WORLD BANK RESREP OUTLINES SUSPENSION TRIGGERS

UNCLAS CONAKRY 000106 SIPDIS SENSITIVE E.O. 12958: N/A TAGS: EAID PGOV ECON AORC GV SUBJECT: WORLD BANK RESREP OUTLINES SUSPENSION TRIGGERS REF: CONAKRY 058 ¶1. (SBU) SUMMARY. During a 10 February meeting, World Bank ResRep Siaka Bakayoko told Embassy officials that he felt Guinea's prime minister has been marginalized by military leaders and has little influence on the CNDD. He said that arrears in excess of $3 million had not yet been paid, and revealed that the Finance Ministry had recently asked if the loan could be repaid from WB grant money slated for teachers' salaries. He then explained the details of the automatic sanctions regime that the World Bank has in place for all borrowers in the case of non-payment. Bakayoko noted that officials at World Bank HQ continue to be concerned about the Bank's "reputational risk" of being associated with Guinea's military regime. Throughout the meeting, the ResRep's frustration with the GoG was apparent. END SUMMARY. ¶2. (SBU) On 10 February, Polchief, Econoff, and Poloff met with Siaka Bakayoko, the World Bank Country Manager for Guinea. During the meeting, Bakayoko shared his perspective on the several recent meetings with both the Prime Minister, Kabine Komara, and the Finance Minister, Captain Mamadou Sande, who was recently suspended. -------------- -------------- PM MARGINALIZED, WB PARTNER ACCOUNTS STILL FROZEN -------------- -------------- ¶3. (SBU) Bakayoko told PolChief that he was increasingly frustrated with the military junta, and with the PM in particular. He said that he had meet with Komara five times since 1 January, and that he had initiated each of those meetings. To Bakayoko, the PM did not seem concerned about the myriad financial and economic issues confronting Guinea, or how to keep international donor programs, such as the HIPC debt relief process and the IMF Poverty Reduction and Growth Facility (PRGF) program, on track. Bakayoko complained: "Given Guinea's problems, this guy (the PM) should be sleeping on my doorstep. Instead, I have to call him!" ¶4. (SBU) Further, Bakayoko said that the PM had been unable to follow through on several of his promises. Bakayoko said that he now believed that the president had essentially stripped the PM of his power, leaving him completely marginalized. In one instance, Bakayoko said that he had asked Komara to unfreeze the bank accounts of his implementing partners. The CNDD had ordered these accounts frozen pending a full audit (reftel). Though the PM promised 
to lift the freeze, he was only able to do so for one day, after which the accounts were immediately refrozen. Giving another example, Bakayoko said that the PM was similarly unable to secure the release of a pickup truck that several soldiers had commandeered several weeks ago and which has since been seen rolling along in presidential motorcades. Owing to these developments, Bakayoko said: "I'm not even going to call (the PM) any more." -------------- "BEYOND CREATIVE FINANCING" -------------- ¶5. (SBU) When asked if the GoG had made their outstanding loan payment of $3.3 million to the World Bank that was due on 30 January, Bakayoko said Guinean officials had neither made the payment nor committed to a date by which the funds would be transmitted. Bakayoko also noted that he was unsure if the junta had the money to pay the arrears. He said that an official at the Ministry of Finance had recently told him that the GoG was short of hard currency, and had asked if it would be possible to pay in local currency. After Bakayoko said no, he said the official reminded him that the WB had not yet disbursed the second half of a $5 million education grant for teachers' salaries. Reportedly, the official continued: "We've set aside local currency that is equivalent to the amount of your grant. So, when you pay the grant, we will pay teachers' salaries in Guinean francs and can make your loan payment in the hard currency we receive from you." Bakayoko said this approach to the problem went "beyond creative financing." -------------- WHAT'S NEXT? 30, 45, AND 60-DAY TRIGGERS -------------- ¶6. (SBU) In terms of next steps, Bakayoko said that the World Bank has automatic suspension triggers in place for delinquent borrowers. At the 30-day mark, which Guinea reached on 30 January, no new credits, loans, or grants may move to the Board, the WB's governing body, for approval. After 45 days--which for Guinea is February 17--the GoG will be warned that disbursements will be suspended if the repayment is 60 days late. At 60 days--March 4--the borrower will also be suspended, meaning that Guinea would no longer receive disbursements from the World Bank. When asked if these trigger would have an impact on the IMF's PRGF loan or the HIPC debt relief process, Bakayoko said he was unsure of the implications for those programs. -------------- VP SAYS REPUTATIONAL RISK IS A MAJOR FACTOR -------------- ¶7. (SBU) Noting that Guinea is a major source of concern for World Bank Headquarters, Bakayoko said that the Bank's Vice President for Africa had instructed him to stay out of the spotlight to avoid the appearance that the World Bank is associated with the coup. He said that the VP was worried about the reputational risk that this association could pose for the Bank. -------------- COMMENT -------------- ¶8. (SBU) On February 17, Guinea will be 45 days overdue on a repayment of over $3 million. Only recently, Bakayoko seemed willing to give the military junta the benefit of the doubt on the subject of debt repayment. However, the increasing marginalization of the civilian PM, coupled with the financial shell game proposed by the Finance Ministry, might finally be bringing Bakayoko's patience to an end. END COMMENT. RASPOLIC