NATIONAL ASSEMBLY APPROVES 2010 BUDGET WITHOUT SPLM;

UNCLAS SECTION 01 OF 02 KHARTOUM 001353 NSC FOR MGAVIN, LETIM DEPT PLS PASS USAID FOR AFR/SUDAN ADDIS ABABA ALSO FOR USAU SENSITIVE SIPDIS E.O. 12958: N/A TAGS: PGOV ECON EFIN KDEM KPKO SU SUBJECT: NATIONAL ASSEMBLY APPROVES 2010 BUDGET WITHOUT SPLM; CORRUPTION ENDEMIC IN GOS ¶1. (SBU) Summary: On November 16, the National Assembly approved the national budget for 2010. Due to a continuing boycott of the National Assembly by the Sudanese People's Liberation Movement (SPLM) and other opposition parties, the National Congress Party (NCP)and its allies unilaterally approved the budget. Allocation for the 2010 election and referenda on southern independence is significantly less than anticipated. A lack of funding for the unity fund may indicate a lack of continued interest in making unity attractive. Sudan's Auditor General earlier issued a report finding financial embezzlement endemic in the Government of Sudan (GOS). End summary. ¶2. (SBU) On November 16, Sudan's Minister of Finance and National Economy Dr. Awad Ahmed Al-Jaz presented the FY 2010 budget (January 1-December 31, 2010). Despite criticism from the National Democratic Alliance (NDA) and the absence of SPLM members at the session, the NCP approved the budget using its mechanical majority vote. The budget details 23.7 billion Sudanese Pounds (SDG) in revenue, 32 billion SDG in expenses, and 8.3 billion SDG as a gross deficit. (Note: The current exchange rate on November 24 was 1 USD = 2.38 SDG. Total budget amounts denote approximately 10 billion USD in revenue, 13.4 billion USD in expenses, and a deficit of 3.5 billion USD. End note.) Al-Jaz stated that the FY 2010 budget was based on the following economic indicators: -- The budget aims to achieve a growth rate of 6 percent and an annual inflation rate of 9 percent. -- Exports will increase revenues to 13.2 billion SDG, and imports will increase expenditures by 8.7 billion SDG. -- Sudan will become self-sufficient in the production of sorghum, meat, rice, cement, edible oil, animal fodder and sugar. -- Local wheat mills will produce 50 percent of Sudan's required yearly supply of wheat. -- Rehabilitation on the following rail lines will be completed: Babanousa - Wau; Khartoum-Port Sudan; Babanousa - Nyala; and Babanousa - Ed Daein. -- Sudan will increase electricity production by 905 megawatts, and construct 1704 km of transmission lines. ¶3. (U) Al-Jaz summarized the FY 2010 budget (in billions of SDG) as follows: -- Taxes 9.6 -- Grants 1.0 -- Oil revenues 10.5 -- Other revenues 1.5 -- Total Revenues 22.7 -- Current expenditures 21.4 -- Development expenditures 10.6 -- Total Expenditures 32.1 -------------- -------------- SECURITY SPENDING FAR EXCEEDS HEALTH AND EDUCATION -------------- -------------- ¶4. (U) Al-Jaz's report noted that the budget figures were prepared according to the new Government Finance Statistics (GFS) code, which mandates transparency and efficiency in allocation of resources as required by the Comprehensive Peace Agreement (CPA). The FY 2010 budget allocated 6.5 billion SDG for defense and security forces, 491 million SDG for health, and 541 million SDG for education. According to the budget, the National Intelligence and Security Services (NISS) was allocated 1.15 billion SDG. -------------- LESS FOR UNITY, ELECTIONS, REFERENDA -------------- ¶5. (SBU) The FY 2010 budget allocated only 6 million SDG for the Unity Support Fund, vice FY 2009 allocation of 366 million SDG. The budget also provides 790 million SDG for the election and referendum commissions, 12.2% less than FY 2009. Specifically the budget allocates the following: -- National Elections Commission 1.4 million SDG -- Southern Referendum Commission 720 thousand SDG -- Abyei Referendum Commission 479 thousand SDG -------------- AUDITOR GENERAL: CORRUPTION RIFE IN GOS -------------- ¶6. (SBU) Fresh on the heels of Al-Jaz's FY 2010 budget, Sudan's KHARTOUM 00001353 002 OF 002 Auditor General submitted his financial review disclosing widespread financial embezzlement in the GOS in FY 2008. According to the report, the total amount embezzled during FY 2008 from various government institutions totaled 5.4 billion SDG, compared to 3 billion SDG embezzled in FY 2007. The report attributed the increase in corruption to the lack of internal supervision, as only 6 percent of the money embezzled funds were repaid. Government companies raked in 1.7 billion SDG in embezzled funds, while government bureaus and officials themselves took an additional 3.7 million SDG. As the Auditor General conducted audits on only 181 out of 237 government offices, the report accused the federal and state levels of not adopting proper financial arrangements to smooth the auditing process. However, the report also attributed Sudan's endemic corruption to off-budget expenditures at the national level, and low overall expenditures on development projects. ¶7. (SBU) Comment: According to preliminary UN estimates, the Southern Sudan Referendum alone will cost over 50 million USD. The current GOS allocation in the 2010 budget is drastically insufficient. While newspaper reports claim that the Assembly may have to pass a supplemental allocation, donors will have difficulty planning without a better fix on the eventual GOS contribution. The allocation of resources in the FY 2010 budget suggests that the GOS will continue robust funding of its security apparatus at the expense of the education and health sectors. The appalling lack of funding for the Unity fund suggests the GOS may not see the value of making unity attractive at this late stage in the implementation of the CPA. ¶8. (SBU) Comment, continued: Each year Sudan's Auditor General submits his annual GOS financial performance report that, implicitly criticizes the University of Southern California-educated Al-Jaz. Despite this, GOS takes little interest in ending impunity for the facilitators of Sudan's inexcusable corruption. END COMMENT. WHITEHEAD