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