VZCZCXRO5565
PP RUEHPA
DE RUEHAB #1176/01 3301612
ZNY CCCCC ZZH
P 261612Z NOV 07
FM AMEMBASSY ABIDJAN
TO RUEHC/SECSTATE WASHDC PRIORITY 3766
INFO RUEHZK/ECOWAS COLLECTIVE
RHEHNSC/NSC WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUEPGDA/USEUCOM JIC VAIHINGEN GE

C O N F I D E N T I A L SECTION 01 OF 04 ABIDJAN 001176 
 
SIPDIS 
 
SIPDIS 
 
STATE PASS TO USTR, CHAMILTON 
TREASURY FOR DPETERS 
USAID FOR CGARRETT, SSWIFT 
DAKAR FOR FAS RHANSEN, FSC SMORRISON 
ACCRA FOR USAID KMCCOWAN, PRICHARDSON 
 
E.O. 12958: DECL: 11/20/2017 
TAGS: EFIN EAID PGOV PREL IBRD IMF IV
SUBJECT: DOES LACK OF DONOR ASSISTANCE EXPLAIN SLOW 
PROGRESS ON OPA IMPLEMENTATION? 
 
REF: A. ABIDJAN 1158 
 
     ¶B. ABIDJAN 1157 
     ¶C. ABIDJAN 1036 
     ¶D. ABIDJAN 765 
 
Classified By: EconChief EMassinga, Reasons 1.4 (b,d) 
 
¶1.  (C)  Summary:  During a number of recent public events, 
President Gbagbo and Prime Minister Soro have blamed slow 
implementation of the Ougadougou Peace Agrement (OPA) on a 
lack of international donor assistance.  The Prime Minister 
and President both made this assertion in meetings with the 
Deputy Secretary (ref b) and evidently made similar 
statements in a November 16 meeting with Louis Michel, the 
EU's Commissioner for Development and Humanitarian Affairs. 
Embassy reps have spoken with various sources in Abidjan to 
determine if the PM's claims are true. Based on our 
discussions, there appear to be two fundamental problems: 1) 
an inability (or unwillingness) on the part of the GoCDI to 
use existing government resources to finance the 'sortie de 
crise' (crisis resolution) program and 2) GoCDI failure to 
honor the conditions set forth by donors. Sufficient funding 
to implement key elements of the OPA appears to be available; 
there does not appear to be sufficient funding to implement 
the OPA and simultaneosly finance all of the other priorities 
and inititiaves the government is hoping for. End Summary 
 
¶2. (C) In response to criticism from the international 
community about slow implementation of the Ougagdougou Peace 
Agreement (OPA), government leaders from President Gbagbo and 
Prime Minister Soro on down have asserted that donors' 
unwillingness to provide funding is the problem. As reported 
in ref a, PM Soro recently convoked the diplomatic community 
to address the same issue, stressing that deployment to date 
of only 25 of 111 planned audiences foraines teams was due to 
insufficient finances. The reality is otherwise, and this 
fact was noted publicly by visiting EU Commissioner Louis 
Michel.  The Ministry of Finance has indeed nearly exhausted 
its budget for the first phase of the identification process, 
but an IMF post-conflict agreement is in place and 
functioning. Half of the USD120 million promised in budgetary 
support has been disbursed. Funding is also available from 
the World Bank and the EU but has not been touched due to 
poor financial management by the GoCDI.  At the same time, 
the Ministry of Finance is aggressively raising funds on the 
regional bond market and preparing the groundwork for what 
they hope will be substantial debt relief in 2008. The 
Presidency continues to control revenue distribution, leaving 
the Prime Minister, a novice at fiscal matters, on the hot 
seat for failing to deliver more quickly on OPA promises. 
 
 
The Government's Spending So Far on Audiences Foraines 
======== 
 
¶3. (C) The government has identified a global need of USD 556 
million for the sortie de crise, and has, according to 
figures compiled by the Prime Minister's office, raised a 
total of USD 401 million, combining the government's own 
revenues with assistance from the international community. 
On the discrete issue of the audiences foraines, the Ministry 
of Finance has announced that of the approximately USG 20 
million it budgeted for the process, USD 14.5 million has 
already been spent.  Only 25 audiences foraines teams have 
been deployed (see septel on the PM's plan to jump-start the 
process).  In public comments during his November 16-17 
visit, Louis Michel noted that the government does not lack 
resources to put into motion either the audiences foraines or 
other elements of the sortie de crise package.  The was 
likely a reference not just to the remaining 5.5 million 
budgeted for the audiences foraines, but also to the fact 
that the GoCDI continues to finance lavish travel and other 
expenditures by favored government officials while portraying 
itself publicly as strapped for cash. 
 
The IMF 
======= 
 
¶4.  (C)  Contrary to claims that all the international 
financial institutions have failed to provide promised 
assistance, the IMF has a USD120 million Emergency Post 
Conflict Assistance program underway. In a recent discussion 
with Ambassador, IMF Country Director Phillipe Egoume said 
 
ABIDJAN 00001176  002 OF 004 
 
 
the program was approved in July, and the first tranche of 
USD60 million was disbursed August 3.  This assistance is 
essentially direct support to the nation's treasury to help 
it meet current expenditures. For the Finance Ministry to use 
the disbursed funds, it must have the IMF Country Director 
"countersign."  According to the Country Director, this 
system has worked acceptably well so far.  The second tranche 
of USD60 million is due to be disbursed in January, 2008, but 
Cote d'Ivoire will still have to meet certain conditions in 
order to "regularize" its relationship with the IMF and 
trigger the resumption of a normal program. In essence, The 
key condition is that Cote d'Ivoire will need to pay 
USD240million in arrears to the World Bank. 
 
¶5.  (C)  Egoume expressed serious concern about the outlook 
for the 2008 budget, saying he anticipated a serious funding 
gap. (Note: An IMF Mission currently in Cote d'Ivoire will 
give donors a full read out on November 26)  He pointed out 
that the government has promised bureaucrats a salary 
increases but did know how this would be treated in the 
budget alongside 'crisis recovery' programs such as the 
Service Civique, which the Prime Minister and President have 
both called a top priority. The IMF rep agreed with the 
government's approach to debt relief, saying that at this 
point in time Cote d'Ivoire simply cannot re-start debt 
servicing without signficantly impacting other programs. 
 
 
World Bank 
======= 
 
¶6.  (C)  Ambassador Nesbitt and EconOff met with World Bank 
Resident Representative Barnard Harbone on November 14 to 
discuss, inter alia, the Bank's financial support for the 
sortie de crise.  The Bank signed on to the same package as 
did the IMF in July 2007 which formally (but not fully) 
reengaged the IFIs in Cote d'Ivoire and through which the 
Bank pledged USD120 million to finance the reintegration of 
youths and vulnerable persons. This is not the same as the 
traditional reintegration element of DDR as assistance will 
be given to communities rather than individuals. The Bank's 
program will also cover community rehabilitation and 
rehabilitation of the civil registries, the latter in 
coordination with the EU.  Cote d'Ivoire has met the 
financial part of the July agreement, prefinancing its 
arrears clearance package through the end of 2007 (total 
arrears this summer reached USD 480 million). The 
government's failure to meet one central condition, however, 
has resulted in no/no WB post conflict assistance money 
having been disbursed to date. 
 
¶7.  (C)  Harbone explained that the Prime Minister's Office, 
which has the lead for the entire government on crisis 
recovery, is also the World Bank's main partner in this 
program. The Bank's agreement with the PM's office calls for 
a crisis recovery committee and committee chair to be 
established via a competitive, transparent hiring process. 
Instead of observing this requirement, the PM and/or his 
staff, selected a committe chair (Daniel Ouattara) who is a 
friend of the PM and set up a committee using a compeltely 
internal and un-transparent process.  The Bank has refused to 
disburse through this committee and insisted that the 
orignally agreed upon procedure be followed.  According to 
Harbone, a recent threat by the Bank to select a different 
primary partner convinced the PM to act after months of 
stalemate, and he has agreed to establish a new committee 
through a transparent process.  Several related steps must 
be taken. The Prime Minister must issue a decree providing a 
legal basis for the new committee (Bank sources report a 
draft is waiting for Soro's signature for when he returns 
from his current swing through the north) and must advertise 
openly for a public auditor of the new committee (the ads 
have been placed and the Bank has already begun receiving 
bids). There should also be an advertisement for a committee 
chair.  The Bank's estimate is that a committee probably 
cannot be in place before January 2008, meaning disbursement 
will be delayed until then, at the earliest. 
 
 
¶8.  (C)  The Bank, along with the Fund and the African 
Development Bank, are pushing through several audits of the 
oil and gas sector along with the cocoa sector.  Those should 
be completed and presented to the respective Boards in 
 
ABIDJAN 00001176  003 OF 004 
 
 
December.  If the Boards accept the fiscal controls proposed 
and Cote d'Ivoire is current on its arrears package, the Bank 
staff intend to present in late January to the Bank Board a 
plan to possibly move forward with HIPC (the Highly Indebted 
Poor Countries initiative) by, tentatively, the summer of 
¶2008.  This would help relieve the country of its enormous 
debt load (USD 18 billion, including bilateral, multilateral 
and commercial).  Harbone warned that the country needs to 
tap the Bank's USD 120 million post conflict assistant 
package and make it to HIPC by the summer, as debt payments 
on the arrears will reach USD 50 million by February, a level 
that will be unsustainable by the Ministry of Finance for 
very long. 
 
EU 
======= 
 
¶9.  (C)  The Commission has expressed willingness to finance 
directly the audiences foraines, and has a package of USD 16 
million for that purpose, along with an equal sum for the 
identification process and eventual organization of 
elections.  The EU's funds can be used to pay per diems and 
other operational costs of the teams, however, the Commission 
has been adamant that it will not buy vehicles for the 
audiences foraines teams.  The government's sortie de crise 
committee had initially said it would arrange for the 
transportation needs of the audiences foraines, but now 
claims it is "unable" to finance the required vehicles. 
According to the EU resident representative, the only hurdle 
to the government tapping funds the EU is ready to provide is 
its own inability to mobilize the resources necessary to 
purchase vehicles and/or other means of transporting the 
audiences foraines teams around the country. EU Rep Arrion 
told the Ambassdor in late October that the PM and his staff 
are both extremely inexperienced in fiscal management; Arrion 
thought the failure to use EU funding was due almost entirely 
to poor financial management and lack of experience in 
dealing with donors. 
 
¶10.  (SBU)  Aside from sortie de crise assistance from the 
IFIs, and the EU, bilateral donors are providing some 
support, but much of that is tied to making initial progress 
or is only loosely tied to the political process.  Japan has 
pledged USD 22 million to rehabilitate the civil registries 
and organize the presidential and legislative elections, but 
intends much of that assistance to be in the form of computer 
and software provision to organize the relevant databases. 
France is has pledged USD 23 million, but 90 percent of that 
is for community rehabilitation and development projects 
vaguely associated with the sortie de crise program.  Germany 
has USD 7 million on the table to support NGOs engaged in 
"national reconciliation", and Switzerland has USD 15 million 
available that is currently unbudgeted.  For its part, the 
African Development Bank has a USD 30 million project in the 
works to aid the government's sortie de crise project through 
restoration of public services in the north, but has been 
frustrated by slow development of a specific implementation 
plan by the government. 
 
Cote d'Ivoire's Successful Commercial Bond Issuance 
======= 
 
¶11.  (C)  In stark contrast to the difficulties the Prime 
Minister and his staff have had managing the crisis recovery 
program, the Ministry of Finance proudly announced that in 
September, it had successfully floated bonds on the regional 
market that will eventually generate CFA 225 billion (USD 508 
million).  The Ministry of Finance is run by a extremely 
competent staff and led by a loyal Gbagbo supporter.  A 
well-placed banker at a U.S. financial institution operating 
in Cote d'Ivoire reports that the bond issuance offered 
slightly over 6.5 percent, maturing in two years.  In a 
meeting with the Ambassador, the IMF Country Director had 
expressed some doubt that the Ministry of Treasury would be 
able to raise its targeted amount, but the U.S. banker said 
that not only had the Ministry succeeded, but that it would 
be soon offering another bond to raise an additional USD 100 
million in the near future.  According to the U.S. banker, 
the money raised thus far is to pay off the World Bank 
arrears entirely. 
 
¶12.  (C)  According to the U.S. banker, and corroborated by 
several other international financial executives based in 
 
ABIDJAN 00001176  004 OF 004 
 
 
Abidjan, once Cote d'Ivoire clears its arrears with the IFIs, 
it plans to borrow on the international, vice regional, debt 
market.  Moreover, the long-rumored deal involving JP Morgan 
and the Ivorian national retirement system (CNPS in French), 
in which CNPS would be recapitalized in exchange for 
discounted non-performing government bonds, is apparently 
being looked at seriously again.  Under the terms of the 
potential USD 200 million agreement (reftel d) being 
discussed, Morgan and the Ministry of Finance would execute 
it once the arrears to the World Bank and African Development 
Bank are fully paid. 
 
 
¶13.  (C)  Comment: The Prime Minister's Office is struggling 
to manage the sortie de crise program and has evidently not 
taken seriously the need to meet conditions attached to 
certain pots of assistance. He does not have the expertise 
nor the level of personnel to take control over government 
revenues to fulfill the PM's mandate to ensure that the 
audiences foraines and the identification processes are 
properly carried out. And remarkably, at least according to 
World Bank sources, Soro hs refused technical assistance to 
help him and his team more fully understand and engage in the 
budgeting process.  At the same time, the Ministry of Finance 
appears to be moving aggressively on its own track to clear 
arrears and set the stage for large scale debt relief.  The 
Ministry also appears to be avoiding major new commitments to 
finance the end of Cote d'Ivoire's long-running political 
crisis. This situation underscores the co-habitational nature 
of this government and reminds us that while Gbagbo and Soro 
have established a national unity government that is still 
very divided in terms of how it operates on a day-to-day 
basis.  End Comment. 
NESBITT