FINANCE MINISTER UNPERTURBED BY ECONOMIC PRESSURES

C O N F I D E N T I A L SECTION 01 OF 02 FREETOWN 000321 SIPDIS DEPARTMENT FOR AF/W (JHUNTER) E.O. 12958: DECL: 08/17/2019 TAGS: ECON EFIN EAID PREL PINR SL SUBJECT: FINANCE MINISTER UNPERTURBED BY ECONOMIC PRESSURES REF: FREETOWN 262 Classified By: Ambassador June Carter Perry for reasons 1.4 (b/d) ¶1. (C) Summary: Ambassador met with Finance Minister Samura Kamara on August 11 to discuss the state of the Sierra Leonean economy. Minister Kamara downplayed the ongoing currency devaluation (reftel),focusing instead on long-term financial and development strategies, such as the GoSL's approach for the upcoming Consultative Group meeting and introducing long-term securities into the market. He also discussed the African Caucus of Finance Ministers and Bank Governors, of which Sierra Leone is now chair, and his expectations for the Caucus meetings that were held in Freetown August 11-14. As per his norm, Minister Kamara seemed unruffled by the economic downturn and provided few specifics about how he will address its immediate, rather than long-term, effects. End Summary. -------------- FEELING THE PRESSURE: SIERRA LEONE'S ECONOMY -------------- ¶2. (C) Minister Kamara admitted that Sierra Leone is starting to feel the impact of the second-round effects of the global economic crisis. Despite this, though, he stated that the growth rate is 4-4.5% (Note: The Economist Intelligence Unit predicts the 2009 growth rate will be 2%. End Note). He also stated that the Leone is particularly under pressure, but did not seem overly concerned at the continued devaluation. The weekly currency auction amount has been raised to a little over USD 1 million, though banks desperately in need of foreign exchange cannot participate. The Minister noted that foreign exchange reserves need to grow, and said that he wants diplomatic missions, international organizations, and non-governmental organizations to hold more savings in Sierra Leone rather than in foreign accounts. ¶3. (C) When asked if the World Bank and International Monetary Fund (IMF) will be supplying an infusion of funds, the Minister responded that the IMF fifth review is expected soon. He intends to support fiscal expansion and issue more Treasury bills in an effort to mop-up liquidity. He also intends to introduce long-term securities, and reported that commercial banks had agreed to invest in those during a meeting on August 10. He also met with commodities importers, and learned that they have enough stocks to meet several weeks' worth of demand: being able to afford replacement stocks is now their primary concern. The Minister did not say if any measures would be taken to assist the importers at that point. -------------- MOVING AHEAD: THE CONSULTATIVE GROUP -------------- ¶4. (C) The FinMin discussed the Consultative Group (CG) meeting, to be held in London November 18-19, after Ambassador sought to clarify the specifics of the agenda. Kamara replied that the CG will start with an investment and trade forum on November 18, in which he hopes to demonstrate that Sierra Leone's investment climate has improved. The CG itself will be held on November 19, using President Koroma's "Agenda for Change" document as a guide. The Minister said that the GoSL is looking for sectoral basket funds in areas such as infrastructure, agriculture, health, education, and strengthening local governments. A session on aid effectiveness and donor coordination will also take place on that day. Ambassador reminded him of the USG's bilateral assistance programs, particularly the current focus on agriculture and agri-business. She told Minister Kamara that the USG would welcome increased donor coordination, and also expressed her hope that Sierra Leone will take greater advantage of AGOA benefits in future. -------------- THE AFRICAN CAUCUS -------------- ¶5. (C) The Minister also highlighted the African Caucus, which Sierra Leone is currently chairing. Sierra Leone assumed the chairmanship a year ahead of schedule following the coup in Mauritania, which came in the middle of its two-year term (Note: The Chairmanship alternates every two years between Anglophone and Francophone countries in alphabetical order. The Democratic Republic of Congo will become chair in 2011. End Note). The Caucus was formed in response to the difficulties African countries face in engaging the Bretton Woods institutions. The primary output from the meetings held August 11 through 13 was a memorandum of mutual issues to be raised during the World Bank/IMF FREETOWN 00000321 002 OF 002 annual meetings in Istanbul. The themes considered this year included infrastructure financing, growth drivers, and the impact of the financial crisis. The meeting closed on August 14 with G-20 consultations (Note: Post will provide a detailed read-out of the consultations and the Caucus declaration septel. End Note). -------------- COMMENT -------------- ¶6. (C) The Finance Minister provided no new information about how Sierra Leone will handle the various economic shocks that are driving down the value of the Leone and making it increasingly hard to meet the needs of this heavily import-reliant country. Though he has an unflappable demeanor generally, the Minister's nonchalance is disconcerting in the face of the genuine concern and anxiety expressed by commercial banking contacts. That said, he does acknowledge that the current economic state could erode stability and security, and it is possible that he intends to maintain an optimistic posture before donors to instill confidence while internally admitting that his arsenal of policy tools to improve the situation is extremely limited. Against the backdrop of strategizing how to maximize donor funds, the GoSL just spent a fortune supporting the in-country costs for an extravagant Caucus meeting. For a government too cash-strapped to provide adequate fuel for its police force, support social services, or even pay salaries for civil servants at times, funding the in-country costs for a multi-day event for upwards of 600 dignitaries did not seem judicious (Note: Dr. Kamara refused to disclose the Caucus' costs to the GoSL in a press interview. End Note). With the CG a few short months away, this kind of financial management could dampen donors' enthusiasm to respond to the GoSL's near-constant refrain that they are nearing insolvency. Nevertheless, we note that President Koroma told Ambassador in an August 8 conversation that he was counting on the CG to pull Sierra Leone out of troubled financial waters. End Comment. -------------- BIOGRAPHIC NOTE -------------- ¶7. (C) Dr. Samura Kamara is an APC party member from the Northern Province, but was appointed to the post of Financial Secretary by former President Kabbah in 2005. He left that position in 2007 to work for the IMF in Washington, and returned to Sierra Leone at President Koroma's behest in December, 2007, to become the Governor of the Central Bank. He became the Finance Minister as a result of the Cabinet reshuffle in March, 2009. Further background information will be provided as it becomes available. PERRY