VZCZCXRO9540
PP RUEHMA RUEHPA
DE RUEHDK #1515/01 2040752
ZNR UUUUU ZZH
P 230752Z JUL 07
FM AMEMBASSY DAKAR
TO RUEHC/SECSTATE WASHDC PRIORITY 8829
INFO RUCPDOC/USDOC WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUEHLMC/MCC WASHDC
RUEHZK/ECOWAS COLLECTIVE

UNCLAS SECTION 01 OF 02 DAKAR 001515 
 
SIPDIS 
 
SIPDIS 
SENSITIVE 
 
STATE FOR EB/IFD, AF/EPS AND AF/W 
 
E.O. 12958: N/A 
TAGS: EFIN EAID ECON ETRD EINV SG
SUBJECT: SENEGAL'S DONORS AGAIN GIVE IMF MISSION AN EARFUL 
 
REF:  06 DAKAR 2614 
 
DAKAR 00001515  001.2 OF 002 
 
 
¶1.  (SBU) SUMMARY:  At the beginning of a two-week mission to 
negotiate a new program with Senegal, IMF officials on July 12 
received a non-stop stream of complaints and concerns by the 
country's traditional donors over the current state of public 
finance and governance.  Senegal very much needs a new IMF program 
to revive donor confidence and assure follow-though on pledges.  On 
July 26 the donors will learn the outcome of the negotiations.  Even 
with a new program, the prospects for near-term sunshine on 
Senegal's budget expenditures and public contracts will likely 
remain dim.  END SUMMARY. 
 
ANOTHER EARFUL 
-------------- 
¶2.  (SBU) Reftel highlighted the tough messages that donors 
delivered to a visiting IMF team last October.  That session proved 
a mild preview to the meeting held on July 12 when Senegal's 
traditional donor community again gathered to highlight their 
concerns at the beginning of a two-week IMF mission, this one to 
negotiate a new IMF program.  The "non-traditional" donors such as 
the Gulf States, Morocco, and China, who have been dominating the 
news in recent months due to their special partnerships with GOS 
ministries and agencies, were apparently invited but did not attend. 
 While acknowledging that the donors were raising all the issues 
(and more) that the mission planned to address with the GOS, after 
an hour-plus of pointed concerns, complaints, and frustrations, the 
IMF Chief of Mission, Johannes Mueller, appeared a bit 
shell-shocked.  Unlike other donor-IMF briefings, nobody at the 
table came to the GOS's defense; not France, not the EU, not the 
World Bank, not the UNDP. 
 
THE LAUNDRY LIST -- JUST AS DIRTY BUT EVEN TOUGHER 
--------------------------------------------- ----- 
¶3.  (SBU) The donors insisted that the IMF address a broad range of 
issues in its discussions with the GOS and that the donors' concerns 
form the basis of any new program's "commonly agreed reform 
measures" (read, "conditionality").  Most of the issues raised by 
the various donors have been well-reported by post, and none are 
particularly new.  Collectively, the issues raised underscore the 
over-arching concern, namely, the GOS does not appear to have any 
specific and sound plan for improving its public finances and 
reviving the economy.  President Wade, his spokesmen, Ministers and 
various agency heads all say, "trust us, we have a plan," but trust 
is in short supply these days in Dakar. 
 
¶4.  (SBU) More specifically, the donors raised, in part: 
-- Senegal's completely stove-piped decision-making, with a single 
point for all decisions (President Wade and his personal political 
advisors); 
-- lack of transparency in Senegal's public finances and 
procurement; 
-- not enough effort to offer fair and open tenders for public 
projects; 
-- no improvement in solving Senegal's energy-financing crisis; 
-- no effective GOS counterparts for donor thematic groups; 
-- no information on the source, control, or GOS requirements under 
agreements for the "Arab funds" (that is, the special, exclusive 
deals between the GOS various companies and entities from Kuwait, 
Saudi Arabia, and the UAE for infrastructure investments); 
-- a National Assembly that has no role providing checks and 
balances; 
-- an ineffective judiciary; 
-- inconsistent application of laws and regulations; 
-- diminishing budgets for development priorities, including health 
and education; 
-- lack of follow-through on debt forgiveness commitments; 
-- the unaccountable role of the "Agencies" set up to manage public 
investment; and 
-- zero movement on improving the business and investment climate, 
including no formal response, after two years, to the letter 
highlighting specific areas for improvement provided to the Prime 
Minister by the U.S.-chaired Private Sector Working Group. 
 
THE IMF'S ASSIGNMENT 
-------------------- 
¶5.  (SBU) Mr. Mueller explained that he is beginning this mission 
with five goals for the negotiations: 
i) establish needed improvements in Senegal's macro-economic 
situation, including effective management of the national budget; 
ii) agree to much-needed transparency and governance reforms for 
public finances; 
iii) outline concrete steps for increasing economic growth; 
iv) establish a workable plan for improving the private sector 
business and investment climate; 
v) underline the importance of improving and modernizing Senegal's 
financial sector. 
 
DAKAR 00001515  002.2 OF 002 
 
 
 
¶6.  (SBU) Mueller explained that the conditionality must be 
established as a first step, because it will be essentially the same 
whether the two sides agree to a new Policy Support Instrument (PSI) 
or a more traditional Poverty Reduction and Growth Facility (PRGF). 
He speculated that the reporting requirements of a PSI might be too 
strict for Senegal at this time.  Another option is a PRGF with only 
a "symbolic" disbursement since once Senegal's budget deficit and 
public finances management are addressed the country does not really 
need a significant financial contribution from the IMF (assuming 
other donors continue their assistance). 
 
¶7.  (SBU) Senegal's IMF Resrep Alex Segura, promised that Meuller 
would brief the donors on the results of their negotiations on July 
¶26.  As for the timeframe for a new program, Mueller explained that 
if there is a general agreement by the end of this mission, the new 
program could be presented to the IMF board by early October. 
 
COMMENT 
------- 
¶8.  (SBU) Senegal has much at stake in a successful conclusion to 
these negotiations -- not just a much-needed boost in credibility 
for securing donor project and budget support pledges, but also for 
agreeing to regularize its management of public finances.  However, 
even with a new program we are not confident that Senegal's talented 
Finance Minister Abdoulaye Diop will be able to implement 
much-needed reforms in the near-term.  That will probably have to 
wait until the opaque financing of projects for the proposed March 
2008 OIC summit has run its course.  It will also require winning 
difficult political battles with the entrenched political advisors 
surrounding President Wade who quite enjoy having their fingers in 
all the pies.  END COMMENT. 
 
¶9.  (U) Visit Embassy Dakar's Intranet site at: 
http://dakar.state.gov/htdocs/section/econSec tion.aspx and Embassy 
Dakar's SIPRNET Web site at http://www.state.sgov.gov/p/af/dakar 
 
SMITH