US embassy cable - 05KINSHASA769

C O N F I D E N T I A L SECTION 01 OF 02 KINSHASA 000769 
 
SIPDIS 
 
DEPT FOR AF/C AND EB 
PARIS FOR AFRICA WATCHER 
FROM BRAZZAVILLE EMBASSY OFFICE 
 
E.O. 12958: DECL: 05/06/2010 
TAGS: ECON, CF, CU, IMF 
SUBJECT: CONGO/B: MEETINGS WITH THE FINANCE MINISTER AND 
IMF TEAM, NOT SEEING EYE-TO-EYE 
 
REF: A) KINSHASA 00541 B) KINSHASA 00610 
 
Classified By: Ambassador Robin R. Sanders for reasons 1.5 (b) and (d). 
 
1.(C) Summary: Over the last week Ambassador held meetings 
with Congo/B's current and former Finance Ministers and the 
visiting IMF team to hear readouts on the recent Washington 
visits, and status reports on the ROC's Poverty Reduction 
Growth Facility (PRGF) program. The IMF team is in ROC for a 
two-week review of Congo's first 6 months on the PRGF as well 
as to determine whether the country is still on track for a 
HIPC decision point in September 2005.  Current Finance 
Minister Issoibeka requested to see Ambassador on May 5 to 
provide his take on his Washington meetings and IMF issues. 
Issoibeka views problems with the banking sector, costs 
overrun with the state-owned refinery CORAF, and unexplained 
budget expenditures as "minor details" that should not 
affected PRGF or HIPC timelines. The IMF team, however, sees 
it differently. Former Finance Minister Andely was recently 
brought back by President Sassou to consult and provide 
advice on IMF concerns. End Summary 
 
--------------- 
IMF Team Views: 
--------------- 
 
2.(C) IMF team members asked to meet with Ambassador May 4 to 
provide a status report on what it found during its first 
week review of Congo's PRGF performance. Team leader Dan 
Ghura expressed some initial concerns about previously 
mentioned problems in the banking sector; with the 
state-owned refinery, water and electric companies; and 
certain unexplained budget expenditures (ref A).  He noted 
that the team still had a week left to examine documents and 
have more discussions, but that it did not appear that Congo 
could stay on the proposed HIPC timeline for September 2005. 
He also commented that it was hard to get the new Finance 
Minister to focus and provide detail steps and measures as to 
how Congo would address the current concerns on the budget, 
CORAF, with the water and electric companies, and private 
banks. 
 
3.(C) Ghura said that he also needed to have more information 
as to how Congo was working with its creditors, given that 
current reports from Washington were not good. Not only are 
vulture funds trying to get repaid, but Congo's legal counsel 
and consultants in D.C. are complaining that they also have 
not been paid.  Ambassador shared with Ghura that she had 
also received information that one of the vulture funds had 
submitted its case to the International Chamber of Commerce 
(ICC) in Paris for arbitration, and that if the company was 
successful, then other vulture funds also would seek to use 
the ICC since governments tend to honor its  decisions. 
Ghura worried about vulture fund actions and whether Congo 
really had a plan in place to reach agreement with these 
creditors.  He added that the IMF would be opening an office 
in Brazzaville by August 2005, posting a full-time resident 
representative, YaYa Moussa a Cameroonian, in country. 
 
 
----------------------------------- 
 Meeting with the Finance Minister: 
----------------------------------- 
 
4.(C) On May 5, Finance Minister Issoibeka requested to see 
the Ambassador to give his take on the current IMF talks. 
Issoibeka began the meeting by thanking the Ambassador for 
her efforts to encourage Congo to be more transparent. He 
apologized for the recent Cuba votes (ref B), and added that 
"sometimes one hand in the ROC does not know what the other 
is doing," noting that this should never have happened. 
Ambassador reiterated the points on the Cuba votes at the 
UNCHR, and said that it was not a good performance week for 
Congo when an abstention on the resolution was what the USG 
was seeking. Moving on to other bilateral issues and World 
Bank/IMF programs, Issoibeka said that during meetings at the 
State Department he noted that his government was looking 
forward to having the new Embassy built and that they hoped 
also to have a cultural center, more educational programs, 
and Peace Corps. He requested a PL 480 program now, and more 
encouragement to get U.S. investors in the banking and 
insurance sectors. Ambassador was frank in her response on 
these issues, by noting that Congo needed to improve 
transparency and have better structures in place for 
oversight over a PL 480 program. In addition, she said that 
if Congo reached the HIPC decision point, it might encourage 
the U.S. private sector to seriously look at Congo as an 
investment opportunity. 
 
5. (C) Turning to the IMF Mission, Issoibeka began by 
restating the sectors where the team had concerns: banking, 
state refinery, and 42.6 billion CFA (approximately USD$84 
million) in unexplained budget expenditures. He said that 
during the last week the ROC had been able to "prove" and 
"explain" the use of all but 27 billion CFA (approximately 
USD $53 million). He added he was confident that the IMF 
would be satisfied with the full use of the entire 42.6 
billion CFA by the end of its visit. On banking, he said 
there was not much Congo could do because the country could 
not survive any more failed banks. Despite the IMF team's 
desire for Congo to take measures to stop subsidizing the 
private Moroccan bank, and operating the already failed 
COFIPA bank, the Finance Minister stressed that the 
government had no alternative given the consequences of 
social unrest if the banks closed. (End note: Just before and 
during the 1997-2000 wars, Congolese lost substantial amounts 
of money because of failed banks and looting of banks during 
the war. End note). 
 
6. (C) With state operations such as the refinery, and the 
water and electric companies, the Finance Minister said, the 
ROC had similar concerns that raising prices in any of these 
areas would upset the delicate social balance in the country. 
The Ambassador stressed that the ROC would have to develop 
some measures to address IMF concerns in these sectors in 
order to move forward. She said that she had understood in a 
previous meeting with the Prime Minister in March (Ref B) 
that the ROC had accepted a World Bank proposal regarding the 
water and electric companies, including raising, even 
incrementally, prices. Issoibeka said that no decision had 
been reached yet on raising prices in any sector, including 
the production prices of the oil operators. He added that all 
of this is under review because President Sassou had 
instructed his economic team to stay on course on both the 
PRGF and HIPC timelines. 
 
7. (C) Meanwhile, President Sassou asked former Finance 
Minister Andely to return for 2 days of consultations on 
Congo's IMF issues. Ambassador later met with Andely to get a 
readout of his meeting with President Sassou. Andely told the 
Ambassador that Sassou is very unhappy with his current 
economic team, and concerned that everything is not being 
coordinated to remain on track with the IMF. Andely added 
that Sassou had others in the room during his discussion with 
him such as National Security Advisor Okemba and Planning 
Minister Moussa -- all who were instrumental in removing 
Andely from his position. Andely claimed that Sassou told 
them that they had given him bad advice on changing Finance 
Ministers. Andely said he would continue to provide guidance 
and assistance to his country on these issues, but he was 
worried that there were "too many hands in the pot--such as 
the Prime and Planning Minsters, etc.," trying to control and 
influence the ROC's work with the IMF.  "The new Finance 
Minister's authority is being diffused" Andely added, "hence 
no coherent fiscal policy decisions are being made." 
 
8.(C) Comment: The IMF team promised to give the Ambassador 
an out brief before it departs on May 13, which will include 
fuller conclusions on where things stand on the PRGF's 
6-month review and whether the September 2005 HIPC timeline 
remains realistic. The ROC feels like the IMF is not 
listening and taking into account social ramifications if 
downstream oil, water or electricity prices rise. The IMF 
feels that the ROC is not seriously developing measures to 
keep the program and timelines on there current course. It 
will be necessary for the ROC to begin to stop seeing these 
issues as "minor details," and really develop strategies and 
measures to address the IMF team's concern. 
 
9.(U) Brazzaville Office - Sanders 
DOUGHERTY 
DOUGHERTY