VZCZCXRO6735
RR RUEHAG RUEHDF RUEHIK RUEHLZ
DE RUEHFR #5184 2130947
ZNR UUUUU ZZH
R 010947Z AUG 06
FM AMEMBASSY PARIS
TO RUEHC/SECSTATE WASHDC 9981
INFO RUCNMEM/EU MEMBER STATES
RUEATRS/DEPARTMENT OF TREASURY WASHDC

UNCLAS PARIS 005184 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EB, EUR/WE 
STATE PASS USAID 
 
E.O. 12958: N/A 
TAGS: EAID EFIN EIND FR
SUBJECT: FRENCH APPROACH TO FINANCING FOR DEVELOPMENT 
 
 
NOT FOR INTERNET DISTRIBUTION 
 
¶1.  (SBU) Ministry of Economy Diplomatic Counselor Gilles 
Mentre told Econoff July 28 that France has taken steps to 
respond to criticism that its aid programs unjustly inflate 
aid figures with debt cancellation numbers.  France has 
devised a scheme that ties debt cancellation more directly to 
poverty eradication projects.  For example, the 500 million 
euro (USD 627 million) agreement signed in June with Cameroon 
is a Debt Development Contract, in which France agrees to go 
cancel more debt than that agreed upon in the Paris Club 
under the Heavily Indebted Poor Countries (HIPC) initiative, 
provided Cameroon spends the money on education, environment, 
health or infrastructure.  To ensure that this happens, 
Mentre said France will continue to bill Cameroon on its 
public debts as payments fall due.  Cameroon is expected to 
make the payments, but then France will immediately return 
the funds to Cameroon for its designated projects.  This 
method will ensure the transparency of expenditures for those 
projects.  It also ensures the &additionality8 and 
&conditionality8 principles of development assistance. 
 
¶2.  (U) The Finance Ministry oversees about a third of the 
French budget (not counting debt cancellations) of 3 billion 
euros for development assistance due to its responsibility 
for multilateral institutions like the World Bank, while the 
Development Ministry controls the rest.  Mentre professed a 
personal interest in development issues, since he helped 
draft the Landau report on financing for development, which 
was one of the reports used to justify France adopting a tax 
on airplane tickets.  He noted that the airfare tax is 
already in place, and per a meeting he had just had at the 
Prime Minister,s office, France should make its first 
medical purchases with the collected funds in October 2006 
through the new international drug purchase facility 
(UNITAID).  France intends to continue promoting the airfare 
tax with other countries, since it views the tax as both a 
market-neutral and a lucrative source of additional revenue. 
 
¶3.  (SBU) COMMENT: The French approach, while conceptually 
similar to the U.S. Millenium Challenge Corporation, differs 
in that it focuses on making sure aid gets spent as planned 
on developing countries, projects, rather than on making 
sure that the money is well spent.  It also encourages France 
to avoid truly 100 percent debt cancellations for HIPC 
countries, since that would mean losing its off-budgetary 
approach to increasing its development assistance statistics. 
 
Please visit Paris' Classified Website at: 
http://www.state.sgov.gov/p/eur/paris/index.c fm 
 
STAPLETON