DEMARCHE: ENCOURAGING CENTRAL GOVERNMENT BUDGET

UNCLAS SECTION 01 OF 03 STATE 081177

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: EAID ECON EFIN PREL AID AO UV CM CD CF NG SO CB EG
LE, SA, YM, AF, KG, MV, TI, BL, DR, DO, NU, VC
SUBJECT: DEMARCHE: ENCOURAGING CENTRAL GOVERNMENT BUDGET
TRANSPARENCY

REF: STATE 28885


1. (U) This is an action request; see para 5.


2. (U) Section 7088(c)(1) of the Department of State,
Foreign Operations, and Related Programs Appropriations Act,
2009 (Div H, P.L. 111-8)("the Act"),prohibits "assistance
for the central government of any country that fails to make
publicly available on an annual basis its national budget, to
include income and expenditures." Section 7088(c)(2) permits
the Secretary of State to waive this restriction on a
country-by-country basis. Congress revised this provision in
FY09 to require individual country waivers after the previous
administration utilized a blanket waiver in FY08. The
Secretary's authority to waive this requirement has been
delegated to the Deputy Secretary for Management and
Resources.


3. (SBU) After passage of the Act, the Department, with
input from Posts, determined which central governments were
not in compliance with the legislation and whether it was in
the national interest to seek a waiver to allow foreign
assistance funding to proceed.


4. (SBU) Administration and Congressional interest in this
issue reflects a view that open budget processes and fiscal
transparency are key components of good governance.
Transparent budget and procurement processes are especially
important to effective allocation and management of limited
resources, as well as key to a government's accountability to
its citizens. Promoting fiscal transparency is therefore a
foreign policy priority. To that end, in justifying future
transparency waivers, the Deputy Secretary for Management and
Resources will specifically inquire about U.S. efforts being
undertaken to bring the governments in question into
compliance with Section 7088(c).


5. (SBU) Action request: Posts in countries whose central
governments received a waiver for the release of FY09
assistance funds are requested to deliver the following
points to host government officials at the appropriate level:

-- Good governance and respect for rule of law are critical
to sustainable development and a country's effective use of
resources, including U.S. foreign assistance. An open budget
process and fiscal transparency are key components of good
governance.

-- The U.S. Government places a high priority on promoting
budget transparency. Transparent budget and procurement
processes are especially important for the effective
allocation and management of limited resources and
accountability to citizens.

-- In March of this year, the U.S. Congress passed the FY
2009 Department of State, Foreign Operations, and Related
Programs Appropriations Act, which prohibits "assistance for
the central government of any country that fails to make
publicly available on an annual basis its national budget, to
include income and expenditures," unless the Secretary of
State waives the restriction and sends a report to the
Congress justifying the waiver. This restriction is likely
to continue in future years, Appropriations Acts.

-- This year the USG required a waiver for (country) in order
to continue providing U.S. assistance.

STATE 00081177 002 OF 003


-- The State Department could not unequivocally state that
your government met the budget transparency standard required
by the FY 2009 Appropriations Act, yet we determined that it
was important to the national interest of the United States
to continue providing assistance.

-- Future waivers will not be automatic. When determining
country eligibility for future waivers, we will look
specifically at improvements made by (country) to improve
budget transparency.

-- We encourage you to improve budget transparency by making
a national budget publicly available that reflects income and
expenditures in a manner that is accurate and credible.

-- If appropriate: Increasing budget transparency can be as
simple and low-cost as posting local budgets in
publicly-accessible places, like schools and government
offices. It can also include creating/expanding budget
technical assistance programs, which is supported by a number
of U.S. government agencies, other donor countries and
international financial institutions. We are interested in
hearing whether there are ways our assistance could help you
to make your budget more transparent.


6. (SBU) FOR POSTS, REFERENCE ONLY ) NOT TO BE SHARED WITH
HOST GOVERNMENT (paras 6-9): EEB/IFD/OMA, in coordination
with F, L, H, and PM, developed a methodology for reviewing
fiscal transparency to satisfy the requirement in the
legislation. In reviewing whether a country met the
requirements, EEB/IFD/OMA relied primarily on:

-- Post's response to reftel, which requested an update on
host country fiscal transparency;

-- State's 2008 Report to Congress on Fiscal Transparency and
Accountability in Countries whose Central Governments receive
U.S. Foreign Assistance;

-- International Monetary Fund reports;

-- The NGO Open Budget's 2008 report on budgetary
transparency.


7. (SBU) In recommending whether a country met the
requirement set out in Section 7088(c)(1),EEB/IFD/OMA:

-- Took into account whether a country makes publicly
available a budget that includes income and expenditures.
"Publicly available" can be broadly interpreted to mean that
the information is available on-line, on request from the
government, for purchase at a government printing office,
etc.;

-- Evaluated the completeness and credibility of that
publicly available information with regard to central
government revenues or expenditures;

-- Did not consider the omission of military or intelligence
spending from the budget, as many countries do not disclose
for national security reasons;

-- Did not review budget transparency below the central
government level.


8. (SBU) Typically, countries were deemed to require a
waiver if:

-- The budget was not publicly available;

-- There was substantial doubt about the credibility of the

STATE 00081177 003 OF 003


-- And/or there was a significant level of extra-budgetary or
non-disclosed revenue or expenditure, rendering the budget
non-transparent.


9. (SBU) Where there were serious concerns about the
aforementioned issues noted in para 8, EEB/IFD/OMA noted them
to the relevant regional bureau. The regional bureau then
made a determination whether to pursue a waiver so that
assistance to the country in question could continue.


10. (SBU) Posts are requested to deliver demarche responses
by September 1 in cable slugged for EEB/IFD/OMA Briana
Saunders, and by e-mail to SaundersB@state.gov.
CLINTON