CONGO-BRAZZAVILLE GEARING UP FOR MAJOR ECONOMIC MILESTONES

UNCLAS BRAZZAVILLE 000291


DEPT FOR AF/C PCARTER, SLOPEZ

E.O. 12958: N/A
TAGS: ECON EAID PGOV CF
SUBJECT: CONGO-BRAZZAVILLE GEARING UP FOR MAJOR ECONOMIC MILESTONES
-- BUT WILL IT SUCCEED?


1. Embassy Brazzaville is an unclassified post.


2. Summary: After 18 months of delays, reviews and stalled
programs, Republic of the Congo (ROC) is making significant
progress toward reaching its Heavily Indebted Poor Countries
(HIPC) completion point and achieving the promise of its debt
relief status, granted in 2006. Recent reviews by the
International Monetary Fund (IMF) and World Bank have been close
to glowing and the Poverty Reduction Growth Facility (PRGF)
program is expected to restart in November after being stalled
since January 2007. Thus, it is possible ROC could achieve its
completion point by 2009. But ... Two key triggers that the
government of Republic of the Congo (GRoC) must satisfy are the
traditional sticking points: Oil industry management and capital
spending management. Given the ROC's history of questionable
spending habits and far-from-transparent accounting of oil
revenues, some IMF staff wonder how well GRoC will do in meeting
the completion point. End summary.


3. Republic of the Congo (ROC) has been mired in inactivity and
lack of progress on its Heavily Indebted Poor Countries (HIPC)
debt relief program since January 2007. HIPC status was granted
to ROC in November 2006, and ROC fell off schedule almost from
the beginning. Recent reviews by International Monetary Fund
(IMF) and World Bank, and recent meetings between EconOff and
key economic contacts at IMF, show substantial progress for ROC
and there is a new sense of possibility. The government (GRoC)
formed a presidential-level committee to cut through the delays
and IMF staff noted, and praised, an almost instantaneous
improvement in data collection and sharing by GRoC officials.
World Bank officials noted positive developments for ROC's
lucrative oil sector, where more information is now available
from GRoC on spending and management. Although the
anti-corruption committees formed by GRoC still lack resources
and power to do any investigating, the fact that they exist at
all is seen as a significant improvement. "It put a voice for
reform of the government the government," said Yaya
Moussa, IMF representative in ROC.


4. A six-month staff monitored program - in effect a
probationary review by the IMF -- normally done for immediate
post-conflict countries and thus unusual for a
post-post-conflict nation like ROC -- ended successfully in
June. (One prime reason for this additional review was the IMF
discovery that GRoC awarded USD $200 million to a single
governmental entity, the CORAF oil refinery (Congolaise des
Raffineries). Although the purpose of the payment was to
subsidize consumer pump prices for refined product, the payment
was somewhat extra-budgetary, and, as Moussa noted, how can a
government that is serious about a poverty reduction campaign be
giving USD $200 million to one, single entity? Attitudes within
GRoC itself appear to have changed after a presidential
committee was created by President Sassou-Nguesso to focus on
the IMF criteria, and now GRoC officials reportedly agree with
the IMF position on CORAF: Reduce its allowance.) With all
indicators pointing in the right direction now, the ROC hopes
that the IMF board will approve a Poverty Reduction Growth
Facility program in November, the next major step toward HIPC
completion.


5. But, the GRoC continues to face a significant hurdle toward
the HIPC completion point. Two of the necessary triggers are
what Moussa termed "vicious" for GRoC: oil management, and
capital spending management. Despite the recent progress, ROC
continues to operate its oil sector in less-than-transparent
manners. GRoC has shown more discipline with capital spending
programs, but has not yet demonstrated sustained improvement.
Given that oil sector transparency and spending habits have been
among GRoC's weakest attributes, successfully navigating those
triggers to reach the HIPC completion point in 2009 is going to
be an extreme challenge.

EASTHAM