Cablegate: Chad: Aid Provisions to Governments With

DE RUEHNJ #0032/01 0181759
O 181759Z JAN 10




E.O. 12958: N/A



1. (SBU) This cable responds to requests for information in
reftel related to Chad's degree of budget transparency and
USG legal strictures prohibiting assistance to central
governments whose budgets are not or have not been
transparent. Paras 4 to 10 below are keyed to questions in
para 3 of reftel. Paras 11 to 14 below respond to additional
action requests in para 10 of reftel.

2. (SBU) In 2009, Chad received a waiver, on grounds of
national interest, of requirements under Section 7086(c)(1)
of the Foreign Operations Appropriations Act to make
improvements in budget transparency. We believe that in the
course of 2009, Chad has progressed on the transparency
front, thanks to ongoing advice and technical assistance from
the IMF, World Bank, and EU, and thanks also to its own
efforts to reform and improve public revenue management. In
our view, the nation should be judged sufficiently
transparent to warrant obligation of all USG assistance funds
without further scrutiny.

3. (SBU) If this is not deemed feasible, we believe that
Chad should be granted another waiver on national security
grounds so that planned USG assistance will not be affected,
and so that cooperation on key regional stability goals
including those affecting Darfur refugees will not suffer.
Chad continues to host 270,000 Sudanese refugees, despite its
own impoverished status and competition for scarce resources.
Any diminution in U.S. assistance might indirectly affect
refugees as well as Chadian IPDs and poverty-stricken host
populations. END SUMMARY.

4. (SBU) Question: Is the Chadian central government
expected to receive funding under the FY 2010 SFOAA? Answer:
Yes. The U.S. spends upwards of $400 million per year in
Chad, although much of that consists of our contributions to
UN assessed and other budgets, and to other international
organizations and NGOs, for international peacekeeping, and
for additional IO and NGO assistance to regional stability
efforts and aid to refugees in Eastern Chad. The USG's
projected 2010 assistance benefiting the Chadian central
government per se will be on the order of $11.6 million in
total ($9.6 in developmental assistance, and some $1 million
each for IMET/FMF and NADR-ATA). Of this, $9 million is for
a food security project that will be channeled through
Africare; thus it does not appear to meet reftel para five
definition of direct assistance. An additional $600,000 is
planned in support for girls' education, similarly channeled
through an NGO to the central government.

5. (SBU) Our planned $1 million combined in IMET and FMF
funding for restarting mil-to-mil cooperation under TSCTP
would/would be in jeopardy if Chad were ruled to have
insufficient budgetary transparency, as would our $1 million
in NADR-ATA law enforcement assistance training. IMET/FMF
and ATA will be used to fund training and education programs
that focus on human rights, rule of law, and proper
civil-military relations, which are areas of extreme concern
with respect to Chad's security institutions. Withholding
assistance at a point when Chad's cooperation is needed to
ensure regional security would be counterproductive to our
broad strategic goals, including stability in areas hosting
refugees, counter-terrorism, and professionalization of the
Chadian military and law enforcement sectors. That such a
large percentage of U.S. spending in Chad goes to
international organizations and NGOs, when compared with our
assistance to the Chadian government, is a source of
considerable tension, and is complicating relations between
the UN and Chad. Thus a withdrawal of IMET/FMF and AFA would
have negative political resonance with the GoC beyond loss of
the programs that will be funded from those sources.

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6. (SBU) Question: Is Chad's national budget publicly
available? Answer: Yes. Yearly national budgets are
printed by the government printing office in book form upon
their adoption by the National Assembly and promulgation by
the President. They are available to the general public from
the Finance Ministry's Budget Office once printed. Some
portions of military budgets are classified for security
reasons. Draft portions of the Chadian national budget are
available on a need-to-know basis to international providers
of technical assistance (including the USG) before they are
approved by the Finance Ministry and forwarded to the
National Assembly for adoption. Chad's budget transparency
improved in 2009 over 2008 in part because 2009 was a year
lacking rebel attacks on the capital. Thus in 2009 Chadian
government and elected officials could focus on matters such
as preparing the national budget, debating it in
inter-ministerial meetings, and submitting it to the National
Assembly for scrutiny. In 2008, budget preparation and
ratification were interrupted by repeated rebel incursions
and by destruction of the National Assembly by rebel forces.

7. (SBU) Question: Are incomes and expenditures included
in the publicly-available budget? Yes. The Chadian national
budget as printed by the government printing office and made
available to the general public by the Finance Ministry
contains information on incomes and expenditures. One local
NGO has as its specific purpose studying national budgetary
incomes and expenditure figures, comparing them, and
publishing its own "citizens' guide" to the national budget.

8. (SBU) Question: What is the extent to which Chad's
publicly-available budget accurately reflects actual
government incomes and expenditures? Answer: The Chadian
national budget is increasingly transparent and accurate
thanks to the efforts of technical advisers from the IMF and
EU, and also thanks to reform efforts on the part of the
Finance Ministry and ongoing anti-corruption campaigns that
President Deby has personally endorsed. In specific:

-- IMF Activities: The IMF has had a Staff-Monitored Program
(SMP) in Chad since April 2009 to offer training in control
and transparency regarding public revenue management and
budgeting. Once the nation meets the program's full
requirements, Chad will become eligible for HIPC debt relief.
In the past, Chad engaged in extra-budgetary expenditures in
the military area in order to procure equipment used to
counter rebel attacks. Chad has also had a tendency to
budget for infrastructure projects in ways that put IMF and
World Bank-required poverty reduction programs at risk when
the international price of oil drops. Among the IMF's goals
are ensuring that Chad reduces extra-budgetary spending to
the extent possible, and that it makes a priority of poverty
reduction by budgeting in a manner that guarantees continued
key project funding independent of oil price fluctuations
(see below). The IMF is also working to ensure that Chad
sticks to its budgets once these are approved: in the past,
in addition to extra-budgetary military and infrastructure
spending from unacknowledged sources of income, there was a
tendency for money to be diverted from the Ministries of
Health and Education to the Ministries of Infrastructure and
Defense even after formal budgets were adopted.

-- EU Activities: Alongside the IMF's SMP, the EU has a Euro
13 million project in place to improve public finance
transparency and strengthen capacity within the Finance
Ministry regarding customs, taxation and budgeting. In
parallel with this project, experts from the EU worked in
conjunction with the IMF's AFRITAC (based in Libreville) in
mid-2009 to establish a technical assistance center in Chad;
the center has been offering ongoing training and seminars on
topics including decentralization, accounting standards, debt
management, microfinance, auditing and economic
record-keeping. One of the EU's aims related to oil revenues

NDJAMENA 00000032 003 OF 005

is to help Chad achieve membership in the Extractive
Industries Transparency Initiative (EITI). This will involve
the GoC's making formal, published commitments to
international standards of transparency with respect to oil
income, including taking part in a four-step "sign-up"
procedure. The EITI's African Regional Director visited Chad
in January 2010 at the invitation of the GoC's Minister of
Petroleum, following a GoC decision to move forward on EITI
candidacy. (The GOC had earlier resisted the need to meet
stipulations in the sign-up procedure.) (NOTE: Oil revenue
accounts for 70 per cent of the GOC's total income. If EITI
membership encourages the kind of transparency that we hope
it will, public information on government income will
increase enormously. END NOTE.)

-- Chadian National Activities: Backed by advisers from the
IMF and EU, the Chadian Finance Ministry took action in 2009
to deal with the effects of lower-than-expected oil revenues,
and thus, with the relatively bleak budgetary picture that
Chad faced mid-year. A sub-ministry in charge of
micro-finance and the fight against poverty was established
in June 2009, and the Finance Ministry revised the 2009
national budget downward and reevaluated spending priorities,
based on advice from the IMF with respect to using oil
revenues so as to benefit all Chadians. The Finance Ministry
prepared its 2010 budget in collaboration with IMF SMP
experts. The Ministry also instituted reorganizations of
certain government organs, enhanced tax and customs
collection procedures, ceased cash payments of salaries to
bureaucrats, insisted that the Ministry of Defense "clean up
its books" so that every soldier's identity would be known
and every soldier paid only once, and in general pressed for
greater accountability regarding public spending,
particularly defense and infrastructure spending. The
Minister of Finance was asked to testify against other GoC
officials charged in a series of anti-corruption campaigns
that are still under way at this writing. President Deby, in
his New Year's address to the nation at the beginning of
2010, pledged to continue the GoC campaign to eliminate
corruption from Chadian national life. He criticized the
practice of "taking liberties" with public goods, and
promised prosecution of those who accepted kickbacks or
demanded bribes. In response to public criticism of
infrastructure spending in a manner suggesting cronyism, the
Ministry of Infrastructure established a public website in
2009 laying out details of its plans, making linkages between
specific plans and the general well-being (including poverty
reduction and education) and explaining methods of financing.

9. (SBU) Question: Have there been any events since the
2009 review that may have affected fiscal transparency?
Answer: Chad enjoyed a relatively benign security situation
in 2009 -- only one significant rebel attack, and that
occurring outside the capital -- affording the GoC an
opportunity to conduct its budgeting processes according to
standard procedures rather than in the emergency manner that
characterized planning in 2008. The climate of relative
stability in 2009 also allowed Chad's higher education
institutions to function more normally; these include a
National School of Administration, akin to France's ENA, and
an elite new business school, akin to France's HEC, both of
which are training future generations of bureaucrats
according to international standards in the economic realm.
The presence in Chad in 2009 of the IMF's SMP team and EU
technical experts, and the World Bank's October 2009 visit to
Chad and announcement that it would resume cooperation
suspended in 2006 in a dispute over management of oil
revenues, all encouraged greater transparency and
accountability. Ongoing anti-corruption campaigns that have
led to investigations against ten high-ranking officials
including several Ministers and the Mayor of N'Djamena are a
response to rising public expectations for GoC accountability
in an election year. The GoC revised its 2009 budget
mid-year in response to requests from the IMF, and prepared
its 2010 budget in conjunction with the IMF's SMP experts.

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IMF sources have pronounced the 2010 budget "not a bad effort

10. (SBU) Question: Since last year's review, what efforts
has Chad undertaken to improve fiscal transparency? What
progress has been made pursuant to the 2009 demarches on the
subject? Answer: See paras 6 and 7 above. Also, Chad's
current presidency of both CEEAC and CEMAC, and its
cultivation of OHADA partners during the twin presidencies of
the former organizations (including by hosting an OHADA
summit in December 2009), have increased opportunities for
participation in regional efforts to standardize customs
procedures, border controls, taxation and duty
implementation, development of new economic investment zones,
harmonization of energy, environmental and health policies,
development of common road infrastructure, development of
common anti-corruption standards, and other multinational
initiatives dependent on budget transparency throughout
Central Africa. In 2008, Chad adopted a national Investment
Charter, designed to draw foreign direct investment into the
nation. It has been active in efforts to standardize
commercial and business law among OHADA participants, and has
pressed other OHADA members to adopt supra-national
arrangements on arbitration, recovery of debts, bankruptcy,
receivership and accounting, all dependent to some extent on
budgetary transparency. OHADA's supra-national arrangements
will begin taking precedence over some local investment laws
in January 2010.

11. (SBU) Question: What efforts has the GoC made since
last year to improve fiscal transparency? See paras 6-10

12. (SBU) Question: What actions have the USG, and U.S.
officials at Post, taken to promote budgetary transparency in
Chad? Answer: The USG has been more active across the board
in 2009 than in 2008, reflecting better staffing and no
emergency draw-downs. Throughout 2009 and up to the present,
we have made a priority of encouraging Chad to focus on the
need to improve public finance management, consistent with
our second MSP goal of promoting good governance, and
consistent with IMF, World Bank and EU goals for Chad. We
have an active dialogue with Chad's Ministries of Finance,
Justice and Morality (all of which are playing key roles in
anti-corruption efforts), as well as with the Prime Minister,
who is himself a strong proponent of rule of law, on all good
governance issues. We have also worked with the Ministries
of Petroleum, Infrastructure and Defense to encourage
transparent and appropriate use of oil revenues. Corruption
remains a serious impediment to economic development in Chad,
but ongoing anti-corruption campaigns focused on ending
non-transparent contracting, bribery, kickbacks, embezzlement
and impunity appear to be having some effect, and the Justice
Ministry -- along with the Finance Ministry, an essentially
impartial body -- has asserted itself to insist that rule of
law be pursued in a number of recent, highly partisan cases.

13. (SBU) Question: Has there been progress? Answer:
Yes. See paras 6-10 and 12 above.

14. (SBU) Updated Action Plan for improving fiscal
transparency and promoting graduation out of the need for a
waiver in 2011, should a waiver be required: Current IMF and
EU assistance will continue into the foreseeable future. The
goals of these organizations for Chad are the same as U.S.
goals. Thus our strategy should consist of working in
concert with international partners to make clear to the GoC
the advantages of eliminating extra-budgetary spending,
sticking with published budgets (particularly regarding the
tendency of Defense and Infrastructure budgets to receive
unplanned "gains" at the expense of social programs), taking
into account fluctuations in international oil prices when
planning for use of oil revenues, fighting corruption, and
continuing to move toward EITI candidate membership. In
concert with the EU, we should press the GoC to announce its
intentions with respect to EITI and to begin composition of a

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plan of work. We should also encourage the World Bank to
make good on its mid-2009 commitment to restart assistance to

15. (U) Minimize considered.

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