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Cablegate: President Wade Fires Budget Minister After Revelations Of

VZCZCXRO3401
PP RUEHMA RUEHPA
DE RUEHDK #1011/01 2461709
ZNR UUUUU ZZH
P 021709Z SEP 08
FM AMEMBASSY DAKAR
TO RUEHC/SECSTATE WASHDC PRIORITY 1061
INFO RUEHAD/AMEMBASSY ABU DHABI PRIORITY 0062
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC
RUEHLMC/MCC WASHDC
RUEHZK/ECOWAS COLLECTIVE

UNCLAS SECTION 01 OF 02 DAKAR 001011

SIPDIS
SENSITIVE

DEPT FOR AF/W, AF/EPS, EB/IFD
ABU DHABI FOR TREASURY/GRIFFERTY
TREASURY FOR RHALL AND DPETRES

E.O. 12958: N/A
TAGS: EFIN ECON PGOV ETRD EAID KCOR SG
SUBJECT: PRESIDENT WADE FIRES BUDGET MINISTER AFTER REVELATIONS OF
IMPROPER PAYMENTS

REFS: A. DAKAR 661, B. DAKAR 813

DAKAR 00001011 001.2 OF 002


1. (SBU) Summary: During an August 7 cabinet meeting, President
Wade fired Budget Minister Ibrahima Sarr and named Mamadou Abdoulaye
Sow, a career Senegal Treasury official, as the new Minister. The
Presidential decree to remove Sarr -- which came just hours after
Wade met the IMF Resrep -- followed an internal audit that revealed
the disbursement of unauthorized and unjustified funds to several
Ministries and Agencies. The appointment of the respected
technocrat Sow as Budget Minister should strengthen the hand of
Finance Minister Diop in his efforts to assure that all GOS
financial commitments are reflected in the government's actual
budget. End Summary.

A DECREE TO CLEAN UP TREASURY "BLACK HOLE"
------------------------------------------
2. (U) On August 7, President Wade fired his Minister of Budget,
Ibrahima Sarr, for committing Senegal's Treasury to finance
unbudgeted expenditures and taking on other funding obligations in
excess of CFA 109 billion (USD 259 million). According to
Senegalese law, such extra-budgetary disbursements require specific
approval by the National Assembly. The decision to fire Sarr came
after an audit carried out by the Ministry of Finance's Inspectors
General division, which had been requested by Minister of Finance
Abdoulaye Diop and IMF Resrep Alex Segura in reaction to Senegal's
increasing budget deficit and revelations of a larger than reported
stock of unpaid invoices owed to private suppliers and contractors.
Though reports differ on the total amount of unjustified expenses,
with some claiming it could be as high as CFA 450 billion (USD 1.07
billion), Minister Diop publically stated that the situation was
"manageable," but he declined to comment directly on the size of the
"financial black hole."

3. (SBU) Sources from the Ministry of Finance claimed that Sarr
took a significant portion of funds previously obligated to pay
private suppliers and also committed additional unbudgeted
expenditures to finance the extra-budgetary spending of a number of
ministries and national agencies. Sarr apparently planned to pay
the private suppliers with the proceeds from the sale of bonds
issued in June 2008. Unfortunately, as reported in Ref B, the June
bond issuance fell short with only CFA 65 billion (USD 155 million)
purchased out of the total offering of CFA 100 billion (USD 238
million), and, in the end, the money was not used to pay the
arrears. Our sources confirmed that out of the CFA 65 billion
collected from the bond sale, CFA 35 billion was used to help with
the recapitalization of the state electricity company Senelec, CFA
10 billion was for food subsides, and the remaining CFA 20 billion
for the government operating budget, including the payment of civil
service salaries.

4. (SBU) According to MinFin sources, ANOCI (the National Agency
for the Organization of the Islamic Conference, which is run by
President Wade's son Karim Wade) was a major recipient of these
extra-budgetary expenses, receiving perhaps as much as CFA 200
billion (USD 476 million), purportedly for costs associated with the
infrastructure projects leading up to the March 2008 OIC Summit in
Dakar. The Ministry of Infrastructure and Transportation received
CFA 12 billion (to support infrastructure projects), and the
Ministry of Interior CFA 3 billion (for the OIC Summit and the 2007
presidential and legislative elections). The Ministries of
Education, Habitat and Urban Development, Health, Water/Hydrology,
Environment, Handicraft, and Maritime Economy all signed contracts
that did not conform to Senegal's formal budget. President Wade
reportedly ordered the Ministries which received these irregular
funds -- but not ANOCI -- to submit explanations and justifications
of their actions.

APPOINTMENT OF A TREASURY VETERAN
---------------------------------
5. (SBU) At the same August 7 cabinet meeting, President Wade
announced without comment the appointment of Abdoulaye Sow as the
new Minister of Budget. Sow, who is known strictly as a technocrat,
is reported to have been the Finance Minister's choice. Sow will
likely play a carefully subservient role to Minister Diop, unlike
Sarr, who reportedly acted without the MinFin's consent on the
extra-budgetary expenditures, and perhaps in other areas. [Note:
The budget portfolio is actually designated as a Junior Ministry
under the Finance Ministry. End note.]

6. (SBU) Bio note: Abdoulaye Sow is a 30-year treasury service
"veteran" who is among the most senior career civil servants at the
Ministry of Finance. Sow graduated from the National School of
Administration and Magistracy with a degree in economics. He was

DAKAR 00001011 002.2 OF 002


most recently the Finance Minister's Director General of the
Treasury and prior to that was the Director of Public Accounting.

COMMENT
-------
7. (SBU) The lack of a complete audit of extra-budgetary
commitments and the need to formulate a plan for the payment arrears
have been some of Senegal's most troublesome issues for the IMF (and
donors). Authorizing the audit was a very good first step.
Dismissing Sarr was probably also necessary. In an August 25
meeting with the Ambassador (reported Septel), Finance Minister Diop
expressed his apparent relief that Sarr had been dismissed. While
Sarr was a respected Ministry of Finance official, he is also
reportedly close to Karim Wade and ruling party politicians. To the
extent that Sarr was able to operate outside of MinFin oversight,
the political pressure on him to authorize payments for pet projects
for ministries would have been intense. The next question is
whether all the firms who signed contracts with the various
ministries and agencies, many knowing that the contracts did not
have Ministry of Finance approval, will be paid. A large number of
these firms are facing serious liquidity problems as a result of the
arrears, and this fiscal knot could continue to have a negative
impact on Senegal's GDP growth and business climate for months to
come.

BERNICAT

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