VZCZCXYZ0001
PP RUEHWEB

DE RUEHJB #0563/01 2201305
ZNR UUUUU ZZH
P 081305Z AUG 07
FM AMEMBASSY BUJUMBURA
TO RUEHC/SECSTATE WASHDC PRIORITY 0476
INFO RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY

UNCLAS BUJUMBURA 000563 
 
SIPDIS 
 
SIPDIS 
SENSITIVE 
 
DEPT FOR AF/C 
 
E.O. 12958: N/A 
TAGS: PGOV PREL BY
SUBJECT: IMF REPRESENTATIVE IN BURUNDI CONCERNED OVER 
BUDGET CRISIS 
 
 
¶1. (SBU) Summary.  Ambassador Moller met on August 7 with 
International Monetary Fund (IMF) Resident Representative 
Israel de la Piedra and visiting IMF Assessment Team 
economist Alvaro Manoel to discuss Burundi's impending 
budgetary crisis.  De la Piedra identified the two most 
immediately troubling fiscal issues for Burundi as loss of 
revenue in the face of increased Government expenditures, and 
the questions of malfeasance raised by alleged illegal 
payments by the Government of Burundi (GOB) of $17 million to 
a private Burundian petroleum company, Interpetrol.  De la 
Piedra said that the IMF would address these two issues and 
try to help the Government find a way to increase 
transparency in its budget process and in its fiscal 
operations.  If the Government of Burundi is able 
convincingly to demonstrate that it is embarking upon 
necessary changes, then the IMF is prepared to consider 
continuing its budgetary support.  De la Piedra noted that 
for IMF to provide further budget support, a third evaluation 
visit would have to take place.  He emphasized to the 
Ambassador how seldom IMF agrees to make such a visit, but 
responding to the Ambassador's remarks about Burundi's status 
as a country emerging from decades of civil strife and about 
its strategic importance in the region, Alvaro Manoel 
conceded a third visit would be possible in Burundi's case, 
cautioning however that IMF visits do not occur "every few 
weeks".  End Summary. 
 
¶2. (U) Ambassador Moller met with IMF Resident Representative 
Israel de la Piedra to discuss the budget crisis facing 
Burundi.  Mr. de la Piedra told Ambassador Moller that on 
August 6, he and Burundi's Second Vice President Gabriel 
Ntisezerana, and others participated in a video conference 
with IMF Washington.  De la Piedra informed the Ambassador 
that the subject of the video conference was Burundi's 
deteriorating fiscal situation, its causes, and what the GOB 
needed to do to ameliorate the present crisis and ensure that 
support would continue to flow from IMF, World Bank, and 
others. 
 
 
 
Two Issues Facing the GOB 
------------------------- 
 
¶3. (SBU) Mr. de la Piedra told Ambassador Moller that, for 
its part, the IMF sees two immediate looming problems facing 
Burundi.  The first of these is the Government's wide budget 
gap, driven partly by a loss of customs revenues at the same 
time as additional expenditures are being approved.  The most 
egregious of these new and unplanned-for expenditures is the 
thirty-four percent salary increase for civil servants 
promised by President Nkurunziza on May 1.  Alvaro Manoel, 
IMF visiting senior economist, pointed out that President 
Nkurunziza made his announcement of the salary increase after 
the IMF had proposed its 2007 budget for Burundi, commenting 
that Burundi's budget is "no longer financeable." 
 
¶4. (SBU) The second problem De la Piedra described was the 
unfolding scandal of allegedly illegal payments amounting to 
some $17 million by the GOB to the private Burundian 
petroleum distributor, Interpetrol.  He pointed out that the 
controversy and scandal surrounding the transaction touched 
both on good governance issues -- corruption -- and on the 
budgetary crisis, through the loss of GOB funds.  Expanding 
on the illegal Interpetrol payments, he explained that the 
monies were handed over in three or four payments, the latest 
of which was in May.  The USD payments requested by the 
Minister of Finance for Interpetrol were said to be needed to 
cover "exchange rate losses," but IMF believes those losses 
had already been paid by the GOB in 2004. 
 
¶5. (SBU) Although it is important for the government to 
recover funds paid to Interpetrol, De la Piedra hoped that 
the GOB would not attempt to recover the lost money "by 
might," but would instead follow the law.  Citing the August 
4 arrest in his home of the Governor of the Central Bank for 
his alleged role in the Interpetrol affair, De la Piedra 
expressed hope the arrest had been made legally. 
 
 
Goals and Strategies 
-------------------- 
 
¶6. (SBU) Mr. de la Piedra said that IMF's immediate goals for 
Burundi are simple.  Burundi must: acknowledge that the 
Interpetrol problem must be put right, begin to move the 
country towards responsible fiscal and budgetary policy and 
practice, and implement measures to enhance revenues and cut 
 
expenditures.  The Second Vice President has already 
identified petroleum products, fizzy drinks and beer, and 
sugar as targets for tax increases. 
 
¶7. (SBU) As part of the IMF's strategy to improve government 
transparency, De la Piedra stressed the importance of finding 
and closing loopholes in the law, such as the one that allows 
the Minister of Finance to write checks without any 
oversight, creating an opportunity for corrupt practices.  He 
recommended as well requiring regular audits of companies 
that do business with the Government. 
 
¶8. (SBU) Mr. de la Piedra informed the Ambassador that prior 
to the IMF's August 8 departure from Burundi, he would meet 
again with the Second Vice President, the Minister of 
Finance, and the Interim Governor of the Central Bank to 
continue their discussions on the budget impasse.  On August 
7, a second video conference with IMF Washington will take 
place.  Mr. Manoel intervened to explain that if the GOB can 
convincingly demonstrate it will make needed changes to 
address the flaws in its budget process, then the IMF is 
prepared to continue its budgetary support.   He went on to 
say, that the GOB must immediately address the loss of 
revenue and the worrying Interpetrol situation, cautioning 
that IMF missions do not occur "every few weeks".  De la 
Piedra emphasized that for IMF to stay in Burundi, the GOB's 
efforts to solve its fiscal problems must be robust and 
transparent.  Acknowledging the gravity of the situation, the 
Ambassador urged the IMF Rep to keep the Embassy apprised of 
developments. 
 
¶9. (SBU) Comment. The IMF representative in Burundi is 
clearly disturbed by the GOB's fiscal behavior, but is 
continuing to work to find a solution.  The IMF's willingness 
to return to Burundi in September is promising, and suggests 
its commitment to the country.  Given the fragility of 
Burundi's young democracy, the need for the IMF and other 
international partners, to remain strongly invested in 
Burundi's future is evident, as is the IMF's need to identify 
serious brokers within the GOB with whom they can work.   The 
IMF's principal Burundian interlocutor, the Second 
Vice-President, appears to be serious, a "straight-shooter", 
and someone who understands the task at hand.  If he can make 
good on his pledges to fix the problems, then the IMF will 
likely consider it has a solid partner.  End Comment. 
 
MOLLER 
MOLLER