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Cablegate: Goss Finance Minister Outlines Plans, Needs for Assistance

VZCZCXRO1242
OO RUEHROV RUEHTRO
DE RUEHKH #0983/01 2380829
ZNR UUUUU ZZH
O 260829Z AUG 09
FM AMEMBASSY KHARTOUM
TO RUEHC/SECSTATE WASHDC IMMEDIATE 4320
INFO RUCNIAD/IGAD COLLECTIVE
RUEHGG/UN SECURITY COUNCIL COLLECTIVE
RHMFISS/CJTF HOA

UNCLAS SECTION 01 OF 02 KHARTOUM 000983

NSC FOR MGAVIN, LETIM
DEPT PLS PASS USAID FOR AFR/SUDAN
ADDIS ABABA ALSO FOR USAU

SENSITIVE
SIPDIS
E.O. 12958: N/A
TAGS: PGOV PREL PHUM PTER PINR KDEM MOPS ECON EFIN ENRG
SOCI, AU-1, UNSC, SU

SUBJECT: GOSS FINANCE MINISTER OUTLINES PLANS, NEEDS FOR ASSISTANCE
TO SE GRATION

1. (SBU) SUMMARY: In a meeting with Special Envoy Scott Gration, the
Government of Southern Sudan's (GOSS) Minister of Finance and
Economic Planning, David Deng Athorbei expressed serious concerns
regarding Southern Sudan's immediate financial challenges. Painting
a grim picture of the South's ongoing fiscal crisis, Athorbei said
that the GOSS needs a $500 million infusion of cash in both 2010 and
2011 to cover its costs. Athorbei expressed particular frustration
with the South's nearly depleted reserves of foreign exchange, and
he requested U.S. intervention in support of the Southern position.
Athorbei was confident that Southern Sudan's financial situation
will rebound should it secede in 2011. END SUMMARY.

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HIT HARD BY ECONOMIC CRISIS, FOREIGN CURRENCY NEARLY DEPLETED
------------

2. (SBU) Athorbei told Gration that the global economic crisis and
the GOSS's failure to set aside reserves had "crushed" Southern
Sudan, saddling it with an unsustainable deficit in operating costs.
The GOSS is responding in the short term, he said, by freezing
contracts, reducing spending, and cleansing public payrolls, as well
as undertaking other reforms agreed in the GOSS's compact with
donors. Athorbei told Gration that Khartoum has been trying to
undermine the South's efforts by cutting off its access to hard
currency and fomenting insecurity.

3. (SBU) The Bank of Southern Sudan's current reserves of hard
currency will last only through the end of October, Athorbei said.
The Central Bank of Sudan is violating the CPA, he claimed, by
refusing to provide the South's oil revenues in hard currency. The
National Congress Party, he said, has a "policy to starve us of
cash." The lack of hard currency is already preventing the South
from obtaining the bank guarantees needed for investment. Athorbei
rejected the idea that the Bank is obliged to provide foreign
exchange only for specific purchases, insisting that the South needs
to control its own money.

4. (SBU) Gration noted that the National Congress Party (NCP) and
the Sudan People's Liberation Movement (SPLM) had agreed to invite
the IMF to review the implementation of the CPA's central banking
system. Athorbei asked him to raise the issue with NCP in the
trilateral talks. (COMMENT: Different GOSS and SPLM officials have
communicated different positions to USG representatives on the
South's entitlement to the hard currency flowing from Sudan's oil
sales. This was the first time that an official has told the USG a
specific date by which the South's hard currency reserves would be
depleted. )

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THINKING OF THE FUTURE, BUT DESPERATE FOR CASH IN THE SHORT TERM
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5. (SBU) Athorbei also outlined his thinking on a longer-term
approach to promoting southern economic growth. His first target is
to ensure food security by promoting increased cultivation of
cereals and rice for sustenance as well as export and creating the
requisite supporting infrastructure. He reported several recent
trade missions to and from Southern Sudan. Athorbei also noted that
he was taking steps to strengthen government systems, including
ending his predecessor's practice of allowing businessmen to line
the halls of the ministry to queue for contracts.

6. (SBU) Asked about his top priority for assistance from the United
States, Athorbei responded that he needed $500 million in cash, in
both 2010 and 2011, to cover the government's operating costs.
"Short of that," he said, "we will crash." Athorbei was sanguine,
however, about the South's finances in the years after 2011. He
told Gration that secession, if it occurred, would allow the South
access to 100 percent of the revenue from southern oil and would
give it the opportunity to sell concessions in additional oil
production blocks. Continued wealth-sharing with the north would
not be politically possible after 2011, Athorbei argued. Only John
Garang could have persuaded the South to continue sharing its wealth
in the interest of facilitating "a clean divorce." (COMMENT:
Athorbei's confidence in the South's ability to immediately close
the financial gap after the referendum seems unjustified, given the
contentious debate over pipeline access that would undoubtedly
follow secession.)

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SKEPTICISM ON NORTHERN INTENTIONS, CONFIDENCE IN U.S. SUPPORT
----------

7. (SBU) Raising the subject of U.S. sanctions, Athorbei expressed

KHARTOUM 00000983 002 OF 002


doubt that Khartoum would "do anything good" if sanctions were
lifted, though he added that there should be a "right way" to make
sanctions smarter. He acknowledged that some in the South had been
made "jealous" by the perception of Washington's engagement with
Khartoum. Athorbei said that there remains a feeling on the street,
however, that the North will not mistreat the South again because
the U.S. will come to its aid. Athorbei added that he is confident
that the U.S. would not enter any agreement with the North that
would hurt the South.

8. (SBU) COMMENT: Athorbei's assessment of the South's financial
straits was grim, and his request for assistance stunning. The size
of the request is a powerful statement that Athorbei does not
believe the GOSS has brought its fiscal crisis under control, even
with the austerity measures agreed in the recent compact with
donors. Other GOSS officials were keenly aware that Gration was
meeting with Athorbei, but it was not immediately clear whether his
request - delivered off-the-cuff and in response to a question - had
been coordinated throughout the GOSS. END COMMENT.

WHITEHEAD

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