VZCZCXRO0600
PP RUEHMA RUEHPA
DE RUEHRY #0829 2001402
ZNR UUUUU ZZH
P 191402Z JUL 07 ZDK RUEHST 8245 2361410
FM AMEMBASSY CONAKRY
TO RUEHC/SECSTATE WASHDC PRIORITY 1409
INFO RUEHZK/ECOWAS COLLECTIVE PRIORITY
RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY UNCLAS CONAKRY 000829 
 
SIPDIS 
 
SIPDIS 
 
TREASURY FOR OFFICE OF AFRICAN NATIONS 
 
E.O. 12958: N/A 
TAGS:        
SUBJECT: GUINEA'S FY07 BUDGET PROPOSAL AIMED AT STABILIZING 
ECONOMY 
 
 
 1.  (SBU) SUMMARY.  In Guinea's FY07 proposed budget, 
submitted to the National Assembly on July 6, the Kouyate 
administration identified increased spending for public 
infrastructure and rural development as priorties for 
stabilizing the economy.  It also called for an increase in 
election spending and tightened budgetary controls.  The 
administration projects a budget deficit of $269 million, 
which is roughly 5% of Guinea's annual GDP.  Changes in the 
key economic indicators used in developing the budget, 
including higher inflation and a stronger currency, mean that 
the budget figures will likely be recalculated.  However, the 
fact that Guinea is undergoing a formal budget process is 
positive and could signal a return to normalization.  END 
SUMMARY. 
 
 2.  (SBU) On July 6, Prime Minister Kouyate submitted his 
administration's FY07 budget during a Special Session of the 
National Assembly.  In the budget narrative, the government 
identifies fighting fraud and tax evasion, reinforcing border 
controls, and heightened responsibility for recovery of 
receipts by the ministries as tools to help balance the 
budget. 
 
 3.  (SBU) The budget projects total receipts of approximately 
$609,000,000 and total expenditures of about $878,000,000, 
leaving a projected deficit of $269,000,000 (representing 
approximately 5% of GDP).  The government proposes covering 
the deficit by authorizing the Ministry of Finance to accept 
gifts, conducting external borrowing, negotiating a 
rescheduling of external debt,  deferring payments of 
domestic arrears, reducing external arrears, changing 
treasury charges, non-bank loans, and finally, undefined 
"other means."  The last category includes a possible 
suspension of service of the external debt.  The budget 
calculations assume a GDP growth rate of 1.5%, inflation of 
24%, a GnF exchange rate of 4,350 to 1, and annual external 
debt service of $195,000,000.  (Note - These figures are 
outdated.  The GoG currently reports inflation at 36% while 
the exchange rate is 3,500 to 1). 
 
 4.  (SBU) The budget also calls for almost $17 million in 
funding for elections, an increase of more than 600% over 
FY06.  This figure does not include the approximately $5.5 
million in election aid from the European Union. 
 
 5.  (SBU) Finally, the budget plan reduces foreign travel by 
government officials and institutes strict budget controls as 
additional ways to balance the budget.  (Note - the program 
budgeting process, another tool to help balance the budget, 
is scheduled to be implemented in FY08). 
 
 6.  (SBU) COMMENT.  The fact that a formal budget has finally 
been submitted is a positive step toward normalization and a 
possible return to a funded IMF program.  The approval of the 
budget by the National Assembly is close to a forgone 
conclusion.  However, since key economic indicators have 
changed significantly, it may need to be reevaluated.  The 
stronger exchange rate means that the external debt service 
will be less of a burden on the budget than assumed. 
However, this also means that exports will be more expensive 
and imports less so.  The higher inflation rate also cuts 
both ways, by calling into question the stated amounts for 
spending, while increasing tax revenue on inflated turnover. 
Meanwhile, the FY08 budget is currently scheduled to be 
submitted October 5.  END COMMENT. 
 
DKAEUPER 
 
 
 
KAEUPER