VZCZCXRO4391
RR RUEHMA RUEHPA
DE RUEHAB #0049/01 0331627
ZNR UUUUU ZZH
R 021627Z FEB 10
FM AMEMBASSY ABIDJAN
TO RUEHC/SECSTATE WASHDC 0081
INFO ECOWAS COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHINGTON DC

UNCLAS SECTION 01 OF 02 ABIDJAN 000049 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EFIN ETRD PREL IV
SUBJECT: Finance Minister Says Election Delay Won't Impact Budget 
 
¶1.  (SBU)  Summary:  On January 27, the Finance Minister told the 
Ambassador that a slight delay in elections would not have a major 
impact on this year's budget.  He said that the USD 217 million 
shortfall in customs revenue was due to problems with a new 
computerized system, which were being remedied.  Diby was confident 
that the President would hold the line on civil service 
expenditures so as not to endanger the country's HIPC program.  End 
Summary 
 
 
 
Customs Revenue Far Below Target 
 
 
 
¶2.  (SBU)  On January 27, Ambassador and Pol/Econ Chief met with 
Finance Minister Charles Diby to discuss budget issues.  Diby went 
into great detail about a customs revenue shortfall that he 
estimated at 100 billion FCFA (USD 217 million).  If this had not 
occurred, he claimed that Cote d'Ivoire would have ended the year 
with a slight budget surplus.  He attributed the shortfall to a 
poorly managed transition to a computerized customs system, 
installed in response to the business community's demands to 
process transactions in 48 hours or less.  Rather than gradually 
installing the system, however, the Director General of Customs had 
managed the transition poorly, "brutally" canceling the old system 
without ensuring the new one was functional.  The Finance Minister 
said he was now personally involved in the issue, reinforcements 
had been sent to Customs, and that the backlog was systematically 
being eliminated.  Even in December, he remarked, customs revenues 
were up from October and November lows.  At the January 26 World 
Customs Day celebrations, Diby noted, business people recognized 
the problem and were generally satisfied with the efforts being 
made to rectify it. 
 
 
 
Reforms are Increasing Farmers' Incomes 
 
 
 
¶3.  (SBU)  Due to these lower than expected inflows, Diby was 
unable to reduce domestic debt arrears.  He said that he also cut 
government spending to the bone two months before the end of the 
year in order to reduce the deficit, although he was quick to note 
that pro-poverty spending (health, water, education, 
infrastructure) and investment spending had not been affected. 
Asked about child labor programs, Diby assured Ambassador that 
spending for them was not affected.  The programs are financed from 
the Investment Fund for Rural Infrastructure, previously  run by 
the Coffee/Cocoa Management Committee, and are not an integral part 
of the budget.  Spending for 30 or so targeted villages (pumps, 
schools) continued.  This fund was created in 2006 with the support 
of the World Bank, and received half of the 25 FCFA levy per kilo 
of coffee/cocoa during the October 2008-September 2009 harvest 
cycle.  (Note: the government has reduced the tax for the current 
harvest cycle, so the fund receives half of 16.30 FCFA per kilo. 
End note) 
 
 
 
¶4.  (SBU) Diby claimed that because of the work already done by 
this fund to improve local roads, more buyers were able to reach 
cocoa farmers, and the increased competition  meant that farmers 
were actually getting the (record) official farm-gate indicative 
price of 1,000 FCFA per kilo set as a target by the Coffee and 
Cocoa Management Committee.  The Ambassador encouraged Diby to 
publicize these accomplishments.  (Note: Industry insiders have 
told post that the record-high prices are driven by projections of 
low cocoa bean production in Cote d'Ivoire--quite contrary to the 
Finance Minister's upbeat presentation of the market's dynamics. 
End note.)   Diby said there were several billion CFA in the fund's 
account and as they recently  started work, plenty of money 
remains.  Diby also mentioned that he is now personally involved in 
reforms that directly affect CdI's HIPC program such as reform of 
the cocoa/coffee sector. 
 
 
 
Election Delay Will Have No Major Impact on Budget 
 
 
 
¶5.  (SBU)  Diby did not believe that the delay in elections would 
significantly impact the budget.  His assistant said that the 2010 
budget had allocated 115 billion FCFA (USD 250 million)for the 
"sortie de crise", which included budgets for SAGEM, and the other 
electoral entities such ONI and CNSI.  Since money has also been 
 
ABIDJAN 00000049  002 OF 002 
 
 
budgeted for parliamentary and communal elections, if the 
presidential elections are delayed by a few months, Diby did not 
believe this would present a problem for the budget. 
 
 
 
Government Will Hold the Line on Civil Service Expenses 
 
 
 
¶6.  (SBU)  Diby said he had told Gbagbo that he must hold firm on 
civil service expenditures, which already consume 40 percent of 
government revenues, a percentage which Diby said needed to be 
reduced.  If not, the wage bill could easily increase to 1,000 
billion FCFA (USD 2.17 billion), compared with the IMF target of 
814 billion FCA, or USD 1.77 billion, which would cause the HIPC 
program to "collapse."  Diby said that Gbagbo had "really 
understood" the message (as evidenced by his New Year's speech 
which took a hard line against strikes by government workers). 
 
 
 
Extractive Industries Transparency Initiative Lagging 
 
 
 
¶7.  (SBU)  According to Diby, the consultant  doing the audit of 
the accounts has taken ill; this is not Cote d'Ivoire's fault if it 
falls behind schedule.  Diby said the World Bank is aware of the 
situation, implying that they were sympathetic to his view. (Note: 
The consultant cites other reasons for the delay:  "difficulties 
and delays in obtaining information from the entities covered by 
the EITI exercise" (i.e., the relevant GOCI agencies); incomplete 
data provided by GOCI sources; and "material differences in flows" 
reported by the private firms and GOCI agencies involved in the 
exercise, which the consultant had to resolve.  End note.) 
 
 
 
¶8.  (SBU) Comment: Diby was recently named Finance Minister of the 
year by a sister organization of the Financial Times and continues 
to receive very high marks from the IMF and World Bank.  By arguing 
that the country must meet the IFIs targets if it hopes to obtain 
debt relief, he has been able to curb some of the worst budgetary 
abuses but it is clear that he still has an uphill battle. 
NESBITT