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Cablegate: Finance Minister Says Election Delay Won't Impact Budget

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RR RUEHMA RUEHPA
DE RUEHAB #0049/01 0331627
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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

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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

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