P R 311533Z OCT 08
FM AMEMBASSY BRAZZAVILLE
TO SECSTATE WASHDC PRIORITY 1186
INFO AMEMBASSY BRAZZAVILLE

UNCLAS BRAZZAVILLE 000291 
 
 
DEPT FOR AF/C PCARTER, SLOPEZ 
 
E.O. 12958: N/A 
TAGS: ECON EAID PGOV CF
SUBJECT: CONGO-BRAZZAVILLE GEARING UP FOR MAJOR ECONOMIC MILESTONES 
-- BUT WILL IT SUCCEED? 
 
¶1.  Embassy Brazzaville is an unclassified post. 
 
¶2.  Summary:  After 18 months of delays, reviews and stalled 
programs, Republic of the Congo (ROC) is making significant 
progress toward reaching its Heavily Indebted Poor Countries 
(HIPC) completion point and achieving the promise of its debt 
relief status, granted in 2006.  Recent reviews by the 
International Monetary Fund (IMF) and World Bank have been close 
to glowing and the Poverty Reduction Growth Facility (PRGF) 
program is expected to restart in November after being stalled 
since January 2007.  Thus, it is possible ROC could achieve its 
completion point by 2009.  But ... Two key triggers that the 
government of Republic of the Congo (GRoC) must satisfy are the 
traditional sticking points: Oil industry management and capital 
spending management.  Given the ROC's history of questionable 
spending habits and far-from-transparent accounting of oil 
revenues, some IMF staff wonder how well GRoC will do in meeting 
the completion point.  End summary. 
 
¶3.  Republic of the Congo (ROC) has been mired in inactivity and 
lack of progress on its Heavily Indebted Poor Countries (HIPC) 
debt relief program since January 2007.  HIPC status was granted 
to ROC in November 2006, and ROC fell off schedule almost from 
the beginning.  Recent reviews by International Monetary Fund 
(IMF) and World Bank, and recent meetings between EconOff and 
key economic contacts at IMF, show substantial progress for ROC 
and there is a new sense of possibility.  The government (GRoC) 
formed a presidential-level committee to cut through the delays 
and IMF staff noted, and praised, an almost instantaneous 
improvement in data collection and sharing by GRoC officials. 
World Bank officials noted positive developments for ROC's 
lucrative oil sector, where more information is now available 
from GRoC on spending and management.  Although the 
anti-corruption committees formed by GRoC still lack resources 
and power to do any investigating, the fact that they exist at 
all is seen as a significant improvement.  "It put a voice for 
reform of the government  the government," said Yaya 
Moussa, IMF representative in ROC. 
 
¶4.  A six-month staff monitored program - in effect a 
probationary review by the IMF -- normally done for immediate 
post-conflict countries and thus unusual for a 
post-post-conflict nation like ROC --  ended successfully in 
June.  (One prime reason for this additional review was the IMF 
discovery that GRoC awarded USD $200 million to a single 
governmental entity, the CORAF oil refinery (Congolaise des 
Raffineries).  Although the purpose of the payment was to 
subsidize consumer pump prices for refined product, the payment 
was somewhat extra-budgetary, and, as Moussa noted, how can a 
government that is serious about a poverty reduction campaign be 
giving USD $200 million to one, single entity?  Attitudes within 
GRoC itself appear to have changed after a presidential 
committee was created by President Sassou-Nguesso to focus on 
the IMF criteria, and now GRoC officials reportedly agree with 
the IMF position on CORAF: Reduce its allowance.)  With all 
indicators pointing in the right direction now, the ROC hopes 
that the IMF board will approve a Poverty Reduction Growth 
Facility program in November, the next major step toward HIPC 
completion. 
 
¶5.  But, the GRoC continues to face a significant hurdle toward 
the HIPC completion point.  Two of the necessary triggers are 
what Moussa termed "vicious" for GRoC: oil management, and 
capital spending management.  Despite the recent progress, ROC 
continues to operate its oil sector in less-than-transparent 
manners.  GRoC has shown more discipline with capital spending 
programs, but has not yet demonstrated sustained improvement. 
Given that oil sector transparency and spending habits have been 
among GRoC's weakest attributes, successfully navigating those 
triggers to reach the HIPC completion point in 2009 is going to 
be an extreme challenge. 
 
EASTHAM