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Cablegate: Goss Budget Shows Need for Donor Action

VZCZCXRO1269
PP RUEHROV
DE RUEHKH #0248 0500934
ZNR UUUUU ZZH
P 190934Z FEB 07
FM AMEMBASSY KHARTOUM
TO RUEHC/SECSTATE WASHDC PRIORITY 6166
INFO RUCNIAD/IGAD COLLECTIVE

UNCLAS KHARTOUM 000248

SIPDIS

SIPDIS
SENSITIVE

DEPT FOR AF/SPG, AF/EPS, EB/IFD, AND EB/ESC
DEPT PLS PASS USAID FOR AFR, AND ALSO PASS USAID

E.O. 12958: N/A
TAGS: PREL PGOV EFIN ECON EAID SU
SUBJECT: GOSS BUDGET SHOWS NEED FOR DONOR ACTION

REF: A) STATE 018712 B) Khartoum 00211

1. Summary: The GOSS 2007 Budget highlights the need for donor
action to assist Southern Sudan with budgeting, civil service
administration, and cash management in order to assure success of
the CPA. The budget also exposes the problem of weak legislative
oversight of the military. The GOSS needs to impose greater fiscal
discipline. Donors should use the Sudan Consortium in late March,
and any potential IGAD meeting in the near future, to coordinate
assistance to the GOSS to address these issues. USAID is already
providing technical assistance to the GOSS, but other donors need to
come on board. End Summary.

2. The Comprehensive Peace Agreement (CPA) seeks to make unity
attractive to the South. For this to happen, the GOSS must deliver
a 'peace dividend' of improved infrastructure and government
services. The GOSS 2007 budget highlights several areas where the
GOSS is facing substantial challenges accomplishing this.

Transparency and Honesty
-------------------------

3.(SBU) The narrative portion of the GOSS budget furnishes honest
statements of problems the GOSS faces. The GOSS needs to get a
handle on these problems early on in order to make the CPA function
as intended. There are three especially important concerns: numbers
of government personnel, cash management, and, military oversight.

Government Employment
---------------------

4.(SBU) In section 4.1 of the budget, the legislative assembly
expressed concern about the projected personnel levels and the
related salaries and wages. The GOSS intends to reduce government
personnel from 116,691 to 64,962 (a 44 percent reduction). But even
with this decrease, expenses for salaries are projected to nearly
triple from 2006 to 2007. Whether the planned decrease will occur
remains to be seen. If a disproportionate part of the budget is
taken for personnel costs, less is available for investment in
infrastructure. Ideally, the budget should be compiled in a way that
budgets both number of positions and dollars. Each Ministry should
have a ceiling on positions, and the dollar budget should be linked
to that number.

Cash Management Needs Strengthening
------------------------------------

5. (SBU) For 2007, projections are that the GOSS will receive
roughly USD 1 billion in oil revenues and another USD 1.4 billion in
non-oil revenues will flow through the GOSS to the 10 southern
states. The budget makes numerous references to reserves, bank
accounts, transfers and so forth, yet overall, the budget does not
evidence a coordinated control of these funds. Projected 2007
revenues are USD 160 million less than expenditures, yet the budget
does not mention borrowing. However recent reports in the press
state that the GOSS will borrow USD 250 million from Emirates Bank.
The current arrangements do not seem to provide sufficient
oversight. Donors should address the question of how to work with
the GOSS to improve cash management.

Legislative Oversight of Military Lacking
------------------------------------------

6.(SBU) In section 4.1.1 of the budget, the legislative assembly
bluntly stated, "As the military needs are much larger than our
budget could provide, Southern Sudan Legislative Assembly therefore,
urges the Commander in Chief of the SPLA to SOLICIT further
resources from friendly nations to meet the SPLA needs." This is
effectively an instruction to the military to seek off-budget,
non-legislated funding. It removes legislative oversight from the
budget of the military. Successful implementation of the CPA
requires that the legislative assembly play a proper oversight role.


7. (U) Action Request: The Sudan Consortium, scheduled for March
20-21, and a possible IGAD meeting (ref A) provide an opportunity to
strengthen the CPA. USAID is already working to address the problems
cited in paras 4 and 5 by providing technical assistance to the GOSS
Ministry of Finance and committees of the Southern Sudan Assembly.
Other donors should be brought onboard and push for the GOSS to
impose greater fiscal discipline. Specific actions should include
getting agreement from other donors for the GOSS to adopt a
transparent, non-chapter budget, and to work with the Ministry of
Finance to impose discipline in cash management. Embassy requests
that the Department incorporate these topics into preparations for
the upcoming meetings.

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