WORLD BANK RESREP DEMANDS CABINET, FINANCE MINISTER

C O N F I D E N T I A L SECTION 01 OF 03 CONAKRY 000021 SIPDIS E.O. 12958: DECL: 01/06/2019 TAGS: EAID EFIN ECON AORC PGOV GV SUBJECT: WORLD BANK RESREP DEMANDS CABINET, FINANCE MINISTER REF: A. CONAKRY 689 ¶B. CONAKRY 838 ¶C. CONAKRY 707 Classified By: ECONOFF T. SCOTT BROWN FOR REASONS 1.4 (B) AND (D) ¶1. (C) SUMMARY. In a discussion with Guinean Prime Minister Kabine Komara, World Bank Country Manager Siaka Bakayoko said that the Bank would not suspend its program, but stressed that appointment of a cabinet and a credible finance minister were critical for HIPC completion and other development goals. He also questioned several of the GoG's fiscal decisions, including a recent drop in fuel price and failure to plug an $80 million budget gap. Though Bakayoko appeared deeply skeptical of the new president's qualifications to run the country, he indicated that he could work with experienced technocrats. He seemed to strike the right balance between cooperation and policy firmness, and is not taking the new government completely at face value. END SUMMARY. ¶2. (U) World Bank Country Manager Siaka Bakayoko met with Charge on January 6 to share his and the World Bank's perspective on newly appointed Prime Minister Kabine Komara and the CNDD-led government. Bakayoko was in the United States when the coup took place, and received high-level briefings at his Washington headquarters before returning to Guinea. -------------- WB HQ: GUINEA IS NOT QUITE MAURITANIA -------------- ¶3. (C) According to Bakayoko, World Bank President Zoellick wants to act fast on Guinea to avoid the impression that the Bank supports coups. However, Bakayoko noted that the Bank would probably not act as fast as it did following the 2008 coup in Mauritania--where it immediately suspended all programs and closed its office--because the situation in Guinea is murkier. Before leaving Washington, the World Bank African VP instructed Bakayoko to take his cues from the rest of the international community rather than quarterbacking the multilateral effort. ¶4. (C) The Bank decided against immediately disbursing an outstanding education grant of $5 million (reftel A),which was set to reinforce teachers' salaries. At one point, the WB VP asked Bakayoko, "If you disburse the money today, can you be sure that (President) Dadis Camara will not pocket the money?" Bakayoko replied that no one could be sure. -------------- --- WB TO PM: APPOINT A CABINET AND FINANCE MINISTER 
 -------------- --- ¶5. (SBU) Bakayoko met with newly appointed Prime Minister Kabine Komara on January 5 and told him that the Bank's mission should have closed immediately after the coup as a matter of policy. However, Bakayoko said that the Bank is willing to work with the new government in the short term, but only if specific objectives are implemented soon, which would establish the GoG as a credible partner. At a minimum, Bakayoko told the PM that he would have to appoint an acceptable civilian cabinet and a competent and qualified finance minister. -------------- POSITIVE POLITICAL DIALOGUE -------------- ¶6. (SBU) PM Komara told Bakayoko that he believed the political dialogue he has thus far witnessed is positive. Komara noted that prior to his appointment as PM he did not know Dadis Camara, but believes Dadis' promise of not holding onto power is sincere. The PM told Bakayoko that he is impressed with Dadis' performance as president up to now, and that, as PM, he has been able to exert a great deal of independence with the CNDD head, at times even rejecting some of the president's nominees to certain posts. -------------- PM'S "PRIMARY PREOCCUPATION" IS HIPC -------------- ¶7. (SBU) PM Komara told Bakayoko that his primary preoccupation is not losing HIPC debt relief. Bakayoko replied that the international community needs to see a higher level of economic performance from Guinea, as well as CONAKRY 00000021 002 OF 003 credible evidence that Komara is truly in charge of fiscal and monetary policy. Bakayoko promised that the Bank would restart the debt-relief discussion after these conditions had been met, but that HIPC completion was not automatic. He reminded the prime minister that Guinea has not yet achieved the two remaining HIPC triggers of completion of several government audits and granting more monetary policy independence to the Central Bank. Additionally, Guinea missed a December loan payment of $70,000, and is now in arrears of $2.2 million. Should the government not repay these amounts by January 15, Bakayoko indicated that the Bank would immediately suspend its program. Going forward, Bakayoko said that he would try to ensure that fiscal policy constraints governing social sector investment would be built into the HIPC process, and to work with the Fund to ensure a more transparent budgetary process. -------------- OUSMANE DORE A GOOD CANDIDATE FOR MINFIN -------------- ¶8. (SBU) Turning to qualifications for a new Finance Minister, Bakayoko asserted that previous experience and familiarity with World Bank and IMF procedures were critical requirements for any appointee because the Bank "does not have the time to train someone new." When asked who he thought would make a good minister, Bakayoko said that ex-Finance Minister Ousmane Dore was the only choice he could think of: "Dore is competent and knows the program; we can't have someone doing on-the-job training, otherwise the project is in danger of failing." -------------- QUESTIONABLE FUEL POLICY -------------- ¶9. (C) Bakayoko expressed surprise that the GoG had recently lowered the price of gasoline (reftel B). After the Ambassador mentioned that Guinea's fuel was the second-cheapest in the region after Liberia, based on an informal survey (reftel C),Bakayoko said he believed that a large quantity of the fuel that is transported to Guinea's border regions is being smuggled out to Mali, Senegal, and other neighboring countries. Bakayoko reportedly told the PM that the Bank would be willing to work with Dore again. -------------- AN $80 MILLION BUDGET GAP -------------- ¶10. (C) On the subject of Guinea's fiscal policy, Bakayoko seemed concerned that Guinea's FY09 budget contained an $80 million deficit. Addressing only part of this, the PM told Bakayoko that he could pay for military promotions and salary increases by eliminating or retiring over 4,000 soldiers--approximately 33% of the official size of the Guinean armed forces. Bakayoko agreed with the Ambassador that it was unlikely that a military government that took power in a coup would agree to a major reduction in its own ranks. -------------- -- THE WAY FORWARD: COOPERATION WITH G8 AND ECOWAS -------------- -- ¶11. (SBU) Bakayoko said he plans to tell Washington that Guinea needs help, but that he will try to coordinate Bank policy toward the new government with the G8 and ECOWAS to the extent possible. He said that ECOWAS has no real leverage on its own, as it is not a lending organization. Bakayoko said he would coordinate with ECOWAS to strengthen their hand, provided that it does not veer too far from the WB's own views. -------------- COMMENT -------------- ¶12. (C) Bakayoko stressed more than once that having a credible partner with whom they could work is paramount for the Bank. While Bakayoko seemed to indicate that Prime Minister Komara or former Finance Minister Ousmane Dore both fit the bill, he derided Dadis Camara as a "gas station attendant," a reference to his previous position as fuel quartermaster for the armed forces. Similarly, he said that a credible partner would need to be able to look reality squarely in the eye. Bakayoko expressed hope that Guinea CONAKRY 00000021 003 OF 003 "... not go back to 1960s rhetoric of 'We can do it without you,'" he said, "because we know that they can't." ¶13. (C) The World Bank may have more leverage than almost all other international actors in Guinea, since the Bank and the Fund control HIPC debt relief, which constitutes by far Guinea's largest potential source of financial assistance. Past Guinean government officials have proven very adept at telling the international community--and the IMF and World Bank in particular--exactly what they want to hear without any real intention of following through. For now, the Bank seems to be striking a balance between cooperation and policy firmness, and is avoiding taking the GoG completely at face value. However, it is unclear how long the Bank can afford to wait before it must make a decision to terminate its program. Bakayoko was very concerned about "not getting burned." END COMMENT. RASPOLIC