VZCZCXRO8634
RR RUEHMR
DE RUEHKI #0984/01 1741110
ZNY CCCCC ZZH
R 231110Z JUN 06
FM AMEMBASSY KINSHASA
TO RUEHC/SECSTATE WASHDC 4176
INFO RUEHXR/RWANDA COLLECTIVE
RUCNSAD/SOUTHERN AFRICAN DEVELOPMENT COMMUNITY
RUEATRS/DEPT OF TREASURY WASHDC
RUEAIIA/CIA WASHDC
RHEFDIA/DIA WASHDC
RHMFISS/HQ USEUCOM VAIHINGEN GE
RUFOADA/JAC MOLESWORTH RAF MOLESWORTH UK

C O N F I D E N T I A L SECTION 01 OF 03 KINSHASA 000984 
 
SIPDIS 
 
SIPDIS 
 
TREASURY FOR LKOHLER 
 
E.O. 12958: DECL: 06/23/2016 
TAGS: ECON EFIN EADI PREL CG
SUBJECT: FINANCE MINISTER RESPONDS TO PRESSURES 
 
REF: A. KINSHASA 968 B. KINSHASA 977 
 
Classified By: Classified by Ambassador Roger Meece.  Reason 1.4 (b/d) 
 
¶1. (C) Summary: Finance Minister Banguli organized a lunch 
June 19 involving Budget Minister Mwamba, Central Bank 
Governor Masangu, and the German, British, French, Belgian, 
and U.S. Ambassadors to discuss the GDRC's rather dire fiscal 
problems.  Banguli focused on three issues, the GDRC,s 
excess April spending, the need for ongoing debt relief 
despite IMF formal program suspension, and the GDRC,s new 
Poverty Reduction Strategy Paper (PRSP).  He vigorously 
denied excess April spending was election-related, and said 
it was not indicative of a trend, but rather mostly a result 
of deferred first quarter bills accumulated due to lack of a 
budget.  Banguli also complained about some IMF media 
statements, asserting that negotiations were better handled 
privately. Regarding debt and the PRSP, Banguli appealed for 
continuing donor support.  Extensive discussion was devoted 
to the need for greater military sector spending and 
transparency, which the Ministers readily acknowledged.  The 
lunch represented a somewhat unusual but welcome initiative 
from the Congolese, offering the promise of a more open 
dialogue than has been the case in the past.  End summary. 
 
Lunch and Budgets 
------------------- 
 
¶2. (C) Finance Minister Marco Banguli organized a June 19 
lunch, inviting the German, British, French, Belgian, and 
U.S. Ambassadors to discuss the GDRC's increasingly dire 
fiscal problems.  Banguli, affiliated with President Kabila's 
PPRD party, also had Budget Minister Muamba, member of VP 
Bemba's MLC party, at the lunch, as well as Central Bank 
Masangu.  During the course of the lunch discussion, all 
three Congolese concurred on all significant points, showing 
little divergence of views or policies, a welcome and 
somewhat untypical sign of multiparty cooperation in the 
DRC's fractious Transition government.  The lunch followed 
the IMF's recent mission to the DRC (reftel A) designed to 
finalize arrangements for a staff monitored program (SMP) 
following the lapse of the former formal IMF program at the 
end of March. 
 
¶3. (C) Banguli had three main points on his agenda: seeking 
to explain the DRC's excessive April spending; appealing for 
support to maintain debt relief, and rapid completion of the 
DRC's new PRSP (ref B). Banguli started with the April 
spending, vigorously denying talk that a reported Congo 
Franc(CF)13 billion (USD 29 million) overrun in the month 
represented election campaign-related spending, not a new 
trend of spiraling expenditures.  Rather, he asserted, most 
of the amount was due to accumulated bills and arrears 
representing obligations arising from the January to March 
period, unpaid because the parliament had failed to pass a 
budget on a timely basis thus creating a backlog that was 
cleared in April.  Banguli cited numerous specific figures 
and expenses, and promised the Ambassadors that a more 
complete accounting of the April accounting would follow in 
writing within days.  Budget Minister Mwamba also noted that 
general figures were also newly available on the GDRC's 
recently-introduced budget web site, an innovation designed 
to promote greater transparency and accountability. 
 
¶4. (C) Banguli was anxious to reaffirm the GDRC's commitment 
to IMF budget and other macroeconomic targets, repeatedly 
stating that there was no substantive disagreement between 
the GDRC and the IMF regarding the parameters of the SMP. 
These targets, in fact, largely parallel those of the past 
formal program.  The GDRC would like to get the SMP signed 
and established as soon as possible, and hopes to do so very 
soon.  Banguli complained, however, about a recent Radio 
France International (RFI) broadcast, quoting the IMF 
resident representative as suggesting that full accounting 
for the April overruns was an explicit precondition for the 
SMP.  He went on to say that while the government was 
prepared to discuss the problem, no such formal condition had 
been identified during the recent IMF mission, and in any 
event a media broadcast seemed an inappropriate way to 
introduce a new topic or otherwise negotiate with the GDRC. 
Banguli and Mwamba repeatedly reassured the Ambassadors that 
while the Transition government may be weakened during its 
remaining months, it was committed to full fiscal discipline. 
 They did acknowledge, however, the difficulty in maintaining 
 
KINSHASA 00000984  002 OF 003 
 
 
a strict line. 
 
¶5. (C) All of the Ambassadors assured the GDRC officials that 
their respective governments strongly support the DRC's 
transition to democracy and elections, and are aware of 
constraints under which the government is operating.  All, 
however, also strongly emphasized the need for the government 
to show maximal effort to keep its fiscal house in order, 
control expenditures, and ensure allocations of available 
funds to priority sectors. 
 
Debt and the PRSP 
------------------ 
 
¶6. (C) Banguli was anxious to appeal for support from donors 
regarding debt payments in coming months.  Both ministers 
were clearly aware of the impact of the IMF program 
suspension, but appealed for whatever could be done from the 
respective creditor nations to defer or waive debt payments 
that would otherwise come due under Paris Club arrangements. 
Banguli pointed out that given the severe fiscal constraints 
the government faces, it is unlikely the GDRC could undertake 
any significant debt payments in any event. 
 
¶7. (C) Banguli also noted the GDRC's strong interest in 
getting its PRSP approved and implemented.  He underscored 
the government's intent to get an approved PRSP to the Fund 
and Bank in Washington as soon as possible, and noted that 
the government's Minister of Planning, who has the lead for 
the PRSP, would stop in several European capitals to seek 
support for the PRSP and answer questions while en route to 
Washington with the GDRC- approved plan. 
 
¶8. (C) The Ambassadors assured the Congolese of their 
interest in being supportive in both areas in response to 
positive actions by the government.  The latest PRSP draft, 
all agreed, looked good with only relatively minor 
adjustments needed to finalize it.  The Belgian Ambassador 
noted that the Finance Minister will soon be signing an 
agreement with his Belgian counterpart which it appeared will 
essentially provide for transferring 
central-bank-to-central-bank debt to government-to-government 
debt which would be easier to manage in the context of debt 
payment deferral.  The Finance Minister and French Ambassador 
both noted that some particularly significant debt payments 
to France are scheduled to come up in the near future, and 
the French Ambassador reported that Paris is actively working 
to see how the situation can be handled.  The Finance 
Minister said that he will be meeting soon with the Paris 
Club secretary general (Note: presumably following the 
Belgian visit and signing) to lay out the DRC,s case.  The 
Ambassadors strongly supported these talks, and more 
generally ongoing active contacts to be as forthcoming as 
possible with the IFIs and creditor governments and 
institutions. 
 
Worried Eye on the Military 
---------------------------- 
 
¶9. (C) The Ambassadors underscored the particular concern of 
the donor community centered on military spending.  This was 
a sector of critical importance, but also one characterized 
by the least amount of budget transparency.  Better control 
and more information is essential, including a general 
meeting on budget and expenditure transparency, requested by 
the donors for several months.  Both Ministers readily 
acknowledged the problem.  Indeed, they welcomed donor 
interest and pressure, indicating that they themselves often 
had trouble getting needed information.  They fully support 
the proposal for a military spending transparency meeting, 
conditioned only by their own participation in the event. 
Recently, for example, the Finance Minister indicated that 
the Army had requested a supplemental allocation of USD12 
million, associated with the sensitive June 30 Transition 
anniversary date.  The Finance and Budget Ministers could not 
understand what the money was for, but wanted to avoid being 
cast as obstacles to a vital national security need. 
Eventually, however, the request had been denied, lacking 
sufficient justification.  The Ambassadors agreed the request 
appeared unwarranted, noting that the police, not the 
military, have primary responsibility for June 30 security 
management.  Everyone agreed that as much pressure as 
possible should be made, indeed coordinated, from within the 
government and from foreign missions to achieve badly needed 
 
KINSHASA 00000984  003 OF 003 
 
 
improvements in military budgeting and spending. 
 
Comment: Useful New Initiative 
------------------------------- 
 
¶10. (C) The lunch represented an unusual and useful new 
initiative from the Finance Minister.  Discussion was open 
and frank, and the Ministers both seemed aware of the need 
for improved communications and good fiscal performance from 
the GDRC to make it through the coming months.  Ambassadors 
frankly laid out their concerns, while the GDRC officials 
laid out their views and justifications without lapsing into 
defensiveness.  The Minister's willingness to tackle head-on 
the April excess spending was also welcome, although we will 
be analyzing further the promised documentation and figures 
when received.  We will, of course, also monitor how 
subsequent months' spending is going.  It appears at minimum 
we will have an available channel to explore whatever 
questions or concerns arise.  End comment. 
MEECE