VZCZCXRO3035
RR RUEHROV
DE RUEHDS #2556/01 3020525
ZNR UUUUU ZZH
R 290525Z OCT 09
FM AMEMBASSY ADDIS ABABA
TO RUEHC/SECSTATE WASHDC 6637
INFO RUCNIAD/IGAD COLLECTIVE
RUEPADJ/CJTF HOA
RUEAIIA/CIA WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEKDIA/DIA WASHINGTON DC
RUEWMFD/HQ USAFRICOM STUTTGART GE
RUEKJCS/JOINT STAFF WASHINGTON DC
RUEHLMC/MILLENNIUM CHALLENGE CORP
RHEHAAA/NSC WASHDC

UNCLAS SECTION 01 OF 02 ADDIS ABABA 002556 
 
SENSITIVE 
SIPDIS 
 
DEPARTMENT FOR EEB/IFD/OMA - JWINKLER AND EEB/CBA - 
DWINSTEAD 
USAID FOR AFR/EA HELLYER AND DALTON 
DEPT PASS TO USTR FOR PATRICK COLEMAN, CECILIA KLEIN, AND 
BARBARA 
GRYNIEWWICZ 
DEPT OF COMMERCE WASHDC FOR ITA MARIA RIVERO 
DEPT OF TREASURY WASHDC FOR REBECCA KLEIN 
 
E.O. 12958: N/A 
TAGS: EAID ECON ET
SUBJECT: ETHIOPIA'S HOLD OVER THE IMF AND WORLD BANK 
 
ADDIS ABAB 00002556  001.2 OF 002 
 
 
¶1. (SBU) Summary:  Both the local International Monetary Fund 
(IMF) and World Bank (Bank) representatives discussed the 
Government of Ethiopia's (GoE) strong position when 
negotiating for additional donor assistance during a October 
22 lunch with Embassy officials and visiting AF/E Director. 
According to the representatives, the GoE masterfully walks 
the line between its status as one of the poorest nations and 
touting its consistent double-digit Gross Domestic Product 
(GDP) growth when seeking additional funding.  The IMF 
representative questioned the quality of the GoE's fiscal 
data and worried about its increased public spending and debt 
levels, but admitted his difficulties in finding other 
reliable data and getting the GoE to open up the books of the 
debt-laden state-owned enterprises (SoEs). End Summary. 
 
¶2. (SBU) Local IMF and Bank representatives discussed the 
clever negotiating skills of the GoE with CDA Meece, visiting 
AF/E Director Geeta Pasi and EconOff during an October 22 
lunch.  Both IMF Resident Representative Sukhwinder Singh and 
Bank Acting Country Director Jeeva Perumalpillai-Essex 
indicated the GoE is adept at playing both sides of the coin 
to assure assistance--from the impoverished country side to 
the booming economic growth side.  They asked, "what can we 
do?" with the GoE when it comes up with good arguments on 
both sides when negotiating for increased funding.  Singh 
stated the GoE often emphasizes the low income status of 
Ethiopia while citing recent IMF funding to wealthier 
countries during its negotiations.  Perumalpillai-Essex 
commented on the GoE's well developed sense of timing, 
stating that she expects the GoE to request additional Bank 
disbursements right before the end of the year when 
Ethiopia's foreign exchange reserves will be low and 
officially counted.  (Note:  Asking the Bank for foreign 
exchange inflows privately at that time will reveal 
Ethiopia's desperate need for assistance, while publicly the 
Bank-boosted reserves will count as another GoE macroeconomic 
success story.  End Note.) 
 
¶3. (SBU) Singh recounted week-long negotiations between the 
IMF and the GoE on the Exogenous Shocks Facility (ESF) 
package approved within the past year.  He stated that the 
GoE insisted that they were going to attain 11 percent GDP 
growth in the fiscal year ending June 2009.  The IMF 
continually questioned the GoE's ability to do so given all 
of the internal and external strains on Ethiopia's economy 
and in the end told the GoE that if it is able to grow GDP at 
11 percent then it does not need IMF ESF assistance.  During 
the next and final day of negotiations, the GoE retracted a 
bit and reported it would only reach 10 percent GDP growth in 
¶2009.  The IMF then relented and agreed to an ESF loan (Note: 
The IMF issued Ethiopia a USD 50 million ESF loan in January 
2009 and a USD 241 million loan in August 2009. End Note.). 
 
¶4. (SBU) Singh admitted he questions the GoE's budget 
numbers, but stated the IMF has to use them since there are 
no other reliable figures.  He expressed concern not only 
about the growth figures, but the GoE's recent public 
spending and recent trends to increase debt.  Singh also said 
the GoE refuses to budge on opening up the books of SoEs and 
these requests often invoke strong negative reactions from 
GoE officials (Note: The SoEs reportedly have more debt on 
their books than the GoE itself. End Note.).  He went on to 
say the IMF believes Ethiopia's real exchange rate is still 
overvalued even after Prime Minister Meles agreed to the 
recent 10 percent Birr devaluation when the central bank 
governor and finance minister were hesistant to do so. 
 
¶5. (SBU) Singh remarked that the GoE often compares itself to 
the Asian Tiger countries due to its historical high growth, 
but when the IMF points out various macroeconomic problems 
Ethiopia is dealing with that the Asian Tigers did not, the 
GoE only focuses on the data that supports its optimistic 
conclusions.  For example, Ethiopia is battling high 
 
ADDIS ABAB 00002556  002.2 OF 002 
 
 
inflation while most Asian Tigers did not; however, the GoE 
focuses on the fact that South Korea struggled with high 
inflation in one year of its growth boom.  In response to CDA 
Meece's inquiry, Singh acknowledged that Ethiopia's growth 
spurt will have to end at some point; however, he said the 
end is difficult to predict when the country continues to 
receive significant levels of one-off donor assistance and at 
least selectively produce decent economic performance. 
 
¶6. (SBU) Comment:  Given Ethiopia's status as a populous 
nation dealing with extreme poverty, the Bank stands in the 
same weak position the U.S. does when negotiating assistance 
packages.  The GoE knows donors will not pull out of Ethiopia 
and leave millions of people to starve to death.  The IMF 
struggles as elsewhere to steer a course above 
minimally-acceptable economic governance of policies.  The 
lack of consequences makes it quite difficult to push the GoE 
on certain objectives such as fiscal transparency and other 
conditionalities.  End Comment. 
MEECE