISCUSSES FINANCING THE
END OF THE POLITICAL CRISIS WITH KEY ACTORS

REF: A. ABIDJAN 337

B. ABIDJAN 286

C. ABIDJAN 274

Classified By: EconChief EMassinga, Reasons 1.4 (b,d)

C O N F I D E N T I A L SECTION 01 OF 03 ABIDJAN 000346

SIPDIS

EEB FOR K.DIZOGLIO, AF/EPS FOR E.REPKO, AF/W FOR E.PLUMB
TREASURY FOR R.HALL, D.PETERS
AMEMBASSY TUNIS FOR R.ADKINS
USAID/AFR/WA FOR S.SWIFT

E.O. 12958: DECL: 05/29/2018
TAGS: PGOV PRELAFDB AFDB EAID ECON IMF IBRD IV
SUBJECT: AF/W DIRECTOR DOUGHERTY DISCUSSES FINANCING THE
END OF THE POLITICAL CRISIS WITH KEY ACTORS

REF: A. ABIDJAN 337

B. ABIDJAN 286

C. ABIDJAN 274

Classified By: EconChief EMassinga, Reasons 1.4 (b,d)


1. (C) Summary: State AF/W Director Thomas Dougherty
discussed the pivotal question of financing for the end of
crisis package ("sortie de crise" in French) with a number of
key interlocutors during his May 14-18 visit to Abidjan.
Interlocutors discussed Cote d'Ivoire's Highly Indebted Poor
Country (HIPC) eligibility and the conditions to reduce the
country's debt burden, the country's weak fiscal balance
sheet and the state of affairs related to SAGEM. Lastly, he
discussed questions related to the much-anticipated launch of
the civic service program to absorb unemployed soldiers
cashiered out of the armed forces, rebel armed groups and
militias. End Summary.

International and Financier Communities Views on Financial
Situation
--------------

2. (C) During a meeting with representatives of the IMF,
World Bank, EU, UNOCI, UNDP and several others, IMF ResRep
Eugume said the national treasury is "empty", and that
without an eventual debt reduction through the HIPC program
the country could be left without the means to pay for the
sortie de crise. This would pose a potentially awkward
situation for the international community, which is
ostensibly engaged in Cote d'Ivoire to support crisis
recovery and development. The ResRep cited as examples of
the Ivoirian treasury's distress the fact that SAGEM was
supposed to have been paid 12 billion CFA (USD 29 million) in
April and 10 billion (USD 24 million) in May. (Note: The
government paid SAGEM an initial tranche of CFA 10 billion
(USD 24 million) on May 27, that should have originally been
paid in April, but still owes CFA 10 billion promised by the
end of May. End note).



3. (C) Eugume added that while his information indicates the
treasury has 100 billion CFA (USD 241 million) on hand, it
owes CFA 24 billion (USD 57 million) to private schools for
promised subsidies, CFA 80 billion (USD 192 million) to the
AfDB as part of the arrears clearance package and CFA 9
billion (USD 22 million) for demobilization payments to
Forces Nouvelles (FN) troops. Moreover, the state has
already exceeded the CFA 90 billion (USD 216 million)
budgeted for electricity subsidies for all of 2008, refusing
to take the politically painful measure of raising
residential and business rates.


4. (C) While the entire donor community agrees that Cote
d'Ivoire needs substantial debt relief, few are inclined to
support special treatment for Cote d,Ivoire given its recent
track record. Dougherty heard some debate regarding whether
debt relief should be granted early, i.e., by the end of 2008
or later, by mid to late 2009. Eugume argued for an early
HIPC "Decision Point" and said Cote d'Ivoire's opportunity to
quality for HIPC could become increasingly questionable as
time passes. He said that the key to qualifying will be when
the calculation of export to debt ratio is done - if the
calculation is made at the end of 2008/early 2009, debt
relief already granted in the form of WB and AfDB arrears
clearances (totaling $800 million),Cote d'Ivoire could very
well fall short of the 250 percent debt/export ratio cutoff
point stipulated by the HIPC rules and the country would not
qualify.


5. (C) Additionally, Eugume said that HIPC Decision Points
are usually only agreed to while a country is under a
rigorously negotiated and closely monitored Poverty Reduction
and Growth Facility (PRGF). Cote d'Ivoire, by contrast, is
only beginning its PRGF negotiations and under the most
aggressive scenario, would have only a six month track record
to back its application, which would be mitigated by
mediocre-to-poor performance under the IMF's
already-disbursed USD 120 million EPCA (Emergency Post
Conflict Assistance) package. Eugume, supported by World
Bank's Interim Country Manager Daniel Sellen, agreed that
Cote d'Ivoire's fiscal management falls short in controlling
presidential spending, subsidies and openly accounting for
all of its oil revenues, but believe that the people of the
country merit the relief HIPC can offer.


6. (C) A cross-section of West African financiers with whom

ABIDJAN 00000346 002 OF 003


Dougherty met separately echoed Eugume's conclusion that the
national treasury is short of liquidity. The financier group
anticipated, however, that the government would be able to
continue its heavy borrowing on the local financial markets
to finance its operations in the short to medium term.
However, such actions would continue to deprive small and
medium sized enterprises of capital, as banks prefer to buy
the never-ending stream of short-term Ivoirian bonds than to
pursue riskier (but better for the economy's long-term
health) business development strategies.

SAGEM
--------------

7. (C) Although President Gbagbo had told many of
Dougherty's interlocutors in the donor community that the
Ivoirian government "needs to pay SAGEM," the company is
anxious at its exposure due to the government's non-payment
(Note: per para 2 above, the government finally made an
initial but far short payment to SAGEM on May 27). Donors
reported that up to 80 percent of the contract has been
subcontracted, and most of those contracts have already been
let, making it difficult for SAGEM to walk away without
incurring painful costs. When asked if perhaps the
government (particularly the presidential camp) never really
intended to pay SAGEM, the EC Country Representative, Michel
Arrion, said "the SAGEM decision had been imposed during the
second Gbagbo-Soro meeting in November 2007" by the
Facilitator, Blaise Compaore. Arrion also said Interior
Minister (and Gbagbo stalwart) Desire Tagro continues to be
particularly adamant in his opposition to the SAGEM contract.

Civic Service
--------------

8. (C) Arrion said the Commission has had positive dealings
with Koffi Malan, newly-named head of the Civic Service.
This entity will focus exclusively on training unskilled
ex-combatants and preparing them to re-enter society
peacefully. Malan is looking at using existing institutions
(vocational, technical, etc.) for the civic service program.
Arrion said this approach has a decent chance of success, and
is being backed by modest support from the Commission (Note:
on May 26, the civic service program was finally launched
after many delays, taking in 250 ex-Forces Nouvelles
combatants. End note). Forces Nouvelles spokesman Sidiki
Konate told Dougherty that the FN was concerned at the slow
rollout of the civic service, particularly because the
program is the centerpiece in the plan to deal with both FN
ex-combatants and pro-government militias.


9. (C) Malan's style contrasts sharply with that of Daniel
Ouattara, head of the National Program for Reinsertion and
Reconstruction. Ouattara, subject of an unusually personal,
at times bitter conflict between WB staff and the Prime
Minister's office, focused initially on creating an expensive
new infrastructure, rather than leveraging existing
facilities. His PNRRC is now to focus exclusively, however,
on finding jobs for ex-combatants who already have a
marketable skill.


10. (C) Comment. Key international and domestic
interlocutors shared candid observations about the budget and
macroeconomic situation, SAGEM and the civic service program,
and despite expected partisan differences, were lQa]RQQ[ist of challenges is not to be dismissed lightly, it
also must be recognized that the political class, across the
spectrum, also strongly believes the electoral process will
somehow move forward. They seem convinced that the resources
needed to cope with the litany of challenges ahead will come
from somewhere, which is perhaps a good (if somewhat
perplexing) sign of collective hope for the future. End

ABIDJAN 00000346 003 OF 003


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