BUDGET TRANSPARENCY DEMARCHE DELIVERED TO MINISTER OF

UNCLAS BRAZZAVILLE 000325


E.O. 12958: N/A
TAGS: EAID ECON EFIN PREL ZF
SUBJECT: BUDGET TRANSPARENCY DEMARCHE DELIVERED TO MINISTER OF
FINANCE

REF: STATE 81177


1.(U) SUMMARY: Ambassador Eastham met November 10 with Minister
of Finance Gilbert Ondongo to deliver the demarche on budget
transparency (Reftel) to encourage transparency in the Congolese
budget process and to describe the waiver process for U.S.
assistance. Minister Ondongo was somewhat puzzled that the U.S.
regarded the Congo(B) budget as lacking transparency but agreed
that transparency is essential. He described the transparency
built into the budget process. Congo's Cabinet discussion of the
2010 draft budget commenced on November 6th. END SUMMARY.

2.(U) Minister Ondongo, who took office in September with the
new government, explained that the budget preparation for
Congo(B)'s calendar year 2010 budget began in early 2009 with
internal consideration within the Finance Ministry of the
prevailing revenue environment, with special attention to the
country's oil production, projection of the international price
of oil into 2010, and consideration of the projected exchange
rate environment. Line ministries made their expenditure
proposals to Finance Ministry staff at the technical level
commencing in June, 2009. Following the July 12 PresiQtial
election, President Sassou-Nguesso issued new budget guidance in
the form of a framework letter to the cabinet, at which point
adjustments were made. The final step was a series of
individual, Minister-level meetings between each line Minister
and the Minister of Finance in September 2009 (during which, he
observed, each Minister requested "most" of the government
budget). This process resulted in the draft budget which was
presented to the Cabinet on November 6. Once the cabinet has
agreed, the draft budget law will be send to the Parliament for
consideration. The Minister noted that targets will be set in
January 2010 for the 2011 budget.


3. (U) With respect to transparency in budget formulation and
execution, the Minister pointed out that the budget is
formulated in accordance with the "mid-term expenditure
framework" developed by the Congo(B) government in partnership
with the World Bank under the HIPC program, and that it is in
full accord with the poverty reduction strategy paper, also a
HIPC "trigger." Moreover, he said, on the execution side,
monthly spending tables are reviewed by the IMF and adjusted by
the Ministry in accordance with IMF advice to ensure that actual
execution is in agreement with the framework. Moreover, he
said, in the HIPC "triggers" there is a requirement that
Congo(B) post all budget documents on an internet site, which is
being done. With all this review, he said, he found it
difficult to understand why the United States had concerns about
transparency in the budget process.


4. (U) In response to a question from the Ambassador regarding
the role of donor assistance in the Congolese budget, the
Minister said that Congo in fact has plenty of money and could
meet its budget needs from revenue. He expressed some concern
that in fact, the government was too conservative in its
expenditures, i.e. maintaining too much in its "future fund" and
clearly indicated that his preference would be to invest more in
infrastructure and social programs in the short term from its
budget resources, rather than depending to a large extent on
foreign (i.e. Chinese) financing for infrastructure projects.
There was a sum of 112 billion CFA (around 255 million USD) in
the budget that reflected the Chinese funding, as well as
smaller amounts relating to other foreign contributions as well
as the funding from anticipated HIPC debt service relief. He
noted that he strongly supported an audit of infrastructure
spending to ensure that Congo(B) was getting value for money.


5. (U) Minister OndQo noted that the draft budget proposed on
November 6 reflects a surplus of around 50% of anticipated
revenus, (i.e. expected receipts are twice the proposed
expenditures) which he partially attributed to rising oil
production and a favorable oil price environment. According to
the Minister, the budget conservatively assumes oil prices in
the range of $63 per barrel for 2010 and anticipates, based on
new production coming on line, that there will be an
approximately 25% increase in oil production. With increased
production and stable oil prices, Congo will experience strong
revenue, and the Minister emphasized that he expects it is
possible that oil prices will in fact exceed the assumed amount
in 2010. The Minister cited the budget as projecting revenue of
approximately 2,814 billion Francs CFA (6.4 billion USD),of
which only 1,450 billion Francs CFA (3.3 billion USD) is
currently proposed on the expenditure side.


6. (U) Minister Ondongo agreed to send a transparency summary in
writing to the Embassy.


7. (U) Bio note: Ondongo was previously the Labor Minister. He
served as chief economic advisor to the President's 2009
campaign for re-election. He holds a PhD in Economics from
France, and has served as Professor of Economics at the
university here. He takes credit for the successful
privatization of the MINOCO flour mill (currently the only
non-petroleum U.S. investment in Congo).


EASTHAM