GOVERNMENT APPROVES $65 MILLION SUPPLEMENTAL BUDGET

UNCLAS SECTION 01 OF 02 NOUAKCHOTT 000968

SIPDIS

SIPDIS

STATE FOR AF/W, AF/EPS (S. BRUNDAGE, A.ADLER),
EB/CBA (D. WINSTEAD),OES/PCI (A. SALZBERG)
USDOC FOR 3131/CS/ANESA/OIO/RD/DHARRIS
4510/IEP/ANESA/OA/PMICHELINI
DAKAR FOR RSCO CGRIFFIN

E.O. 12958: N/A
TAGS: BEXP BTIO EFIS ETRD EINV PGOV MR
SUBJECT: GOVERNMENT APPROVES $65 MILLION SUPPLEMENTAL BUDGET

NOUAKCHOTT 00000968 001.2 OF 002


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Key Points
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-- The Military Council for Justice and Democracy (MCJD)
approved a $65 million supplemental budget for CY2006 to
account for significantly increased revenues from
renegotiated oil and fishing contracts, and IMF debt relief.

-- $35 million is earmarked for stabilizing troubled public
utilities, while the remaining $30 million will go to
physical infrastructure improvements and job training.

-- The MCJD also decided to reduce custom taxes for
essential consumer products, such as powdered milk, sugar,
cooking oil and vegetables.

-- For the first time, the finance ministry released its
financial report for public scrutiny.

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Comments
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-- The MCJD is likely to have some trouble in effectively
spending these additional revenues in the 5 months remaining
before the close of the calendar year.

-- The MCJD's plan, aimed at reducing the cost of consumer
products and increasing employment opportunities, will draw
additional praise for the MCJD, which already enjoys broad
public support.

End Key Points and Comments.


1. In meetings on July 27 and 28, the Military Council for
Justice and Democracy (MCJD) approved a supplemental budget
for CY2006 to account for significantly increased revenues
from renegotiated oil and fishing contracts, and IMF debt
relief. In all, the MCJD increased the 2006 budget by 15.8
billion Ouguiyas ($65 million). This sum represents a 7.6%
increase over the existing CY2006 budget of 208.8 billion
Ouguiyas.

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How the new funds will be spent
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2. Approximately 8.8 billion Ouguiyas ($35 million) is
earmarked for stabilizing troubled public utilities, such as
the National Water Company (SNDE) and the Mauritanian
Electricity company (SOMELEC). The new funds will pay down
these utilities' existing debt and reduce the need for
future government subsidies.


3. The remaining 7 billion Ouguiyas ($30 million) will go to
physical infrastructure and employment training, with the
goal of improving Mauritanian living standards. The land
management and rural development sectors will use 51% of the
amount, while 22% will go towards employment training, and
16% for other projects which have not yet been specified.


4. Specific expenditures include 650 million Ouguiyas to an
employment creation and development project to increase
national employment, and 700 million Ouguiyas to purchase
equipment and materials necessary for canalizing stagnant
waters that form after heavy rains. Approximately 450
million Ouguiyas will be used by the national company in
charge of well drilling (SNF) to increase the availability
of drinking water throughout the country. Additional
amounts will also be allocated for road improvements in the
urban centers of Nouakchott and Nouadhibou, and the
construction of health units in several cities in the East
and center of the country.


5. In addition, the government decided to reduce custom

NOUAKCHOTT 00000968 002.2 OF 002


taxes for essential consumer products, such as powdered
milk, sugar, cooking oil and vegetables; the differential
resulting from these tax reductions will be compensated by
part of new receipts earned.


6. Significantly, for the first time, the finance ministry
has just released its financial report to the public. This
transparency measure is the result of negotiations with the
IMF. The report, for the first quarter of 2006, in French,
can be found on the MOF website at www.tresor.mr.

KOUTSIS