GOH FY07 BUDGET: MOVING FORWARD BUT SLOWLY

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TAGS: ECON EAID PGOV PINS HA
SUBJECT: GOH FY07 BUDGET: MOVING FORWARD BUT SLOWLY

REF: PAP 1483

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1. This message is sensitive but unclassified: please
protect accordingly.


2. (U) Summary: President Rene Preval's economic advisor
Gabriel Verret told econoff Sept 6 that finance minister
Daniel Dorsainvil is discussing his FY07 budget informally
with parliament, but has not yet presented it officially.
Dorsainvil verified August 29 that the budget was in the
final stages of preparation and that a draft of the budget
had been already been presented to parliament. The minister
of finance presents the government's budget to the
parliament, which must approve it by majority vote in both
houses. Reportedly, because of the ongoing discussions
between the ministry of finance and parliament during the
drafting of the budget, the approval process should not take
the entire three months allotted to parliament by the
constitution. Verret expressed some concern about pork
barrel politics in parliament, but hoped that country-wide
NGO projects would alleviate it. The IMF estimates the
current financing gap for FY07 to be US $9.6 million, which
IMF resrep Ugo Fasano told Dorsainvil needs to be reduced to
zero before the budget is presented to the IMF board
regarding Haiti's Poverty Reduction and Growth Facility
(PRGF) eligibility. End summary.

Budget Process
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3. (U) The operations portion of the budget is drafted by
the ministry of finance and the investment portion by the
ministry of planning, which is presented to parliament by the
minister of finance. According to the constitution, the
chamber of deputies, finance commission approves the budget
before passing it forward for the entire chamber's approval.
Then the senate's finance commission must approve the budget,
followed by the entire senate body. Should parliament make
changes to the budget, they return the document to the
executive for final approval or further changes. In the
event that the executive makes further changes, the budget
will start the process over with the chamber of deputies,
finance commission. If, the second time around, both the
deputies and the senators approve further changes, the GOH is
obligated to publish the budget as is. The constitution also
states that the GOH should present the budget by the end of
June for parliament's final approval by the end of September.
Awaiting the results of the July donors, conference, the
GOH delayed initiation of the process.

GOH Fears Potential Pork Barrel Politics
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4. (SBU) Verret said that GOH officials fear the
parliamentarians will use the budget to "flex their muscles,"
citing Senator Youri Latortue, who has threatened not to vote
in favor of the budget unless it includes the creation of a
national army. Latortue aside, the parliamentarians have not
made a lot of noise about the budget: a few have expressed
reservations in local press reports. Separately, employees
at the planning ministry told econoff that they plan to send
a budget annex to parliament. The annex will inform
parliamentarians about country-wide projects which are funded
by international donors through NGOs, and are not included in
the GOH budget. Presumably, this will help cut down on
potential pork-barrel conflicts.

FY07 Financing Gap Persists at US $9.6 Million
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5. (SBU) According to Verret, the FY07 budget financing gap
is US $9.6 million, which Dorsainvil said he would prefer to
address during the second half of the fiscal year, if the gap
persists. Verret reported that Dorsainvil told the IMF that
in the event of obvious financing gap mid-year, he will
request assistance from the donor community or will work to

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lower GOH expenditures. IMF resrep Ugo Fasano asked
Dorsainvil to clarify his plans, and to close the gap, before
the budget is presented to the IMF board to determine Haiti's
eligibility for the poverty reduction and growth facility
(PRGF) this month. (Verret said it was supposed to be
presented to the IMF board today, September 6, but that
Fasano pulled it from the agenda because the budget was not
ready.)


6. (SBU) Reportedly, Fasano told Dorsainvil he should
consider closing the gap by delaying the EU disbursement of
10 million euros until after September 31. Verret told
econoff he endorsed this idea because he does not think the
GOH can usefully spend the 10 million euros by the end of
this month anyway. Verret also stressed that government
revenues have been stronger than ever: 1.8 million Haitian
gourdes (about US $46,000) for the month of August and an
estimated 1.5 million Haitian gourdes (about US $38,000
million) for September. (Note: The GOH has not clarified its
plans regarding salary arrears and severance pay as outlined
in the Social Appeasement Program (Programme d'Apaisement
Social -- PAS). This possibly accounts for the discrepancy
between the IMF and Verret on one hand, and Dorsainvil on the
other, regarding GOH financing needs before the end of this
fiscal year. End note.)


7. (SBU) Comment: Taking into account the inauguration of
the new government in mid-May and the donors, conference at
the end of July, the GOH is moving the budget process as
quickly as can be expected. The GOH gave a draft of the
budget to the parliamentarians in advance of the official
presentation which should speed up the final approval
process. Both Verret and Dorsainvil are confident that
parliament will approve the budget, if not by the end of the
month then shortly thereafter, despite the probability that
the parliamentarians will seek changes.
TIGHE