MAURITANIA: FINANCE MINISTER REQUESTS US SUPPORT WITH IMF

UNCLAS NOUAKCHOTT 000042 SENSITIVE SIPDIS E.O. 12958: N/A TAGS: EFIN PREL PGOV MR SUBJECT: MAURITANIA: FINANCE MINISTER REQUESTS US SUPPORT WITH IMF ¶1. (SBU) On January 13, Ambassador called on Finance Minister Ousmane Kane at the latter's request. Kane said that he was pleased with the work that had been done on the annual budget claiming that the GIRM had made the most responsible use of its limited resources. He nonetheless lamented the government's inability to address more than one of four potentially catastrophic liabilities that it faced. Doing so, he said, would require outside assistance. ¶2. (SBU) The four major challenges that Minister Kane outlined were crippled parastatals, unpaid bills from previous administrations, crumbling state infrastructure and uncontrolled benefits and perqs for government employees. Kane said that parastatals SOMELEC (electricity) and SONEGAS (natural gas),in particular, were on very precarious footing, managing virtually day to day and potentially subject to failure at any moment. If that happened, he said, government intervention would not be optional and would require massive resources. ¶3. (SBU) Similarly, Kane noted that previous Mauritanian administrations going back to the Taya regime had covered budget deficits by simply not paying for some of the goods and services received. These unpaid bills, he said, constituted a massive liability for which demands for payment could be forced at any time by court action, assets seizures and the like. Kane also regretted that the current budget, like those that had preceded it, contained little or no money for maintenance or capital construction for government facilities. According to Kane, "Our buildings are crumbling around us. It is increasingly difficult to deliver essential services and almost impossible for the state to command respect." ¶4. (SBU) The one bright note, Kane claimed, was with the explosive growth of generous benefits and perqs such as housing, utilities and vehicles for government employees and former officials that had spiraled out of control. According to Kane, the Aziz administration had imposed strict control on these expenses, eliminating in the process one of the four major catastrophic financial threats. ¶5. (SBU) Kane said that he thought that the best policy was to put all of his cards on the table by fully exposing these risks to Mauritania's friends in the international community in the hope that he could mobilize the necessary resources to take care of these problems "once and for all." He said that he believed he had a creative solution that would make available financing on the order of between 200 and 400 million euros "without any budgetary impact on the U.S." Kane explained that he had been formally advised by the IMF that countries that had not used the Special Drawing Rights (SDRs) that had previously been allocated could make transfers from those SDRs to another country as a loan or a grant. Kane said that in responding to French and Spanish offers to be of assistance to the GIRM following democratic elections in July 2009 he had raised the possibility of such a transfer from their SDRs. Asked by the Ambassador whether he was making a similar request for funds from the USG's SDRs, Kane clarified that he was only asking for USG policy support within the IMF for the transfer of French and Spanish SDRs. He admitted that neither country had yet formally agreed to the transfer but indicated that he was "optimistic." ¶6. (SBU) While applauding the Minister's initiative and prudence in attempting to resolve the GIRM's longstanding and potentially catastrophic financial liabilities, the Ambassador said that he could not make a substantive reply to the request without consulting with Washington. Noting that he was scheduled to travel there for meetings and consultations, the Ambassador promised to raise the Minister's request and assured that it received careful consideration. ¶7. (SBU) Comment: President Aziz has sought to make good governance, accountability and responsible financial management hallmarks of his administration and early signs are encouraging. A genuine and transparent attempt to put government finances in order would be a positive step and one that we should encourage. If France or Spain is disposed to make funds from SDR's available to Mauritania, post recommends that the USG support this initiative. HANKINS