VZCZCXRO1224
PP RUEHMA RUEHPA
DE RUEHDK #2758/01 3201552
ZNR UUUUU ZZH
P 161552Z NOV 06
FM AMEMBASSY DAKAR
TO RUEHC/SECSTATE WASHDC PRIORITY 6887
INFO RHEBAAA/DEPT OF ENERGY WASHDC
RUCPDOC/USDOC WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUEHLMC/MILLENNIUM CHALLENGE CORPORATION
RUEHZK/ECOWAS COLLECTIVE

UNCLAS SECTION 01 OF 02 DAKAR 002758 
 
SIPDIS 
 
SIPDIS 
SENSITIVE 
 
STATE FOR EB/IFD, AF/EPS AND AF/W 
 
E.O. 12958: N/A 
TAGS: EAID ECON EFIN PGOV PREL SG
SUBJECT:  IMF MISSION DISAPPOINTS SENEGAL'S DONORS 
 
REF: DAKAR 2614 
 
DAKAR 00002758  001.2 OF 002 
 
 
¶1.  (SBU) SUMMARY:  On November 8, an IMF Mission to Senegal for 
Article 4 consultations briefed the Ambassador and other members of 
Senegal's donor community on its impressions of Senegal's economic 
situation and performance and policy outlook for 2007.  The team did 
not provide any new insights.  The Chief of Mission downplayed the 
importance of renewing an IMF program with Senegal.  Donors were 
largely unconvinced and unsatisfied by the IMF brief.  It appears 
that many donors are looking to the U.S. to take the lead in 
pressing the Wade government to improve governance and transparency. 
 A representative from China's mission to Senegal attended the 
session, a very infrequent occurrence for donor gatherings in 
Senegal.  END SUMMARY. 
 
REVIEWING OBVIOUS PROBLEMS 
--------------------------- 
¶2.  (SBU) The IMF Chief of Mission, Mr. Reza Vaez-Zadeh, presented a 
pat list of economic difficulties facing Senegal, most of which he 
had been noted during his "pre-consultations" meeting with donors on 
October 26 (Reftel).  Vaez-Zadeh noted that Senegal would likely not 
register GPG growth above 3.5 percent in 2006, and that the 
country's budget deficit is an increasingly worrisome problem.  He 
added that in the near term, the GOS needs to reach an agreement 
with its Indian partners on recapitalizing and restarting Industries 
Chimiques du Senegal (ICS), and to continue improvements in the 
electricity supply.  Governance and public procurement reform 
continues to be a pressing issue; the IMF team was not able to meet 
with the "project manager" (that is, President Wade's son, Karim) to 
discuss two of the country's largest public works programs:  the 
road construction for Dakar's Corniche, and the proposed new 
international airport.  Vaez-Zadeh appeared to accept that the 
current "charged" political situation in the run-up to Presidential 
and National Assembly elections on February 25 precluded significant 
progress on budget tightening and transparence. 
 
2007 SHOULD BE BETTER 
--------------------- 
¶3.  (SBU) The IMF team provided a fairly positive assessment of 
Senegal's potential for significantly enhanced economic performance 
in 2007.  Assuming that the political situation re-stabilizes, 
energy costs drop, and the ICS becomes largely operational, 2007 GDP 
could again surpass five percent.  Of course, there is no certainty 
of realizing these assumptions, and the country's ever-expanding 
wage bill, particularly at the highest levels of government will 
continue to put a drag on economic performance.  [Note:  President 
Wade recently pushed through an expansion of the National Assembly 
to 150 members from 120, and there is speculation that he will also 
attempt to create a new Senate.  End note.] 
 
NO IMF PROGRAM REMAINS A PROBLEM 
-------------------------------- 
¶4.  (SBU) As in their earlier meeting with this IMF team, a number 
of donors highlighted the desirability for Senegal to have an active 
program with the IMF.  [Note:  Senegal completed its previous 
Poverty Reduction and Growth Facility (PRGF) in April.  End note.] 
The EU, Canadian, and German representatives noted that an IMF 
programs provides a measure of legitimacy to requests for direct 
budget support.  In addition, a policy monitoring program provides 
clear actions and goals for the government to achieve, providing a 
counterweight to abuses in budget resources which appear to be 
increasingly common in Senegal.  The donors were skeptical that 
"Comfort Letters" from the IMF could provide sufficient legitimacy 
for consideration of budget support. 
 
¶5.  (SBU) The IMF Chief of Mission reiterated his point from the 
previous meeting that Senegal had not yet requested negotiations on 
the possibility of a new PRGF or a non-financial Policy Support 
Instrument (PSI).  He also asserted that IMF "engagement" with 
Senegal would be almost equivalent with or without a program, 
through regular dialog with GOS officials.  Vaez-Zadeh suggested 
that donors could organize themselves to present policy goals to the 
Finance Minister and other officials, to the same effect as having 
an IMF program.  The donors were unconvinced. 
 
COMMENT 
------- 
¶6.  (SBU) The IMF has an important role to play in Senegal, a 
country that is an increasingly ineffective partner for many donors. 
 However, the IMF presentation was unsatisfactory, given the serious 
structural/economic problems facing Senegal and President Wade's 
apparent increasing willingness to put political expediency ahead of 
sound policy.  While we accept that this IMF team did not have the 
remit to enter into discussions with the GOS about a new policy 
program, Mr. Vaez-Zadeh's assertion that the IMF can maintain the 
same level of engagement with Senegal, or that other donors can be 
 
DAKAR 00002758  002.2 OF 002 
 
 
just as effective without the IMF in pushing for economic reform, 
came across as disingenuous. 
 
¶7.  (SBU) There appeared to be an expectation that the U.S. might be 
able to take the lead in pushing the GOS to get back on track with 
economic reform.  We will continue to press for policies that 
promote pro-growth and good governance.  However, since we do not 
disburse direct budget support our options are limited.  If the IMF 
does not take the lead in keeping the Wade administration focused, 
we hope the EU and other financial donors will also step up.  We 
encourage State and Treasury to engage the IMF on the possibility of 
negotiating a new program for Senegal, whether it is a new PRGF or a 
Policy Support Instrument. 
 
(U) Visit Embassy Dakar's classified website at 
http://www.state.sgov/gov/p/af/dakar/. 
 
JACOBS