DRC Fiscal Transparency

UNCLAS KINSHASA 000256 SIPDIS SIPDIS FOR EEB/IFD/OMA ASNOW and RFIGUEROA STATE PASS TREASURY for OWHYCHE-SHAW E.O. 12958: N/A TAGS: EAID ECON PREL SUBJECT: DRC Fiscal Transparency REF: STATE 016737 ¶1. (U) The Democratic Republic of Congo (DRC),after successful national and provincial elections in 2006, has had a government in place now for one year. The current USG foreign assistance package for FY 08 is over USD 150 million, consists of both direct project funding and food aid, and includes IMET funds, meaning that the submission to the Foreign Operations, Export Financing and Related Programs Appropriations Act of 2003 (FOAA-03) must be updated (reftel). ¶2. (U) Since the official return in mid-2003 of the IMF and World Bank (WB),DRC state financial institutions, particularly the Congolese Central Bank (BCC) and the Ministries of Finance and Budget, have created official websites and are posting documents such as the national budget, which has been made public annually since 2003 both in hardcopy and electronic form. Revenues and expenditures are detailed in the budget, but it is not always easy to determine the source of the revenue. The 2008 DRC budget is the first ever to surpass USD 3 billion, but it is generally conceded that this may be an optimistic target for state revenue collection. However, the GDRC continues to report its finances on a monthly basis and has made efforts to maintain its spending within income limits. ¶3. (U) The USAID Mission in Kinshasa is supporting accurate disclosure of revenues paid to the central government at the provincial level by working with companies in the copper mining sector to encourage adherence to international standards, including the Extractive Industries Transparency Initiative. USG programs to encourage democratic reform and participatory decision-making indirectly promote transparency by making government officials more accountable to the public. ¶4. (U) The World Bank was the first institution to analyze DRC public finance, beginning in 2005. An EU-funded January 2008 report on DRC public finance management, using the Public Expenditure and Financial Accountability (PEFA) methodology found that there are still weaknesses in the national budget, the system of GDRC expenditures and receipts, and overall transparency of public finances. (Note: PEFA is a partnership between the World Bank, the International Monetary Fund (IMF),several national aid agencies and the Strategic Partnership with Africa. End note) ¶5. (U) The formal IMF program begun in 2003 lapsed at the end of March, 2006, during the transitional government period, due to increased macroeconomic instability and failure to achieve targeted structural reforms. Since then, the IMF has had an informal Staff-Monitored Program in place and continues to work with the GDRC to reinstall a Poverty Reduction and Growth Facility program that will eventually lead to increased outside budgetary assistance and nearly complete external debt forgiveness. The IMF has generally been satisfied with GDRC fiscal transparency, but recently learned of GDRC deficit spending in December 2007 and January 2008 that has delayed discussions of a new PRGF. The DRC has not/not requested that the IMF prepare reports on compliance with standards and codes covering fiscal transparency. GARVELINK