Identifier
Created
Classification
Origin
07KHARTOUM211
2007-02-13 07:40:00
UNCLASSIFIED
Embassy Khartoum
Cable title:  

GOSS 2007 Budget Adopted

Tags:  EFIN PGOV PINR ECON EAID SU 
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VZCZCXRO5665
PP RUEHROV
DE RUEHKH #0211/01 0440740
ZNR UUUUU ZZH
P 130740Z FEB 07
FM AMEMBASSY KHARTOUM
TO RUEHC/SECSTATE WASHDC PRIORITY 6101
INFO RUCNIAD/IGAD COLLECTIVE
RHMFISS/CJTF HOA
UNCLAS SECTION 01 OF 03 KHARTOUM 000211 

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DEPT FOR AF/SPG, AF/EPS, AND EB/IFD/ODF
PLEASE PASS TO USAID FOR AFR

E.O. 12958: N/A
TAGS: EFIN PGOV PINR ECON EAID SU
SUBJECT: GOSS 2007 Budget Adopted

REF: A) Khartoum 00133, B) Khartoum 00157

UNCLAS SECTION 01 OF 03 KHARTOUM 000211

SIPDIS

SIPDIS

DEPT FOR AF/SPG, AF/EPS, AND EB/IFD/ODF
PLEASE PASS TO USAID FOR AFR

E.O. 12958: N/A
TAGS: EFIN PGOV PINR ECON EAID SU
SUBJECT: GOSS 2007 Budget Adopted

REF: A) Khartoum 00133, B) Khartoum 00157


1. Summary: The Southern Sudan Legislative Assembly (SSLA) adopted
its 2007 budget on January 29 with a projected revenue level of USD
1.536 billion. The anticipated amount flows from oil, non-oil, and
non-tax revenue sources, excluding donor grants. The budget, as in
2006, allocates over 40 percent of planned expenditures to the
military, USD 555 million, and provides roughly similar amounts for
social and infra-structure spending as in the FY 06 budget. The
Minister of Finance and Economic Planning (MOF) received harsh
criticism for failing to provide information on expenditures,
non-oil revenues, and missing reserves. Key ministries saw cuts
from the 2006 budget because of the failure to spend last year's
allocations or poor performance.


2. The legislators are beginning to assert themselves as budgetary
watchdogs and are demanding more accountability and results from the
ministries. The contentious budget review has turned up the heat on
the MOF and raised the bar for performance by the GOSS. A more
in-depth analysis will follow separately. End Summary.

--------------
Legislators Lambast MOF
--------------


3. After a two-month delay, the embattled GOSS MOF, Arthur Akieun
Chol, presented the FY 07 budget to the Southern Sudan Legislative
Assembly (SSLA) on December 19, 2006, allowing for only a few days
review before the holiday break. The legislators reconvened in
mid-January to finish their review. (Note: The budget is being
sent electronically to AF/SPG separately. End note.) The MOF's
political future has been under a cloud for several months following
ongoing corruption investigations over questionable procurements by
his ministry (REF B). The latest scandal revolves around the
missing USD 60 million reportedly given to the Sudan People's
Liberation Movement (SPLM) by Khartoum to establish the Southern
Sudan administration in the North. SPLM Secretary General Pagan
Amum has accused the MOF of failing to turn over all but USD 18
million of those funds.



4. Unlike in FY 06, the SSLA critically reviewed the FY 07 budget
and made substantial revisions based on performance and needs. The
MOF was grilled before the members and lambasted in the final budget
review for failing to provide a full accounting for revenues and
expenditures. The SSLA questioned how the annual oil revenue in the
projected budget remained constant at USD 1.3 billion despite the
2006 increase in Sudan's oil production level and the rise in global
oil prices.(Comment: the SSLA seems not to understand that the
budget is prepared using a benchmark price for oil and with a
reserve account created to smooth the fluctuations of revenues. End
Comment.)


5. The legislators also raised concerns about the unexplained
withdrawal of USD 260 million from the Oil Revenue Stabilization
Account, the omission of non-oil revenues (the South's estimated
share of Customs revenue alone is USD 16 million),and the absence
of any international aid management strategy. The SSLA further
criticized the MOF for preparing the budget with no input from the
Bank of Southern Sudan (BOSS) and the corresponding lack of any
fiscal, monetary, or taxation policies designed to promote economic
growth and productivity. The MOF was commended, however, for
introducing a flat personal income tax of ten percent, which the
SSLA is likely to make progressive up to twenty percent.


6. The legislators gave stern instruction to the Finance Ministry
that it is to establish a mechanism for effective collection of tax
revenues and ensure that the BOSS actively engages in the budget
preparation process.

--------------
Winners and Losers
--------------


7. The approved FY 07 budget total is USD 1.536 billion, of which
USD 1.375 million was originally proposed by the MOF and USD 161
million added by the legislators. In comparison, the projected
budget revenue for FY 06 was USD 1.304 billion, about 18 percent
lower than that of FY 07. Although the SSLA was concerned that the
various GOSS ministries did not fully spend the allocated FY 06
expenditure budget, mainly due to late disbursement of funds by the
MOF, the Assembly allocated similar levels of budgetary resources to
several of the GOSS entities. The Assembly also issued instructions
that timely disbursement be made to ensure accelerated project
implementation to meet heightened public expectations.


8. The FY 06 and 07 projected revenue is as follows, (all amounts
in USD):

FY 2006 FY 2007

KHARTOUM 00000211 002 OF 003



Oil revenue 1.300 Billion 1.300 Billion

Non-oil revenue 4 Million 219 Million

Non-tax revenue 104 Thousand 17 Million

Total: 1.377 Billion 1.533 Billion


9. The total budget is allocated to 12 budget sectors:
accountability; economic functions; education; health;
infrastructure; natural resources and rural development; public
administration; rule of law; security; social and humanitarian
affairs; transfers; and reserves. Over 80 percent of the budget,
however, was allocated to six key sectors during both fiscal years.
The allocation for the six sectors was at 90 percent in FY 06, while
it is reduced to 84 percent in FY 07. The decline is due to reduced
07 allocations in education and health.


10. Allocations for the six major sectors:

FY 06 FY07

Sector Amount Percent Amount Percent
USD M USDM

Security 528 42 555 43
Infrastructure 279 22 309 24
Transfers 116 9 125 10
Education 137 11 112 9
Rule of law 74 6 98 8
Health 109 9 84 7

Six Sectors

Total 1.243 B 90 1.283 B 84

Total GOSS
FY Budget 1.377 B 1.536 B

(Note: In the budget as published, expenditures do not equal
revenues. End note.)

--------------
Show us the Money, Spend the Money
--------------


11. The legislators have also underscored that the Finance Ministry
must improve its disbursement performance, following testimonies
from various ministries that they were not given their allocated
resources when requested. Reportedly, the Ministry of Housing,
Lands and Public Utilities, headed by Vice President Riek Machar,
succeeded in spending about 86 percent of its FY 06 expenditure
allocation, while only 45 and 11 percent of the allocations were
spent by the Ministry of Health and the Disarmament, Demobilization,
and Resettlement Commission, respectively. The SSLA has directed
that, in the future, the MOF must report progress to the assembly on
a quarterly basis.


12. Although the projected overall personnel level declined in FY 07
by 44 percent (from 117 thousand in FY 06 to 65 thousand in FY 07)
projected expenditures on personnel salary/wages rose by 192 percent
(from USD 252,645 million in FY 06 to USD 737,535 million in FY 07).
The legislators noted that most ministries or agencies overspent on
salaries/wages in FY 06. The Finance Ministry is still expected to
provide additional explanations on the personnel number and
expenditure linkages.

--------------
The Role of the BOSS
--------------


13. Even though the Comprehensive Peace Agreement (CPA) envisaged
the BOSS to be central in depositing and transferring GOSS funds,
only 34 percent of the FY 06 revenues were handled by it. The
remainder was deposited in various financial institutions in
Khartoum, Nairobi, Geneva, and Abu Dhabi. The SSLA has now directed
that in the future the Finance Ministry is to deposit all GOSS funds
in the BOSS before any payments are made in or out of the country.

--------------
Military Needs Trump All
--------------


14. The military was the biggest winner in dollar amounts under the
FY 07 budget, getting an additional 50 million on top of the 500
million originally proposed by the MOF. The legislators justified
the increase as necessary to address the growing insecurity,
specifically "the wanton murder of Southern Sudanese in cold blood

KHARTOUM 00000211 003 OF 003


by ambuscades (sic) on the roads throughout the summer...the
shootout in Malakal in November, the incidents in Wau, Jonglei, and
in various places..." as well as for "capacity building." GOSS
officials have told ConGen that while the military spending is huge,
quarterly reporting will provide a means of accounting for how it is
spent.

POWERS