Cablegate: Senegal Supplemental Budget for Oic Projects, Parastatal,

VZCZCXRO6874
PP RUEHBC RUEHDA RUEHDBU RUEHDE RUEHGI RUEHJS RUEHKUK RUEHLH RUEHPW
RUEHROV
DE RUEHDK #1987/01 2771604
ZNR UUUUU ZZH
P 041604Z OCT 07
FM AMEMBASSY DAKAR
TO RUEHC/SECSTATE WASHDC PRIORITY 9316
INFO RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RUEHLMC/MCC WASHDC
RUCNISL/ISLAMIC COLLECTIVE

UNCLAS SECTION 01 OF 02 DAKAR 001987

SIPDIS

SIPDIS
SENSITIVE

DEPT FOR AF/W, AND AF/EPS
TREASURY FOR OIASA/ED BARBER

E.O. 12958: N/A
TAGS: EFIN ECON PGOV SG
SUBJECT: SENEGAL SUPPLEMENTAL BUDGET FOR OIC PROJECTS, PARASTATAL,
AND PRSP

REF: A. DAKAR 588
B. DAKAR 1925

DAKAR 00001987 001.2 OF 002

1. (SBU) SUMMARY: On September 28, Senegal's National Assembly
approved a supplemental budget for the current fiscal year,
augmenting targeted expenditures by eleven percent following the
successful issuances of treasury bonds in June and August 2007,
recent announcements of new loans from Saudi Arabia and Kuwait, and
greater than expected revenues from import duties. Budget Minister
Sarr explained that the new funds would target the Agency for the
Islamic Conference Organization's (ANOCI) infrastructure projects,
help for Senegal's electricity parastatal's budget woes, and
undefined goals under Senegal's PRSP. This supplement does not take
into account the proceeds from the sale of the third telephone
license to Sudatel (Ref B), the revenues collected from airline
passenger tickets to support Senegal's new airport project, nor the
anticipated proceeds from the sale of GOS's shares in Sonatel and
ICS, announced to take place in the near future. This plan may help
the Wade administration meet its political agenda, but is not
sufficient for its poverty reduction requirements. END SUMMARY.

WHERE'S THE MONEY COMING FROM, WHERE'S IT GOING?
--------------------------------------------- ---
2. (U) In presenting his goals for a supplemental budget to the
National Assembly on September 28, Budget Minister Ibrahima Sarr
explained that the treasury had available CFA 174 billion
(approximately USD 348 million) in extra revenues which represents
11 percent of the total expenditures of the original FY (and
calendar) 2007 budget. Sarr outlined the sources of the additional
revenue as: CFA 132 billion (USD 264 million) from the successful
June and August offering of Treasury bonds, a new CFA 26 billion
"concessional" loan (USD 52 million) from Saudi Arabia, a new CFA 5
billion loan from Kuwait (USD 10 million), and CFA 11 billion (USD
22 million) in excess revenue from import duties.

3. (U) Sarr told the Deputies that CFA 10 billion (USD 20 million)
will be allocated to ANOCI to speed up the constructions of hotels
and the conference center for the Organization of Islamic
Conferences (OIC) summit scheduled for March 2008. The government
has recently admitted that it is behind schedule on constructing new
hotel space for the summit, and has recently committed to spending a
reported USD 200 million on renovations to Dakar's premier hotel, Le
Meridien President, (including shutting the place entirely from
mid-October to Mid-November), on new "presidential villas" for heads
of state, and two new mosques.

4. (U) Senelec, Senegal's debt-ridden, ineffectual electricity
parastatal will receive an infusion of CFA 65 billion (USD 130
million), which should help it get current on accounts (but is not
enough to help with transmission problems and the lack of generating
capacity).

5. (U) Sarr also noted that the revised budget will allocate CFA 99
billion (USD 198 million) to support the country's 2006-2010 Poverty
Reduction Strategy Paper (PRSP) goals, which call for combating
rural poverty and improving health care, education, and governance.
He did not specify how the allocation would be divided or what
sectors would receive money.

6. (U) Sarr insisted that Senegal is not bankrupt and the treasury
bond issuances do not mean that the budget deficit is critical. He
admitted that Senegal's fiscal deficit is severe but manageable.
[Note: The GOS does have a serious fiscal deficit of close to USD
600 million, almost six percent of GDP, up from about three percent
in 2004-2005, to 5.5 percent in 2006-2007. The IMF recently raised
the alarm that Senegal's budget deficit could reach ten percent of
GDP in 2008. The government has been roundly criticized by donors,
the IMF, and Senegalese commentators for its funding choices that
include a new Senate, civil service wage increases and perks, and
the commitment of significant resources for preparations for the OIC
summit. End Note.]

MORE MONEY IN THE PIPELINE
--------------------------
7. (U) Minister Sarr was silent on what the government plans to do
with new, unbudgeted resources headed its way, although he
speculated that these would be included in the FY 2008 budget.
These include USD 200 million from the sale of a third telephone
license to Sudatel (a Sudanese consortium) and the collection of
taxes from passenger airline tickets to support the building of a
new international airport, whose dedicated account is currently
estimated at USD 58 million. In addition, President Wade recently
confirmed that the government planned to sell its holdings in some
of the country's largest firms, including its 25 percent stake in
the major telephone company Sonatel, worth perhaps USD 600 million,
as well as government shares in the phosphates mining company ICS,

DAKAR 00001987 002.2 OF 002

and a major public transportation company.

COMMENT
-------
8. (SBU) While the GOS has a good record of presenting its budget
plans and outlining its revenue sources, the Wade administration has
routinely been criticized for its spending priorities and lack of
transparency with its public expenditures. If used wisely, an extra
USD 198 million on poverty reduction activities could benefit the
less well-off citizens of Senegal. The money to help recapitalize
Senelec may give the company a bit of breathing space to get
organized and better address the country's frequent power outages if
it is used to good effect. The allocation of funds for renovating
luxury hotels in preparation for the OIC is less justifiable. While
the government is very much under the gun to meet expectations for
the March gathering, many of the projects and priorities for the OIC
summit have been poorly and opaquely managed. Moreover, we question
why a country that is struggling to fill a $4 billion gap needed to
implement its poverty reduction strategy should instead spend $200
million to renovate a hotel.

9. (SBU) Though not included in this supplemental budget, Sudatel
is scheduled to deposit USD 100 million before January 2008. If
that happens, we anticipate it being committed to some of President
Wade's priorities right away, rather than wait for the 2008 budget.
All the same, we hope that budget planning for 2008, currently being
finalized, will demonstrate that the government understands it can
no longer postpone critical reforms to lower its fiscal deficit and
will demonstrate a new commitment to improving the effectiveness of
its public finances.

10. (SBU) Visit Embassy Dakar's intranet site at:
http://dakar.state.gov/htdocs/section/econsec tion.aspx and Embassy
Dakar's SIPRNET Web site at http://www.state.sgov.gov/p/af/dakar.

PIAZZA

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