US embassy cable - 04DJIBOUTI290

UNCLAS DJIBOUTI 000290 
 
SIPDIS 
 
STATE FOR EB, AF/E; STATE PASS TO IMF 
 
E.O. 12958: N/A 
TAGS: PREL, EAID, ECON, EFIN, DJ 
SUBJECT: IMF TO MONITOR DJIBOUTIAN ECONOMIC REFORMS 
 
REF: DJIBOUTI 00023 
 
1. (U) SUMMARY: The IMF's February 22-29 visit resulted in 
the beginning of a Staff Monitored Program (SMP) to assess 
the Government of Djibouti's (GODJ) commitment to the 
carrying out the required reforms that went unmet in the 
1999-2003 Enhanced Structural Adjustment Facility (ESAF) 
program.  Following the successful completion of the year 
long SMP, the IMF and GODJ will re-evaluate the possibility 
of a new ESAF. END SUMMARY. 
 
IMF'S RECENT HISTORY IN DJIBOUTI 
-------------------------------- 
2. (U) The IMF approved a three-year US$26.5 million loan 
for the GODJ under the ESAF programin October 1999 to 
assist GODJ's three-year Poverty Reduction and Growth 
Facility (PRGF) program.  The ESAF was scheduled to end 
October 2002, but, by request of the GODJ was extended 
until January 2003.  Despite this extension, GODJ did 
not complete all the reforms required by the IMF.  The 
IMF has now returned to begin a new partnership, called 
a Staff Monitored Program.  The SMP, which does not 
involve any financing, is an informal agreement between 
GODJ and the IMF staff to monitor the implementation of 
the GODJ's economic program.  The secondary purpose of 
the IMF visit was to finalize GODJ's Poverty Reduction 
Strategy Paper. 
 
SUMMARY OF DONOR'S MEETING: 29 FEBRUARY 2004 
------------------------------------------- 
3. (U) As a conclusion to the IMF team's visit, the 
donors from the international community present in Djibouti 
met to hear the findings of the recent evaluation.  The 
participants included two visiting IMF representatives, 
the resident IMF representative and representatives from 
the French Cooperation, Russian Embassy, the European Union, 
Saudi Arabia, the World Bank, Japan, UNDP, UNHCR, UNICEF, 
WFP and the U.S. Embassy. 
 
4. (U) According to the IMF, the SMP will last one year 
(2004) and will mainly monitor the completion of the 
reforms required by the IMF in the first ESAF. There will 
also be some additional measures, such as the Code of 
Commerce and the publication of the "Chambre des Comptes" 
2002 report.  The SMP will start after the signing of the 
Memorandum of Economic and Financial Policies (MEFP), 
which reportedly should be done in the coming days. 
The MEFP contains a detailed list of reforms to be 
completed and requires regular progress reporting on a 
quarterly or bi-yearly basis.  The SMP is expected to 
restore GODJ's credibility with the donors. 
 
5. (U) The IMF delegation is also assisting GODJ in the 
final review of the Poverty Reduction Strategy Paper 
draft in the area of micro-economic framework.  The IMF 
delegation indicated that the PRSP is in good shape with 
more realistic figures.  It will be officially discussed 
for approval in the regular IMF Council meeting April 
2004.  GODJ would like to present the approved document 
to a round table donors' meeting in Djibouti this summer. 
The funding for the first three years of the PRSP is 
estimated at US$ 261 million. 
 
6. (U) The IMF also touched on the Program of Public 
Investment (PIP), which concerns all the major public 
projects; infrastructure, education, health, etc.  The 
IMF indicated that 80 percent of the fund should come 
from the international community.  The PIP will not be 
feasible without the assistance of the donors. 
 
CONCLUSION 
---------- 
7. (U) The IMF staff indicated that GODJ has shown a 
change in attitude and is now more receptive to their 
recommendations.  The IMF delegation added that GODJ is 
realizing that they have to show transparency in order 
to gain the international community's confidence.  The 
representatives from the French Cooperation and the 
European Union did not seem convinced of GODJ's new 
behavior.  If the SMP is successfully completed, the 
IMF and GODJ will negotiate the terms of a new ESAF. 
RAGSDALE