Cablegate: French Approach to Financing for Development

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RR RUEHAG RUEHDF RUEHIK RUEHLZ
DE RUEHFR #5184 2130947
ZNR UUUUU ZZH
R 010947Z AUG 06
FM AMEMBASSY PARIS
TO RUEHC/SECSTATE WASHDC 9981
INFO RUCNMEM/EU MEMBER STATES
RUEATRS/DEPARTMENT OF TREASURY WASHDC

UNCLAS PARIS 005184

SIPDIS

SENSITIVE
SIPDIS

STATE FOR EB, EUR/WE
STATE PASS USAID

E.O. 12958: N/A
TAGS: EAID EFIN EIND FR
SUBJECT: FRENCH APPROACH TO FINANCING FOR DEVELOPMENT

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1. (SBU) Ministry of Economy Diplomatic Counselor Gilles
Mentre told Econoff July 28 that France has taken steps to
respond to criticism that its aid programs unjustly inflate
aid figures with debt cancellation numbers. France has
devised a scheme that ties debt cancellation more directly to
poverty eradication projects. For example, the 500 million
euro (USD 627 million) agreement signed in June with Cameroon
is a Debt Development Contract, in which France agrees to go
cancel more debt than that agreed upon in the Paris Club
under the Heavily Indebted Poor Countries (HIPC) initiative,
provided Cameroon spends the money on education, environment,
health or infrastructure. To ensure that this happens,
Mentre said France will continue to bill Cameroon on its
public debts as payments fall due. Cameroon is expected to
make the payments, but then France will immediately return
the funds to Cameroon for its designated projects. This
method will ensure the transparency of expenditures for those
projects. It also ensures the &additionality8 and
&conditionality8 principles of development assistance.

2. (U) The Finance Ministry oversees about a third of the
French budget (not counting debt cancellations) of 3 billion
euros for development assistance due to its responsibility
for multilateral institutions like the World Bank, while the
Development Ministry controls the rest. Mentre professed a
personal interest in development issues, since he helped
draft the Landau report on financing for development, which
was one of the reports used to justify France adopting a tax
on airplane tickets. He noted that the airfare tax is
already in place, and per a meeting he had just had at the
Prime Minister,s office, France should make its first
medical purchases with the collected funds in October 2006
through the new international drug purchase facility
(UNITAID). France intends to continue promoting the airfare
tax with other countries, since it views the tax as both a
market-neutral and a lucrative source of additional revenue.

3. (SBU) COMMENT: The French approach, while conceptually
similar to the U.S. Millenium Challenge Corporation, differs
in that it focuses on making sure aid gets spent as planned
on developing countries, projects, rather than on making
sure that the money is well spent. It also encourages France
to avoid truly 100 percent debt cancellations for HIPC
countries, since that would mean losing its off-budgetary
approach to increasing its development assistance statistics.

Please visit Paris' Classified Website at:
http://www.state.sgov.gov/p/eur/paris/index.c fm

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