CHAD'S PUBLIC FINANCES (II): SEARCHING FOR

UNCLAS SECTION 01 OF 03 NDJAMENA 000115

SIPDIS
SENSITIVE

STATE FOR AF/C AND AF/USSES
NSC FOR GAVIN AND HUDSON
LONDON FOR POL - LORD
PARIS FOR POL -D'ELIA AND KANEDA
ADDIS ABABA ALSO FOR AU

E.O. 12958: N/A
TAGS: PGOV ECON EPET EFIN IMF IBRD CDB EAID PREL
EU, FR, CD
SUBJECT: CHAD'S PUBLIC FINANCES (II): SEARCHING FOR
SOLUTIONS

REF: A. NDJAMENA 113

B. NDJAMENA 0099

C. NDJAMENA 0079

This cable is Sensitive but Unclassified. Not for Internet
dissemination.



1. (U) This is an action message. See para 11 below.

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SUMMARY
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2. (SBU) Finance Minister Gata Ngoulou told Ambassador and
DCM March 30 that Chad's public finances were in serious
disarray, but that the budget picture was not yet
"disastrous." Ngoulou pointed out that Chad's efforts to
manage its public revenues responsibly had been undermined by
the global economic crisis, especially the sudden and deep
drop in international oil prices. Ngoulou stressed that Chad
knew it needed help and was seeking assistance from partners
-- the World Bank, IMF, ADB, and EU. Ngoulou reported that
in recent weeks he had met with delegations focused on public
finance from the IMF,s PEFA and AFRITAC, the World Bank, and
the EIB. He expressed hope that members of the new U.S.
administration would have time and advice for Chad in areas
including customs, taxation, and budgeting, as well as public
finance.


3. (SBU) Ngoulou confirmed that he was redrafting the
current national budget with a view to significantly scaling
back expenditures. He described a series of reorganizations
in tax and customs collection procedures, as well as efforts
to address corruption, which he though would net the
government extra (and deserved) revenues. He conceded that
the path of restraint would be politically challenging, but
expressed strong personal commitment to staying the course of
combatting corruption and achieving budgetary stringency.
END SUMMARY.

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GETTING THE HOUSE
IN ORDER?
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4. (SBU) Finance Minister Gata Ngoulou indicated that that
security and reconstruction needs after the events of
February 2008 were responsible for current high levels of
public expenditures, along with education, public health, and
the need to complete some key capital projects. He confirmed
that he was revising the most recent Chadian national budget,
drafted in September 2008 when oil prices were high, in order
to focus exclusively on necessities. A prolongued spell of
low oil prices would be "catastrophic" for Chad's public
finances, he predicted, as Chad depended on oil income for
70-80 percent of its total revenues. In addition to finding
ways to pay for education and health care, the GoC was also
trying to manage debt servicing according to World Bank
schedules. Chad "needed extra means to pay necessary
expenses," said the Minister.


5. (SBU) Ngoulou reported that the GoC said had taken a
number of steps to respond to the current situation. First,
the GoC had asked ESSO-Chad to agree to defer implemention of
a 2008 repayment schedule for last fall,s "overpayment" to
the GoC until July 2009, leaving ESSO-Chad's January and
March payments larger than if deductions had been implemented
immediately. The GOC was also making strenuous efforts to
collect non-oil revenues. The Finance Ministry had
reorganized tax and customs collection procedures, especially
to capture more revenue from the "informal" sector, which
Ngoulou defined as all but the largest enterprises (which
were themselves already paying taxes). Ngoulou said he had
bought the Customs Service boats to patrol the Chari River

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against smugglers, and motor bikes for Customs agents to use
in Ndjamena. He had also set up five new tax collection
locations to reach more actors in the "informal" economy.


6. (SBU) Ngoulou pointed out that ceasing cash payments of
salaries to bureaucrats and substituting transfers to bank
accounts ("banquarisation" of salaries for public officials)
would help address corruption, as would better scrutiny of
existing bank accounts. According to Ngoulou, improved
management of the military salary system had netted a savings
of 1 billion CFA (USD 2 million) oveer the past three months.
The GOC wanted to impose biometric identification mechanisms
to improve accountability in all areas of public revenue
management. Finally, Ngoulou said Chad had possibilities of
financial help from the BEAC in the form of two lines of
credit: one of 200 million CEFA (USD 400,000) consisting of
Chad's own reserves (it was already drawing on these funds),
and one of 130 billion CEFA (USD 260 million) that it could
repay at 4 percent interest. Ngoulou said that he would try
to resist drawing from this second line of credit if at all
possible.

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LOOKING AHEAD
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7. (SBU) Ngoulou indicated that he was looking forward to
traveling to Washington for late-April Bank/Fund meetings,
adding that he hoped to talk to U.S. officials in more detail
about Chad,s program of economic reforms. Ambassador
offered to request appropriate meetings.

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TECHNICAL ASSISTANCE
BEING PROVIDED
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8. (SBU) We have met with a number of the IFI teams in town
recently to provide advice to the Chadians. Harry Snoek,
Head of the IMF's AFRITAC (Regional Technical Assistance
Center for Central Africa, located in Libreville),told us
that his organization had given training to Chadian officials
in areas ranging from debt servicing to banking supervision,
budget planning and decentralization, management of customs,
taxation and government accounting, and statistical methods.
Snoek described Chad as seriously in need of advice and
capable of absorbing most of what his organization could
teach. AFRITAC is a Franco-German initiative within the IMF,
under a general EU rubric. In addition to AFRITAC, the EU is
providing aid to Chad's public finance sector through
technical assistance to the Chadian Department of Budget and
Public Investment in the area of database development and
management.


9. (SBU) The IMF's PEFA (Public Expenditure and Financial
Accountability) team also recently offered us an analysis of
its own just-completed four-year program of assistance to
Chad, which focused on strategic reform, integration of
information-management systems, capacity development and
external auditing. The PEFA team gave the GoC grades of "B"
or "C" in most of its 28 sub-areas of budget management. The
team noted that the GoC's greatest weakness lay in
implementing external auditing, and made clear that
additional assistance would be highly desirable in this area.


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COMMENT
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10. (SBU) Ngoulou, who spent 25 years with the BEAC in
Yaounde, has good ideas on how Chad stands the best chance of
surviving the current difficult period, although his hopes
depend on a return to higher petroleum revenues in the near
future. We think it would be useful to talk to him in DC,

NDJAMENA 00000115 003 OF 003


especially to ascertain if the USG could offer technical
assistance to the GOC this year and next.

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ACTION REQUEST
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11. (U) Action Request: That the Department arrange
appropriate USG meetings for Ngoulou later this month, to get
his take on Chad's public financial management sitiuation and
to explore the possibility of U.S. technical assistance to
the GOC's efforts to manage its public revenues more
efficiently and responsibly.
NIGRO