***image1:Left***Representatives of the World Bank who met with Eritrean government officials last week inform our sources that the government of Eritrea has rejected a critical Country Economic Memorandum (CEM) prepared by the Bank.   Among its findings, the CEM reports that the government of Eritrea is hindering the growth of the private sector and monopolizing the economy.  The CEM also cites the government�s public expenditure priorities such as the Intercontinental Hotel and the Massawa Airport as wasteful depletions of the country�s scarce resources.

President Isaias Afwerki and his new team of economist were angered by the World Bank�s characterization of these projects as �white elephants.�

The World Bank reserved its harshest criticism for the government�s delay in demobilizing tens of thousands of Eritrea�s armed forces.  The Eritrean government responded that it would �soon� launch the first phase by demobilizing seventy thousand Eritreans.   Officials of the World Bank reportedly warned the government �very bluntly� that the Bank would stop payment on the partial demobilization it is funding if �a single dollar is spent elsewhere.�

Our source, who is a long-time admirer of Eritrea and its government, reports, "It is sad...but the World Bank has given up on Eritrea."