This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 02 ROME 001442 
 
SIPDIS 
 
TREASURY FOR WSCHUERCH, MJASKOWIAK 
USDA FOR FAS/LYNN REICH AND DAVID WINKELMAN 
STATE FOR IO/EDA ROSE BERSTEIN 
USAID FOR AA/PPC;DAA/G/EGAD;AFS 
 
FROM FODAG 
 
E.O. 12958:  N/A 
TAGS: AORC EAID IFAD EAID AORC IFAD
SUBJECT:  REPORT OF IFAD FIRST CONSULTATION ON THE SIXTH 
REPLENISHMENT 
 
 
                       UNCLASSIFIED 
 
PAGE 02        ROME  01442  01 OF 02  211425Z 
REF:  01 ROME 06528 
 
¶1.  SUMMARY: THE FIRST CONSULTATION ON THE SIXTH 
REPLENISHMENT MET FEBRUARY 21. WHILE PARTICIPANTS DEVOTED 
MOST OF THEIR COMMENTS AND QUESTIONS TO THE TERMS OF 
REFERENCE OF THE RECENTLY PROPOSED REVIEW OF IFAD'S 
IMPACT, A SIZEABLE NUMBER OF MEMBERS CONTINUED TO EXPRESS 
CONCERN AT IFAD'S INVESTMENT POLICY AND THE LOSSES THAT 
HAD BEEN INCURRED AND AT THE COSTS TO IFAD OF DEBT 
FORGIVENESS (HIPC) AND HIPC'S RELATION TO THE UPCOMING 
REPLENISHMENT.  MEMBERS AGREED TO MEET IN THREE MORE 
SESSIONS OF CONSULTATIONS WITH A VIEW TO CONCLUDING THE 
SIXTH REPLENISHMENT NEGOTIATIONS BY THE END OF THE YEAR. 
END SUMMARY 
 
FIRST CONSULTATION ON IFAD'S SIXTH REPLENISHMENT 
--------------------------------------------- -- 
 
¶2.  THE FIRST CONSULTATION ON IFAD'S SIXTH REPLENISHMENT 
MET FEBRUARY 21, 2002.  PRESIDENT BAGE KICKED OFF THE 
SESSION BY STATING THAT IFAD HAS THE "PROVEN CAPACITY" TO 
DO ABOUT USD 450 MILLION IN LENDING ANNUALLY, BUT THAT 
THE LENDING LEVEL COULD BE RAISED.  HE ENCOURAGED DONORS 
TO USE "PROVEN INTRUMENTS" SUCH AS IFAD IN WORKING TO 
REACH THE MILLENIUM SUMMIT GOALS. THE GROUP AGREED TO THE 
PROPOSED DATES (APRIL 18-19, JULY 2-3 AND OCTOBER 9-10) 
FOR THE SECOND, THIRD AND FOURTH CONSULTATIONS AND THE 
PROPOSED WORKPLAN.  PARTICIPANTS DISCUSSED THE EXTERNAL 
REVIEW OF THE RESULTS AND IMPACT OF IFAD OPERATIONS 
(REQUESTED BY LIST A (OECD COUNTRIES) AT THE BEHEST OF 
THE U.K.); THE SECRETARIAT-DRAFTED INDICATIVE OUTLINE OF 
                       UNCLASSIFIED 
 
PAGE 03        ROME  01442  01 OF 02  211425Z 
THE CONSULTATION'S FINAL REPORT AND RESOURCE SCENARIOS 
FOR THE SIXTH REPLENISHMENT FRAMEWORK.  DISCUSSION 
FOCUSSED ON THE FOLLOWING TOPICS: 
 
THE EXTERNAL REVIEW 
------------------- 
¶3.  DISCUSSION OF THE PROPOSED EXTERNAL REVIEW CONSUMED 
MOST OF THE DISCUSSION -- BOTH IN THE LIST A MEETING 
PRIOR TO THE CONSULTATION, AND DURING THE CONSULTATION 
ITSELF.  WHILE THERE WAS LITTLE DISAGREEMENT BETWEEN 
DONORS AND RECIPIENTS ON THE PRINCIPLE OF NEEDING REGULAR 
EVALUATIONS OF IFAD'S IMPACT AND THE UTILITY OF SUCH A 
REPORT, QUESTIONS AROSE PRIMARILY IN THE CONTEXT OF THE 
SHORT TIME FRAME OF THE REVIEW, ITS CONNECTION TO THE 
CONSULTATIONS, AND THE EXACT ROLE OF FIELD VISITS (THE 
REVIEW IS PRIMARILY A REVIEW OF EVALUATIONS CONDUCTED TO 
DATE, WITH SOME FIELD VISITS TACKED ON.) 
 
¶4.  IN A LIST A MEETING PRIOR TO THE OPENING OF THE 
SESSION, FINLAND AND THE U.K. STRESSED THAT ANY REVIEW 
SHOULD IDENTIFY -- NOT WHETHER IFAD PROJECTS WERE 
SUCCESSFUL SINCE THE MOVE TO "SECTOR AND BUDGET SUPPORT 
MADE PROJECT EVALUATION DIFFICULT" --  BUT WHETHER IFAD 
HAD MANAGED TO ADVOCATE THE NEEDS OF THE RURAL POOR 
WITHIN THE WORLD BANK PRSP PROCESS. USDEL RESPONDED THAT, 
ON THE CONTRARY, UNDERSTANDING PROJECT IMPACT AND 
OUTCOMES WERE ESSENTIAL. 
 
¶5.  DURING THE CONSULTATION SESSION ITSELF, MOST LIST C 
(DEVELOPING COUNTRIES) PARTICIPANTS WERE CONCERNED WITH 
THE CRITERIA FOR SELECTING THE COUNTRIES FOR THE FIELD 
                       UNCLASSIFIED 
 
PAGE 04        ROME  01442  01 OF 02  211425Z 
VISIT AND THE LEVEL OF PARTICIPATION OF THE COUNTRY 
CONCERNED.  ONLY INDIA PROBED THE TACTICAL REASONS FOR 
THE PROPOSED REVIEW AND EMPHASIZED THAT THERE SHOULD BE 
NO LINKAGE BETWEEN THE CONCLUSIONS AND THE REPLENISHMENT 
AT HAND (THE NETHERLANDS RESPONDED THAT MEMBERS WOULD 
DRAW THEIR OWN CONCLUSIONS FROM THE REVIEW.) USDEL STATED 
THAT THE REVIEW WAS A COMPROMISE BETWEEN TIME AND SCOPE 
AND THAT IT WAS LITTLE MORE THAN A REVIEW OF OTHERS' 
WORK. 
 
PRELIMINARY VIEWS ON THE DESIRED LEVEL FOR THE NEXT 
REPLENISHMENT 
--------------------------------------------- -------- 
¶6.   SAUDI ARABIA STATED THAT HIS COUNTRY WOULD 
CONTRIBUTE TO THE SIXTH REPLENISHMENT, AND WAS WILLING TO 
LOOK AT ALL POSSIBLE LEVELS FOR FUNDING THE REPLENISHMENT 
TO REACH A LEVEL "WHICH IS CONSIDERED ADEQUATE." THE 
NETHERLANDS, SPEAKING FOR LIST A, EXPRESSED HIS GROUP'S 
WISH TO START AND CONCLUDE THE CONSULTATIONS AS SCHEDULED 
AND TO MAKE THEM "AS SUCCESSFUL AS POSSIBLE." PAKISTAN 
STATED THAT IFAD MUST HAVE CONSISTENT, STABLE AND 
CREDIBLE LENDING LEVEL:  THIS WAS AT LEAST USD 450 
 
                       UNCLASSIFIED 
 
                           UNCLASSIFIED     PTQ2619 
 
PAGE 01        ROME  01442  02 OF 02  211425Z 
ACTION IO-00 
 
INFO  LOG-00   NP-00    AID-00   AMAD-00  CIAE-00  COME-00  CTME-00 
      DODE-00  ITCE-00  SRPP-00  EB-00    EXME-00  EUR-00   UTED-00 
      TEDE-00  INR-00   ITC-01   NSAE-00  OES-01   OIC-02   OMB-01 
      OPIC-01  SS-00    STR-00   TEST-00  SAS-00     /006W 
                  ------------------788A83  211724Z /38 
R 211341Z MAR 02 
FM AMEMBASSY ROME 
TO SECSTATE WASHDC 2864 
USMISSION USUN NEW YORK 
USMISSION GENEVA 
INFO USDA FAS WASHDC 2063 
DEPT OF TREASURY WASHDC 
 
UNCLAS SECTION 02 OF 02 ROME 001442 
 
SIPDIS 
 
TREASURY FOR WSCHUERCH, MJASKOWIAK 
USDA FOR FAS/LYNN REICH AND DAVID WINKELMAN 
STATE FOR IO/EDA ROSE BERSTEIN 
USAID FOR AA/PPC;DAA/G/EGAD;AFS 
 
FROM FODAG 
 
E.O. 12958:  N/A 
TAGS: AORC EAID IFAD EAID AORC IFAD
SUBJECT:  REPORT OF IFAD FIRST CONSULTATION ON THE SIXTH 
REPLENISHMENT 
 
                       UNCLASSIFIED 
 
PAGE 02        ROME  01442  02 OF 02  211425Z 
MILLION AT 1996 PRICES; HE ALSO ARGUED THAT HIPC COSTS 
SHOULD NOT CUT INTO IFAD'S LENDING LEVEL, AND THAT 
"DONORS NEEDED TO FIND THE SOLUTION."  PAKISTAN ALSO 
STATED THAT HIS COUNTRY WAS WILLING TO SHOULDER A "FAIR 
SHARE" OF WHATEVER WAS DECIDED.  INDONESIA STATED THAT 
THE BURDEN SHARING FOR THE NEXT REPLENISHMENT NEEDED TO 
REFLECT COUNTRIES' ABILITY TO PAY BASED ON WHAT HE CALLED 
"REAL ECONOMIC CONDITIONS."  HE NOTED IN THIS REGARD THAT 
THE 1997 ASIAN FINANCIAL CRISIS HAD AFFECTED INDONESIA'S 
ABILITY TO MAINTAIN ITS FUNDING LEVEL, AND THAT "FOUR- 
FIVE" MORE YEARS WOULD BE NEEDED FOR INDONESIA'S 
RECOVERY. 
 
CONCERNS ABOUT IFAD'S FINANCIAL HEALTH 
--------------------------------------- 
¶7. THE DELEGATE OF FRANCE WAS CONCERNED ABOUT THE SPEED 
WITH WHICH IFAD WAS MOVING TO REDUCE ITS EQUITIES 
PORTFOLIO; HE ALSO STATED THAT INVESTMENT LOSSES COULD 
NOT JUSTIFY ACCESSING THE WORLD BANK HIPC TRUST FUND FOR 
IFAD'S HIPC COSTS. 
 
¶8.  USDEL STATED THAT IFAD NEEDED A STRONGER -- BUT 
ESPECIALLY A MORE STABLE -- FINANCIAL BASE.  HE CALLED 
THE "CREATIVE USE OF THE ADVANCE COMMITMENT AUTHORITY 
(ACA) TROUBLING" AS IT WAS USED WHERE THE PERCEIVED NEED 
AND AVAILABILITY OF RESOURCES DID NOT MATCH.  HE NOTED 
FURTHER THAT THE USE OF THE ACA IMPAIRED FLEXIBILITY AND 
"MORTGAGED THE FUTURE."  USDEL STATED THAT THE U.S. WOULD 
REQUEST ADDITIONAL SCENARIOS, INCLUDING A BASE CASE OF 
MAINTENANCE OF NOMINAL CONTRIBUTION LEVELS; CONSERVATIVE 
INVESTMENT INCOME; A GOOD ESTIMATE OF REFLOWS, AND NO USE 
                       UNCLASSIFIED 
 
PAGE 03        ROME  01442  02 OF 02  211425Z 
OF THE ACA.  USDEL ALSO REQUESTED A PRESENTATION FROM THE 
WORLD BANK (WB) HIPC TRUST FUND AT THE NEXT CONSULTATION, 
NOTING THAT THE DELEGATES IN ROME WERE NOT WELL-INFORMED 
ON THE TRUST FUND. IN THIS REGARD, HE POINTED OUT THAT 
THE TRUST FUND ALREADY HAD A FINANCING GAP OF USD 700 
MILLION -- USING MONEY FOR IFAD WOULD ONLY WIDEN THE GAP. 
HE STATED THAT IDA HIPC WAS FUNDED ON A "PAY AS YOU GO" 
BASIS -- WITH THE HIPC NEEDS BEING CONSIDERED WITH EACH 
REPLENISHMENT.  AS FAR AS IFAD USING THE WB TRUST FUND, 
IFAD HAD BEEN "PERCEIVED" TO BE IN A DIFFERENT FINANCIAL 
SITUATION WHEN THE TRUST FUND WAS CREATED.  HOWEVER, THIS 
COULD ALWAYS BE RECONSIDERED.  HE NOTED, IN THIS 
CONNECTION, THAT IT WAS HARD TO ENVISION NOT HAVING A 
SECOND ROUND OF HIPC REPLENISHMENT. 
 
¶9.  THE DELEGATES OF ARGENTINA AND ALGERIA EXPRESSED 
CONCERN ABOUT IFAD'S INVESTMENT POLICY AND ASKED FOR 
UPDATES ON PROGRESS IN REDUCING IFAD'S EQUITY EXPOSURE IN 
LINE WITH THE AGREEMENT OF THE LAST EXECUTIVE BOARD 
SESSION (REFTEL).  THEY ALSO EXPRESSED DOUBTS ABOUT 
IFAD'S ABILITY TO FIND FUNDING FOR HIPC COSTS.  THE 
DELEGATE OF ARGENTINA ASKED FOR COMPLETE CLARITY AS TO 
HOW HIPC RELATED TO THE REPLENISHMENT. 
 
ALLOCATION OF RESOURCES 
------------------------- 
 
¶10. USDEL STATED THAT IFAD NEEDED TO USE RESOURCES 
STRATEGICALLY AND EFFECTIVELY FOR GREATEST INFLUENCE: NOT 
JUST PROVIDE LOANS TO COUNTRIES BECAUSE THEY WERE 
MEMBERS.  HE SAID THAT CRITERIA SHOULD INCLUDE: 
                       UNCLASSIFIED 
 
PAGE 04        ROME  01442  02 OF 02  211425Z 
COUNTRIES IN THE MOST DIFFICULT SITUATION AND WHERE IFAD 
CAN BEST MAKE A DIFFERENCE. THE NETHERLANDS ALSO NOTED 
THE IMPORTANCE OF LINKING THE FOLLOW-UP TO THE IFAD V 
PLAN OF ACTION WITH THE REPORT OF IFAD VI AND WITH THE 
FUNDING LEVEL.  OTHER LIST A COUNTRIES (NETHERLANDS, 
SWITZERLAND) STRESSED THE IMPORTANCE OF LINKING IFAD'S 
STRATEGIC PLAN TO THE RESOURCES NEEDED FOR THE NEXT 
REPLENISHMENT. 
 
¶11. DAS SCHEURCH DID NOT CLEAR THIS CABLE PRIOR TO 
DEPARTING ROME. HEILEMAN 
 
                       UNCLASSIFIED 
 
> 
 2002ROME01442 - Classification: UNCLASSIFIED