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ORIGIN AF-01
STATE
INFO LOG-00
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EUR-01
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385341
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9092
DRAFTED BY: AF/EPS: MUURBINA DE BREEN/AISTON
APPROVED BY: AF/EPS: ALHOLLICK
AF/C: KCAISTON
EB/IFD/ODF: PEROHRLICH
TREASURY: EBARBER
USED IBRD: DKLINE
146748 271713Z /38
R 271711Z DEC 93
FM SECSTATE WASHDC
TO AMEMBASSY KIGALI
INFO AMEMBASSY BONN
AMEMBASSY BRUSSELS
AMEMBASSY BUJUMBURA
AMEMBASSY DAR ES SALAAM
AMEMBASSY KAMPALA
AMEMBASSY KINSHASA
AMEMBASSY PARIS
TREASURY DEPT WASHDC 0000
USMISSION USUN NEW YORK
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LIMITED OFFICIAL USE STATE 385341
E.O. 12356: N/A
TAGS: ECON EFIN IBRD RW
SUBJECT,: AMBASSADOR RAWSON'S CONSULTATION WITH WORLD BANK
1. SUMMARY. ON DECEMBER 22, AMBASSADOR DAVID RAWSON MET
WITH WORLD BANK OFFICIALS PRIOR TO HIS DEPARTURE FOR
RWANDA. AS THE COUNTRY ENTERS A NEW PEACE CONSOLIDATION
PHASE, THE BANK IS COMMITTED TO REACHING AN AGREEMENT
WITH THE GOVERNMENT ON A NEW MACROECONOMIC FRAMEWORK IN
AN EFFORT TO BRING RWANDA'S ADJUSTMENT PROGRAM BACK ON
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UNITED STATES DEPARTMENT OF STATE
REVIEW AUTHORITY: SHARON E AHMAD
DATE/CASE ID: 08 SEP 2003 200301834
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TRACK. HOWEVER, COMPLETING NEGOTIATIONS WITH THE IFIS ON
A SECOND POLICY FRAMEWORK PAPER (PFP) IS CONTINGENT ON
THE GOVERNMENT'S COMMITMENT AND UPFRONT ACTION TO REDUCE
ITS FISCAL DEFICIT AND DEVALUE ITS CURRENCY. THE BANK
HOPES TO RETURN TO RWANDA IN JANUARY, AND TOLD AMBASSADOR
RAWSON THAT ONCE THEY COMMIT TO A MACROECONOMIC
FRAMEWORK, THE BANK PLANS TO RECONVENE A SPECIAL DONORS
MEETING TO REASSESS AND DISCUSS RWANDA'S EXTERNAL
FINANCING REQUIREMENTS. THE BRIEFING ALSO COVERED ISSUES
RELATED TO RESETTLEMENT, INTRA-REGIONAL TRADE AND THE
ENVIRONMENT. AMBASSADOR RAWSON TOLD BANK OFFICIALS THAT
THE USG WAS COMMITTED TO SUPPORTING THE PEACE PROCESS,
WITHIN A DEMOCRATIC FRAMEWORK. HE HIGHLIGHTED THE NEED
TO FOCUS MORE ON DEVELOPMENT EFFORTS IN ORDER TO HELP
SOLIDIFY NATIONAL RECONCILIATION. END SUMMARY.
2: ON DECEMBER 22, MESSRS. JEROME CHEVALLIER, NAT
COLLETA, DAVID BERK AND MS. HERMINIA MARTINEZ OF THE
WORLD BANK GAVE A FORTY-FIVE MINUTE BRIEFING TO
AMBASSADOR RAWSON. ALSO ATTENDING WERE REPRESENTATIVES
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FROM THE USED'S OFFICE, STATE AND TREASURY. MOST OF THE
PRESENTATION WAS MADE BY CHAVALLIER, WHO INFORMED THE
AMBASSADOR THAT THE RECENT IMF/WORLD BANK DISCUSSIONS
WITH A JOINT DELEGATION OF THE RWANDAN GOVERNMENT (GOR)
AND RWANDAN PATRIOTIC FRONT (RPF) WENT WELL. THE
DISCUSSIONS FOCUSED ON REVISING THE PFP AND THE STEPS
THAT NEED TO BE TAKEN TO RESUME NEGOTIATIONS. WHILE THE
GOVERNMENT IS RECEPTIVE TO IMF AND. WORLD BANK
SUGGESTIONS, THE BANK STAFF NOTED THAT IT IS FACING MANY
CONSTRAINTS, AND HAS PIVOTAL DECISIONS TO MAKE SOON.
3. GOR/RPF JOINT DELEGATION: CHEVALLIER NOTED THAT THIS
WAS THE FIRST TIME THE BANK HAD HAD THE CHANCE TO TALK TO
BOTH THE GOR AND RPF. HE SAID THE TWO RWANDAN
DELEGATIONS HAD NOT REALLY HAD A CHANCE TO DISCUSS
RELEVANT ISSUES TOGETHER BEFORE THE TRIP. SO THE BANK
LET THE TWO SIDES MEET WITH EACH OTHER ALONE ON BANK
PREMISES FOR TWO OR THREE DAYS, BEFORE THE JOINT
DELEGATION BEGAN ITS DISCUSSIONS WITH THE BANK.
CHEVALLIER SAID THE RPF DELEGATES WERE MUCH MORE
ECONOMICALLY SOPHISTICATED THAN THEIR GOR COUNTERPARTS,
AND MORE PRIVATE SECTOR ORIENTED.
4.
UPFRONT ECONOMIC ACTIONS: THE IMF/IBRD ECONOMIC TEAM
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TOLD THE RWANDAN DELEGATION THAT THE RESUMPTION OF THE
PFP NEGOTIATIONS WOULD BE CONTINGENT ON THE GOVERNMENT'S
TAKING SOME "TOUGH MEASURES" UPFRONT TO REDUCE THE FISCAL
DEFICIT AND DEVALUE THE CURRENCY. RWANDA'S ADJUSTMENT
PROGRAM WAS DERAILED BY A DROP IN COMMODITY EXPORT PRICES
AND THE WAR, WHICH LED TO THE BUILD UP OF MILITARY
SPENDING. MILITARY. EXPENDITURES, WHICH REACHED 8 PERCENT
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OF GDP IN 1992, CONTINUED UNABATED IN 1993, CROWDED OUT
DEVELOPMENT EXPENDITURES. AND JEOPARDIZED THE SOCIAL
SAFETY NET UNDERLYING THE ADJUSTMENT PROGRAM. THE BANK
TOLD AMBASSADOR RAWSON THAT IT WILL MOVE QUICKLY ONCE THE
GOVERNMENT TAKES CONCRETE STEPS TO FIX THE SERIOUS FISCAL
IMBALANCE. AMONG POSSIBLE ACTIVITIES WHICH THE BANK
COULD UNDERTAKE ONCE THE RWANDAN AUTHORITIES RESUME A
CREDIBLE ADJUSTMENT POSTURE IS RELEASE OF THE SECOND
TRANCHE (USD 35 MILLION) OF THE FIRST STRUCTURAL
ADJUSTMENT CREDIT (SAC), DELAYED BY THE GOVERNMENT'S
INABILITY TO MAINTAIN A SATISFACTORY MACROECONOMIC
FRAMEWORK AND MEET THE SPECIFIC TRANCHE CONDITIONS.
CHAVALLIER ALSO MENTIONED DRAWING ON CREDITS SUCH AS THE
FINANCIAL AND AGRICULTURAL SECTORS ADJUSTMENT CREDITS. A
BANK TEAM IS EXPECTED TO VISIT RWANDA IN JANUARY TO
REAPPRAISE THE AGRICULTURAL SECTOR. IT IS LIKELY THAT
THE FINANCIAL SECTOR CREDIT WILL NEED RENEGOTIATION AS
WELL. THE BANK ALSO SUPPORTS HAVING A UNDP-LED
ROUNDTABLE ON RWANDA TO ASSESS HUMANITARIAN (INCLUDING
DEMOBILIZATION) NEEDS, BUT ONLY AFTER THERE IS A
COMPREHENSIVE MACROECONOMIC AGREEMENT AND FUNDING IS
FOUND TO SUPPORT IT. THE BANK SIMPLY WANTS TO MAKE SURE
THERE ARE NO CONFLICTS BETWEEN UNDP'S HUMANITARIAN
EFFORTS AND THE IMF/IBRD MEDIUM-TERM ECONOMIC PROGRAM.
AMBASSADOR RAWSON SHARED THE BANK'S CONCERNS AND WELCOMED
THE CHANCE TO SEE THE "BIG PICTURE" FIRST.
5. EXTERNAL FINANCING REQUIREMENTS AND PROSPECTS:
RWANDA'S SHORT TERM ECONOMIC AND FINANCIAL PROSPECTS
HINGE ON THE ABILITY OF THE TRANSITIONAL GOVERNMENT TO
MAINTAIN PEACE AND TO REVITALIZE THE ADJUSTMENT PROCESS.
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ONCE AN AGREEMENT HAS BEEN REACHED WITH THE BANK AND THE
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FUND ON A NEW MACROECONOMIC FRAMEWORK, THE BANK NOTED
THAT RWANDA'S EXTERNAL FINANCING REQUIREMENT WILL BE
REASSESSED AND DISCUSSED AT A SPECIAL DONORS MEETING ON
RWANDA WHICH THE BANK IS COMMITTED TO RECONVENE.
6. RESETTLEMENT OF REFUGEES: AMONG THE MANY CHALLENGES
IS THE ARDUOUS TASK OF RESETTLING UP TO 2 MILLION
REFUGEES WHICH SOME PROPOSED TO RESETTLE IN THE AKAGERA
PARK. THE BANK NOTED THAT REINTEGRATION EFFORTS ARE JUST
TOO MASSIVE, EMPHASIZING THAT THE IDEA OF. CONCENTRATING
ALL REFUGEES IN ONE AREA COULD BE AN UNWORKABLE SOLUTION
AND MAY CAUSE PROBLEMS FOR THE GOVERNMENT. CHAVALLIER
NOTED THAT THE RPF WAS PARTICULARLY. INTERESTED IN
ASSISTANCE TO THE REFUGEE REPATRIATION EFFORTS (WHICH HE
NOTED WOULD HELP BOLSTER THE RPF'S ELECTORAL STRENGTH).
7. DEMOBILIZATION: BANK TECHNICAL SPECIALIST NAT
COLLETA, WHO TOOK THE LEAD IN ASSISTING UGANDA WITH ITS
SUCCESSFUL DEMOBILIZATION PROGRAM, IS EXPECTED TO HEAD A
BANK MISSION TO RWANDA AT THE END OF JANUARY. COLLETA
SAID THAT A WORKING PAPER ENTITLED, "DEMOBILIZATION AND
REINTEGRATION OF MILITARY PERSONNEL: THE EVIDENCE FROM
EIGHT COUNTRY CASE STUDIES" HAS BEEN SHARED WITH RWANDA
GOVERNMENT OFFICIALS. (NOTE THAT THIS DOCUMENT IS NOT A
FORMAL PUBLICATION OF THE BANK AND HAS A RESTRICTED
DISTRIBUTION). COLLETA SAID HE UNDERSTOOD THE REGIONAL
SENSITIVITIES INVOLVED AND WAS CAREFUL NOT TO MENTION HIS
EXTENSIVE WORK IN UGANDA AT HIS FIRST MEETING WITH THE
GOR AND RPF. THE BANK APPEARS TO HAVE A STRONG DESIRE TO
CREATE A PROGRAM THAT MEETS RWANDA'S NEEDS, AS CONDITIONS
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ARE VERY DIFFERENT THAN IN UGANDA. THE BANK PLANS TO
SEND LETTERS TO KEY DONORS INVITING THEM TO PARTICIPATE
IN SOME FASHION IN THE JANUARY DEMOBILIZATION MISSION,
EITHER AS AN ACTIVE PARTICIPANT OR BY SIMPLY ATTENDING
DISCUSSION MEETINGS.
8. BUJUMBURA: MINIMIZED CONSIDERED.
TARNOFF
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