VZCZCXRO1121
PP RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
DE RUEHAN #0520 1511122
ZNR UUUUU ZZH
P 311122Z MAY 07
FM AMEMBASSY ANTANANARIVO
TO RUEHC/SECSTATE WASHDC PRIORITY 4862
INFO RUCNSAD/SADC COLLECTIVE
RUEHBJ/AMEMBASSY BEIJING 0011
RUEHGH/AMCONSUL SHANGHAI 0003
RUEHLMC/MILLENNIUM CHALLENGE CORPORATION
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS ANTANANARIVO 000520 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR AF/E - MBEYZEROV, AF/FO DAS JSWAN AND EAP/CM 
DEPT FOR EB/IFD/OMA - ABESMER 
TREASURY FOR FBOYE 
PARIS FOR D'ELIA 
 
E.O. 12958: N/A 
TAGS: EFIN ECON PGOV EAID MA
SUBJECT:  EMBEZZLING PLAGUES MADAGASCAR'S CENTRAL BANK 
 
REF: ANTANANARIVO 599 
 
¶1. (SBU) SUMMARY. The Central Bank of Madagascar (BCM) faces growing 
concerns about its competence following recent cases of 
embezzlement.  Three weeks ago evidence came to light that USD six 
million was missing at the BCM's Manakara agency.  Local press 
reported last week another case of theft of USD 60,000 at the 
Toamasina branch of the BCM.  A total of fifteen people are under 
investigation in connection with the two cases.  Rumors implicate 
the brother of Minister of Foreign Affairs Marcel Ranjeva, branch 
manager of the Manakara agency, in the first case.  A third case, 
involving USD 150,000 was already reported last March/April at 
Antananarivo BCM headquarters, which resulted in the arrest of seven 
persons.  In the midst of ongoing scandals, the GOM extended the 
mandates of the board of directors and assessors of the Central 
Bank.  END SUMMARY. 
 
¶2. (SBU) Local press first reported an embezzlement case in the 
Manakara (eastern coastal city) branch of the BCM during the 2006 
presidential campaign, alleging that the embezzled sums were 
destined to partly finance the Ravalomanana campaign.  In 
February/March 2007, the newly appointed BCM Governor, Frederic 
Rasamoely, proceeded with a financial audit which revealed a gap of 
about USD six million in the accounting of its Manakara branch. 
According to the BCM, the crime was carried out by fraudulent 
subtraction of banknotes from their original packing spread out over 
approximately a year.  An investigation carried out jointly by the 
Independent Anti-Corruption Bureau (BIANCO), the Economic Police 
Force and the Central Service of Criminal Affairs resulted in the 
arrest of four people.  The Branch Manager of the Manakara agency, 
reportedly the brother of Minister of Foreign Affairs Ranjeva, is 
currently on a mission out of the country.  His departure came a few 
days before the beginning of the audit investigation raising 
suspicion of his implication in the case. 
 
¶3. (U) The Toamasina case seems not to have anything to do with 
politics.  The BCM of Toamasina routinely collects old banknotes 
which should be destroyed.  Profiting from a temporary break down of 
a machine, some agents withdrew approximately USD 60,000 in old 
Ariary bills.  One of the culprits turned on the others leading to 
several arrests. 
 
¶4. (U) In April, seven people were arrested in connection with yet 
another case of embezzlement at the BCM headquarters in Antananarivo 
in which USD 150,000 went missing.  Investigations discovered 
several cases of forgery of records and checks. 
 
¶5. (U) Amid this series of scandals, the GOM tried to reinforce 
confidence in the BCM by extending the mandate of all members of the 
Board of Directors and of all Bank Assessors.  When opposition 
members in the National Assembly asked Finance Minister Benjamin 
Radavidson about the ongoing investigations and the extensions for 
Bank leaders, he replied, "these are internal Central Bank 
affairs." 
 
¶6. (SBU) COMMENT:  The BCM already had a reputation as a relatively 
weak institution.  With the Ariary steadily appreciating, export 
manufacturers would like to see the Bank intervene to stabilize the 
currency.  An ongoing IMF audit of the TIKO company is investigating 
tax liabilities estimated close to USD 10 million (Septel).  The 
massive Rio Tinto and Dynatech investments should bring millions of 
dollars of revenue to the government.  The infusion of their early 
investment funds is considered the main driver of the Ariary's 
appreciation.  Economic policy management and governance remain top 
challenges for the GOM.  END COMMENT. 
 
MCGEE