VZCZCXYZ0022
PP RUEHWEB

DE RUEHLC #0224/01 1341345
ZNY CCCCC ZZH
P 141345Z MAY 07
FM AMEMBASSY LIBREVILLE
TO RUEHC/SECSTATE WASHDC PRIORITY 9709
INFO RUEHKI/AMEMBASSY KINSHASA 1385
RUEHLO/AMEMBASSY LONDON 0348
RUEHFR/AMEMBASSY PARIS 0889
RUEHYD/AMEMBASSY YAOUNDE 0806
RUEATRS/DEPT OF TREASURY WASHDC

C O N F I D E N T I A L LIBREVILLE 000224 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: DECL: 05/14/2017 
TAGS: EFIN ECON PGOV GB
SUBJECT: GABON WILL SEEK EARLY PARIS CLUB REPAYMENT 
FOLLOWING IMF AGREEMENT 
 
REF: A. LIBREVILLE 126 
     ¶B. 06 LIBREVILLE 446 
     ¶C. 06 LIBREVILLE 167 
 
Classified By: DCM: K. Dhanani.  Reason: 1.4 (b) & (d). 
 
¶1. (C) Summary: On May 10, the Gabonese Finance Minister 
briefed the cabinet on Gabon's new three-year IMF agreement, 
and said the GoG will now seek early repayment of Paris Club 
debt.  Gabon's external debt burden is moderate and 
declining, thanks to high oil prices, although new borrowing 
is up sharply over the last two years.  The Paris Club is 
unlikely to offer Gabon a deep discount, but the GoG will 
(with justification) tout any Paris Club deal as the 
consequence of the current government's wise policy choices. 
End summary. 
 
¶2. (U) Finance Minister Paul Toungui briefed his government 
colleagues on Gabon's three-year Stand-By Arrangement (SBA) 
with the IMF (Ref A) during the GoG's May 10 cabinet meeting. 
 The cabinet's press release reported that the SBA was based 
on three pillars: consolidation of sound macroeconomic 
management, with a sustainable non-oil budget deficit; 
strengthened public expenditure management; and acceleration 
of structural reform to establish a foundation for private 
sector led development.  For domestic public consumption, the 
GoG has stressed the SBA's provision of $117 million in 
drawing rights, without noting that these are precautionary 
only, i.e. there is no expectation that Gabon will use or 
require any financing from the IMF.  According to the press 
release, the cabinet's discussion of the SBA concluded with 
the statement that Gabon will shortly request negotiations 
with the Paris Club to arrange an early repayment of Gabonese 
debt, at a "significant discount." 
 
¶3. (C) Since Gabon doesn't need IMF funding, the GoG's 
motivation for seeking an SBA (and thereby tying its own 
hands) is not immediately evident.  Reformers in government, 
including Minister Toungui, have sought a formal arrangement 
with the IMF in order to safeguard sound fiscal policy and 
build momentum for institutional change.  The IMF reports 
that a desire to negotiate with the Paris Club has also been 
a major factor underlying Gabon's persistent pursuit of an 
SBA (Ref C); Paris Club rules require that debtors have an 
agreement with the IMF before they request debt treatment. 
 
¶4. (C) The GoG's desire to engage with the Paris Club is not 
founded in debt sustainability problems.  A recent GoG 
briefing to donors on Gabon's official debt confirmed that 
the country's debt burden is declining and sustainable. 
Gabon's external public debt declined from 63% of GDP in 2002 
to just 33% in 2006, and is projected to fall to 13% in 2010. 
 The debt-to-export ratio was 118% in 2002, 49% in 2006 and 
is projected to decline to 23% in 2010.  Debt service to 
exports has declined similarly, from 27% in 2001 to just 11% 
in 2005.  IMF analysis suggests that swiftly declining debt 
ratios are robust even if there are unfavorable surprises in 
growth or interest rates.  Debt will level off, rather than 
decline, if petroleum prices or terms of trade deteriorate 
sharply. 
 
¶5. (C) During the donor briefing, both the GoG's Deputy 
Director General of Public Accounts, Theophile Nkue Nguema, 
and the IMF Resident Representative in Gabon expressed 
concern about transparency of new debts taken on by the GoG. 
Nguema admitted that his office has to monitor cabinet press 
releases to learn about new GoG commitments, and often finds 
out about new debt many months after it is contracted.  He 
said that Finance Ministry civil servants have no information 
about any commitments to China in exchange for recent public 
infrastructure investments.  IMF staff report that Gabon may 
have taken on a total of $800 million in commitments in the 
last eighteen months (Ref C); this contrasts sharply with 
only about $250 million in new borrowing between 2001 and 
¶2005. 
 
¶6. (C) Comment: The windfall of high oil prices has 
exponentially multiplied the dividend of relatively 
responsible macroeconomic policy in reducing the burden of 
Gabonese public debt.  There is some concern that new loans 
contracted outside the regular budgetary process (including 
U.S. Ex-Im Bank financing for a road project) threaten to 
undermine this progress. 
 
¶7. (C) Comment cont.: Post understands that the Paris Club is 
likely to offer only a modest discount if Gabon pursues early 
repayment.  It is not clear to us whether Toungui and the 
rest of the GoG share this understanding.  In any case, we 
 
anticipate that any early repayment of Paris Club debt will 
be spun as a ringing endorsement of the policies of the 
current government.  While the Paris Club may not view early 
repayment in those terms, the GoG does deserve credit for 
resisting the temptation to squander the oil windfall on 
current expenditures.  Instead, Gabon's budget surplus in 
2006 was over 10% of GDP, and represented a third of revenue. 
 
WALKLEY