Cablegate: Somalia - What We Know About the Tfg's Finances

VZCZCXRO6201
OO RUEHDE RUEHROV RUEHTRO
DE RUEHNR #2398/01 3271729
ZNR UUUUU ZZH
O 231729Z NOV 09
FM AMEMBASSY NAIROBI
TO RUEHC/SECSTATE WASHDC IMMEDIATE 1622
INFO RUCNSOM/SOMALIA COLLECTIVE IMMEDIATE
RHEHNSC/NSC WASHDC IMMEDIATE
RUEKDIA/DIA WASHDC IMMEDIATE
RUEAIIA/CIA WASHDC IMMEDIATE
RHMFIUU/CJTF HOA IMMEDIATE
RUZEFAA/CDR USAFRICOM STUTTGART GE IMMEDIATE
RUZEFAA/HQ USAFRICOM STUTTGART GE IMMEDIATE
RHMCSUU/CDR USCENTCOM MACDILL AFB FL IMMEDIATE

UNCLAS SECTION 01 OF 02 NAIROBI 002398

SENSITIVE
SIPDIS

DEPT FOR AF/E AND A/S CARSON

E.O. 12958: N/A
TAGS: PGOV EFIN ECON KDEM EAID SO
SUBJECT: SOMALIA - WHAT WE KNOW ABOUT THE TFG'S FINANCES

1. (SBU) Summary: The Somalia Transitional Federal
Government's (TFG) finances are generally funneled through
four accounts that we are aware of: a UN trust fund, the
PriceWaterhouseCoopers (PWC) mechanism, the Central Bank, and
a government account at the Somali money transfer company
Dahabshil. The TFG seems to be relying at the moment on the
PWC mechanism, to which the U.S., Chinese, and the Libyans
have given over $2 million, and on Dahabshil, where Mogadishu
port revenues ranging from $600,000 to $1.3 million per month
are deposited. The Dahabshil account is the most opaque
account although steps, including the recent formation of an
oversight committee, are being taken to improve its
transparency. End summary.

2. (SBU) According to the UN, the TFG Finance Ministry, and
other officials, the TFG relies on four separate accounts
through which both donor money and government revenue is
flowing. The Central Bank of Somalia holds U.S. Dollar and
Somali shilling cash, and also receives funds via an account
at commercial bank Standbic (the East African division of
South Africa's Standard Bank). The Central Bank also has a
SWIFT international banking code. The Bank receives its U.S.
dollar cash via money transfer companies (known as hawalas).
When the Central Bank requires cash from one of the TFG's
accounts, hawalas electronically receive the money in
Mogadishu and deliver the cash (for a hefty fee) under tight
security. The hawalas in turn maintain reserves by flying
cash into Mogadishu from their headquarters and branches in
northern Somalia and the Gulf.

3. (SBU) The Government of Norway will soon test the
reliability of the Central Bank and Health Ministry by
depositing $100,000 for use on a small health initiative and
infrastructure renovations at the Health Ministry and its
environs. The Norwegian Embassy believes that the money will
be used responsibly. If that proves to be the case, the
Norwegian Foreign Ministry plans to undertake further funding
via the Central Bank.

4. (SBU) Second, the United Nations Political Office for
Somalia (UNPOS) maintains a trust fund for donor
contributions to TFG security institutions. That trust fund
has received $800,000 in funds generated during the April
Brussels TFG security pledging conference, according to the
UN. Donors to the fund include Norway, Turkey and the
Philippines. Disappointingly, to date UNPOS has used none of
the money for direct assistance to the security services.
According to the UN, the money has been used instead for
Joint Security Committee expenses and to fund a conference of
former Somali military officers in Washington. The remainder
may be used to host a reconciliation workshop for Somali
clerics, and to pay the trust fund's sixteen percent overhead.

5. (SBU) In June, the TFG entered into a contract with
PriceWaterhouseCoopers to manage donor funds. Under the
agreement, PWC is obliged to certify that contributions are
being used appropriately. PWC charges a four-percent
commission for its services. So far China ($500,000) and the
United Stat}73gSVQUQIj}QLdkey into the PWC
mechanism. According to the Chinese Embassy and a TFG Finance
Ministry official, the Chinese money was used to re-pay a
Somali contractor for provision of food and water to TFG
troops. The Chinese Ambassador to Kenya told SRSG
Ould-Abdullah that a second donation was under consideration.
U.S. money is earmarked for vetted troops' salaries, food and
equipment.

6. (SBU) Remarkably, the TFG itself has also deposited $1.6
million in cash given by Libya into the PWC mechanism, a sign
the government may be serious about accounting for large cash
donations. The TFG instructed PWC to transfer $1.37 million
of that money to the Somali Central Bank on November 16 to
provide the following one month's operating funds for the
Transitional Federal Institutions:

--President's Office $95,000
--Prime Minister's Office $72,000
--Parliament Speaker's office $75,000
--Parliamentarian's Salaries $660,000
--$12,000 for each of
39 ministries $468,000

NAIROBI 00002398 002.2 OF 002

7. (SBU) Per the agreement, PWC, working with the Treasury
Ministry, Central Bank, and Accountant General's office, is
monitoring disbursement of the funds. In addition, the
government has publicized the infusion of money in order to
dissuade corrupt TFG officials from denying the TFG's debtors
and civil servants payments to which they are entitled. We
are urging the TFG to gain Libya's permission to publicly
report on PWC's certification process in order to build the
confidence of potential donors.

8. (SBU) A TFG account at the trusted Somali hawala
Dahabshil may be the most important government account. In
response to widespread graft at the Port of Mogadishu,
Sharif's government decreed that the port's customs revenue
would be deposited in a TFG account at Dahabshil. The
decision was widely applauded as an attempt to reform the
port's notoriously leaky revenue collection process. TFG
officials tell us that only a few senior government ministers
have the authority to withdraw money from that account. Once
the Central Bank has opened an office at the port, the
officials say, all port revenues will flow through the
Central Bank only. (Note: In the interim, the TFG on November
22 announced that it had formed a ten-person committee that
was charged with monitoring the efficiency of port
operations. Among the committee's responsibilities, is
working closely with revenue collection officials to improve
transparency. End note.) We have no information on the
account's current balance but, according to a well-informed
TFG official, the port generated an average of $600,000 per
month from June to February, and $1.3 million per month from
March to May. The variance in monthly revenue is due to the
effect of seasonal winds on ship traffic into the Mogadishu
port.

9. (SBU) In October, the TFG released an estimated budget for
its normal operations. The budget justifies ministry outlays
by listing wage costs, recurring costs, fuel, rent and other
expenses. (Comment: Despite an expected variation in the
ministries' expenses, each ministries' budget totals
precisely $12,000, which suggests that the budget does not
truly reflect the ministries' actual operational needs. End
Comment). The TFG estimates the armed forces' operational
costs at $1.8 million per month. The budget document does not
specify the size of the force that is to be funded by the
projected budget.

10. (SBU) Comment: The current TFG is, perhaps belatedly,
more transparent about its finances than its predecessors.
There are nevertheless the inevitable rumors, a few of which
seem credible, of other hidden government accounts, as well
as of extremely large individual accounts in the Gulf and
elsewhere. The most liquid account, and the one we know the
least about, is the Dahabshil account into which port
revenues are deposited. It is not clear even to many insiders
who has access to that account, and where that money is
currently going, but the projected opening of a Central Bank
office in the port might ultimately shed more light on the
TFG's use of port revenues.
RANNEBERGER

© Scoop Media