Ivory Coast nears default with World Bank

ABIDJAN, Ivory Coast (Reuters) -- The World Bank has written to the government of Ivory Coast saying new projects were being frozen because it is more than 45 days in arrears with payments, a bank official said on Wednesday.

The Bank has also warned that, in line with its regulations, disbursements would halt completely and its programmes in Ivory Coast effectively stopped if a payment due on September 1 was not made by the close of business on October 30.

A freeze on budgetary aid by major donors since the end of 1998 plus low commodity prices have strained public finances in the West African country, which is the world's biggest cocoa producer.

Until now the government has managed to make its World Bank payments within the grace period deadlines.

However, September was a particularly heavy month for debt service payments and government revenue has fallen as economic activity has slowed ahead of a presidential election on Sunday to restore the country to civilian rule after a December coup.

A finance ministry official confirmed that no arrangements had been made to make the September payments. Brady bond payments of some $36 million due on September 30 have not been made either, he added.

A total of around $27.5 million was due to the World Bank in two instalments on September 1 and 15.

Payments in various currencies totaling some $4.87 million were due on October 1 and a total of around $6.97 million on October 15. Neither has been made, the Bank official said.

Ivorian Finance Minister Mamadou Koulibaly said earlier this month that debt service was not his priority at present.

The ruling junta has made the payment of public sector wages its priority and said this week that October's salaries would be paid early, on Friday -- two days before the election in which junta leader General Robert Guei is a candidate.

Koulibaly said the government expected only 60 billion CFA francs ($78 million) in revenue in October while essential payments amounted to 120 billion. Wages amount to 42 billion.

The government was trying this week to raise extra funds by the sale to a commercial bank of around 10 billion CFA francs in debt owed to the Treasury by privatized palm oil company PALMCI, a source with knowledge of the deal said.

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