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Cablegate: National Assembly Approves 2010 Budget Without Splm;

VZCZCXRO7420
OO RUEHROV RUEHTRO
DE RUEHKH #1353/01 3380829
ZNR UUUUU ZZH
O 040829Z DEC 09
FM AMEMBASSY KHARTOUM
TO RUEHC/SECSTATE WASHDC IMMEDIATE 4826
INFO RUCNIAD/IGAD COLLECTIVE
RUEHGG/UN SECURITY COUNCIL COLLECTIVE
RHMFISS/CJTF HOA

UNCLAS SECTION 01 OF 02 KHARTOUM 001353

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 ECON EFIN KDEM KPKO SU
SUBJECT: NATIONAL ASSEMBLY APPROVES 2010 BUDGET WITHOUT SPLM;
CORRUPTION ENDEMIC IN GOS

1. (SBU) Summary: On November 16, the National Assembly approved the
national budget for 2010. Due to a continuing boycott of the
National Assembly by the Sudanese People's Liberation Movement
(SPLM) and other opposition parties, the National Congress Party
(NCP)and its allies unilaterally approved the budget. Allocation
for the 2010 election and referenda on southern independence is
significantly less than anticipated. A lack of funding for the
unity fund may indicate a lack of continued interest in making unity
attractive. Sudan's Auditor General earlier issued a report finding
financial embezzlement endemic in the Government of Sudan (GOS).
End summary.

2. (SBU) On November 16, Sudan's Minister of Finance and National
Economy Dr. Awad Ahmed Al-Jaz presented the FY 2010 budget (January
1-December 31, 2010). Despite criticism from the National
Democratic Alliance (NDA) and the absence of SPLM members at the
session, the NCP approved the budget using its mechanical majority
vote. The budget details 23.7 billion Sudanese Pounds (SDG) in
revenue, 32 billion SDG in expenses, and 8.3 billion SDG as a gross
deficit. (Note: The current exchange rate on November 24 was 1 USD
= 2.38 SDG. Total budget amounts denote approximately 10 billion USD
in revenue, 13.4 billion USD in expenses, and a deficit of 3.5
billion USD. End note.) Al-Jaz stated that the FY 2010 budget was
based on the following economic indicators:

-- The budget aims to achieve a growth rate of 6 percent and an
annual inflation rate of 9 percent.
-- Exports will increase revenues to 13.2 billion SDG, and imports
will increase expenditures by 8.7 billion SDG.
-- Sudan will become self-sufficient in the production of sorghum,
meat, rice, cement, edible oil, animal fodder and sugar.
-- Local wheat mills will produce 50 percent of Sudan's required
yearly supply of wheat.
-- Rehabilitation on the following rail lines will be completed:
Babanousa - Wau; Khartoum-Port Sudan;
Babanousa - Nyala; and Babanousa - Ed Daein.
-- Sudan will increase electricity production by 905 megawatts, and
construct 1704 km of transmission lines.

3. (U) Al-Jaz summarized the FY 2010 budget (in billions of SDG) as
follows:

-- Taxes 9.6
-- Grants 1.0
-- Oil revenues 10.5
-- Other revenues 1.5
-- Total Revenues 22.7

-- Current expenditures 21.4
-- Development expenditures 10.6
-- Total Expenditures 32.1

--------------------------------------------- -----
SECURITY SPENDING FAR EXCEEDS HEALTH AND EDUCATION
--------------------------------------------- -----

4. (U) Al-Jaz's report noted that the budget figures were prepared
according to the new Government Finance Statistics (GFS) code, which
mandates transparency and efficiency in allocation of resources as
required by the Comprehensive Peace Agreement (CPA). The FY 2010
budget allocated 6.5 billion SDG for defense and security forces,
491 million SDG for health, and 541 million SDG for education.
According to the budget, the National Intelligence and Security
Services (NISS) was allocated 1.15 billion SDG.


------------------------------------
LESS FOR UNITY, ELECTIONS, REFERENDA
------------------------------------

5. (SBU) The FY 2010 budget allocated only 6 million SDG for the
Unity Support Fund, vice FY 2009 allocation of 366 million SDG. The
budget also provides 790 million SDG for the election and referendum
commissions, 12.2% less than FY 2009. Specifically the budget
allocates the following:

-- National Elections Commission 1.4 million SDG
-- Southern Referendum Commission 720 thousand SDG
-- Abyei Referendum Commission 479 thousand SDG

---------------------------------------
AUDITOR GENERAL: CORRUPTION RIFE IN GOS
---------------------------------------

6. (SBU) Fresh on the heels of Al-Jaz's FY 2010 budget, Sudan's

KHARTOUM 00001353 002 OF 002


Auditor General submitted his financial review disclosing widespread
financial embezzlement in the GOS in FY 2008. According to the
report, the total amount embezzled during FY 2008 from various
government institutions totaled 5.4 billion SDG, compared to 3
billion SDG embezzled in FY 2007. The report attributed the
increase in corruption to the lack of internal supervision, as only
6 percent of the money embezzled funds were repaid. Government
companies raked in 1.7 billion SDG in embezzled funds, while
government bureaus and officials themselves took an additional 3.7
million SDG. As the Auditor General conducted audits on only 181
out of 237 government offices, the report accused the federal and
state levels of not adopting proper financial arrangements to smooth
the auditing process. However, the report also attributed Sudan's
endemic corruption to off-budget expenditures at the national level,
and low overall expenditures on development projects.

7. (SBU) Comment: According to preliminary UN estimates, the
Southern Sudan Referendum alone will cost over 50 million USD. The
current GOS allocation in the 2010 budget is drastically
insufficient. While newspaper reports claim that the Assembly may
have to pass a supplemental allocation, donors will have difficulty
planning without a better fix on the eventual GOS contribution. The
allocation of resources in the FY 2010 budget suggests that the GOS
will continue robust funding of its security apparatus at the
expense of the education and health sectors. The appalling lack of
funding for the Unity fund suggests the GOS may not see the value of
making unity attractive at this late stage in the implementation of
the CPA.

8. (SBU) Comment, continued: Each year Sudan's Auditor General
submits his annual GOS financial performance report that, implicitly
criticizes the University of Southern California-educated Al-Jaz.
Despite this, GOS takes little interest in ending impunity for the
facilitators of Sudan's inexcusable corruption. END COMMENT.

WHITEHEAD

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