Identifier
Created
Classification
Origin
06COLOMBO763
2006-05-11 06:45:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Colombo
Cable title:  

Your Efforts to Rationalize Foreign Assistance

Tags:  EAID ECON CE 
pdf how-to read a cable
VZCZCXRO0759
RR RUEHLMC
DE RUEHLM #0763/01 1310645
ZNR UUUUU ZZH
R 110645Z MAY 06
FM AMEMBASSY COLOMBO
TO RUEHC/SECSTATE WASHDC 3332
INFO RUEATRS/DEPT OF TREASURY WASHDC
RUEHNE/AMEMBASSY NEW DELHI 9605
RUEHKA/AMEMBASSY DHAKA 9168
RUEHIL/AMEMBASSY ISLAMABAD 6058
RUEHKT/AMEMBASSY KATHMANDU 4093
RUEHCG/AMCONSUL CHENNAI 6609
RUEHLMC/MILLENNIUM CHALLENGE CORP
UNCLAS SECTION 01 OF 02 COLOMBO 000763 

SIPDIS

For Administrator Tobias from Ambassador Lunstead

ADM AID Dept please pass to USAID

SENSITIVE, SIPDIS

E.O 12958: N/A
TAGS: EAID ECON CE
SUBJECT: Your Efforts to Rationalize Foreign Assistance


UNCLAS SECTION 01 OF 02 COLOMBO 000763

SIPDIS

For Administrator Tobias from Ambassador Lunstead

ADM AID Dept please pass to USAID

SENSITIVE, SIPDIS

E.O 12958: N/A
TAGS: EAID ECON CE
SUBJECT: Your Efforts to Rationalize Foreign Assistance



1. (SBU) I have read with interest the information we have
received regarding your efforts to revamp US foreign
assistance processes. In that vein, I believe Sri Lanka
deserves a closer look and poses interesting questions for
the foreign aid planning community to consider as it moves
forward with budget and implementation decisions. I hope to
discuss these issues with you when I am in Washington next
week.


2. (SBU) With regard to your efforts to coordinate foreign
aid more centrally in Washington, there are four issues I
would like to comment on: 1) As I mentioned in the MPP
"Blue Skies" exercise, the budget process does not match the
planning process. Three to five-year budget commitments
would allow continuity in planning and programming; 2) MCC
eligibility should not lead to a reduction in USAID funding;
3) conditions in Sri Lanka warrant that our two agencies
take a critical look at re-categorizing it as a `Rebuilding
Country'; and, 4) While there are good reasons for a strong
guiding hand to ensure budget discipline, thus far the new
process sounds highly Washington-centric. I urge you to
include a mechanism that allows for significant input from
the field perspective, in order to ensure that the budgets
are consistently implemented and justified.

Strategic Planning and Budgeting
--------------


3. (SBU) In October 2003, USAID Washington approved a five-
year strategy, with accompanying budget, for Sri Lanka. In
the initial year of implementation, the annual budget to
USAID/Sri Lanka was in line with this strategy. However,
beginning in 2004, and each year since, USAID has faced
annual budget cuts of between $3 and $21 million USD (as
much as 100 percent of some categories). Those cuts have
steadily increased each year, with little explanation and no
requests for strategy revisions. This `tug-of-war' approach
to budget allocation does not make for sound strategic
thinking and confuses the host government and implementing
partners.

MCC-Induced USAID Cuts
--------------


4. (SBU) Post was informed this year that one of the reasons
for the budget cuts was Sri Lanka's eligibility for the
Millennium Challenge Account (MCA),a program that allocates
budgets on a five-year time horizon. Over the past three

years, Sri Lanka has been deemed MCA-eligible. While it is
certainly an honor for Sri Lanka to be eligible and
recognized as having promoted the concepts of good
governance, investing in people and economic freedom
(relative to other developing countries),the hard truth is
that the road to an MCA compact is bumpy and makes for a
slow ride. The bottom line is that the only benefits of MCA-
eligibility so far are lots of hard work and drastically
reduced ESF and DA levels.


5. (SBU) MCA, with its focus on country-driven plans and
removing barriers to economic growth, concentrates on
certain areas, including infrastructure. But other crucial
needs such as humanitarian assistance, conflict-resolution,
good governance, etc. are handled by USAID. Or at least
they were, up until Sri Lanka became MCA-eligible, and USAID
funding was cut..and cut..and cut again, forcing us to operate
on a shoestring, limiting the scope and reach of some of our
most successful projects and, as an unintended consequence,
undercutting the potential success of MCA-related projects,
none of which will focus on these critical areas.


6. (SBU) We are at best six months away from an MCA compact,
and possibly another year away from the disbursement of
funds. Both we at Post and our contacts in the GSL are
looking forward to those days arriving. Meanwhile, US
influence and impact in the country is declining as our
USAID programs face cutbacks and program closure.

Sri Lanka: Rebuilding more than Transforming
--------------


7. (SBU) I understand Sri Lanka has been labeled a
"Transforming Country" based on its scores on particular

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measures, including the Millennium Challenge Corporation
(MCC) eligibility scales. While Sri Lanka's Western
province, which includes the capital city, could be included
in a "transforming" category, the north, east and deep south
remain mired in poverty, post-tsunami rebuilding and
conflict-related upheaval (the current security situation
calls into question whether we are "post-conflict" or not).
Given these issues, Sri Lanka seems to fit partially in both
the "Transforming" and "Rebuilding" categories. Peace
building is the most important US foreign policy objective
in Sri Lanka. Economic growth will not be sustained without
sustained peace. True, those portions of Sri Lanka under
the Government's control have a vibrant democracy and
generally sound (though far from exemplary) macroeconomic
framework. Nonetheless, its significant budget and current
account problems remain, and as possible new security
requirements loom, any "peace dividend" that has been
available could disappear.


8. (SBU) Therefore, I would urge serious consideration and
analysis of Sri Lanka's internal situation, as the "numbers
game" of applying only quantitative measures, can be
misleading.

Concluding Thoughts
--------------


9. (SBU) As you look at the challenges before you, and as we
consider the huge interplay among US goals, including
peaceful resolution of internal conflicts, enhanced
democratic institutions, counterterrorism, economic
development, increased market access for US business and
support for the successful conclusion of the Doha Round,
among others, I urge you to consider the following four
issues:

-- strategic thinking in budgeting as well as planning - a
commitment to continuity is important;

-- greater interplay among overarching USG policies and
goals - MCC and USAID are complementary, but only if both
are functioning at full strength and in a cooperative
manner;

-- a re-designation of Sri Lanka as a `Rebuilding Country';
and,

-- inclusion of a strong, practical voice from the field to
complement Washington's resource management skills and
structure.

LUNSTEAD