FY 2010 PROHIBITION ON ASSISTANCE TO CENTRAL

UNCLAS SECTION 01 OF 06 STATE 001923 SENSITIVE SIPDIS FOR AMBASSADORS FROM DEPUTY SECRETARY LEW E.O. 12958: N/A TAGS: AID EAID ECON EFIN PREL SUBJECT: FY 2010 PROHIBITION ON ASSISTANCE TO CENTRAL GOVERNMENTS WHOSE BUDGETS ARE NOT TRANSPARENT REF: A. (A)STATE 81177 ¶B. (B)STATE 98111 -------------- RESTRICTIONS ON ASSISTANCE -- POST INPUT NEEDED -------------- -- ¶1. (U) This is a request for action by January 20; see paragraphs 3, 4, and 10. ¶2. (U) Under Section 7086(c)(1) of the Department of State, Foreign Operations, and Related Programs Appropriations Act, 2010 (P.L. 111-117) (SFOAA),the Department and USAID are prohibited from providing any bilateral economic assistance or international security assistance (i.e., funds appropriated under titles III or IV of the SFOAA) to the central government of any country "that fails to publicly disclose on an annual basis its national budget, to include income and expenditures." Section 7086(c)(2) permits the Secretary or her designee to waive the restriction on a country-by-country basis if it is important to the U.S. national interest to do so. Before any FY 2010 funds can be obligated to provide assistance to the central government of any country, the Department must determine which, if any, central governments are not in compliance with Section 7086 and whether it may be important to the U.S. national interest to seek a waiver to allow funding to proceed. EEB's Office of Monetary Affairs (EEB/IFD/OMA) is coordinating the 2010 fiscal transparency review. Fiscal transparency promotes sound management of scarce resources, citizens' engagement in budgetary decisions that affect them, and rule of law. The Department is committed to use this process to effect positive change toward better fiscal transparency in countries, including compliance with the standard contained in Section 7086(c)(1). ¶3. (SBU) ACTION REQUEST: Action addressee posts -- in countries that either received waivers last year or that have been identified by EEB as requiring further analysis in the FY 2010 cycle -- are asked to please respond to the following questions to assist EEB in its analysis: -- Is the central government expected to receive funding STATE 00001923 002 OF 006 under the FY 2010 SFOAA? (See guidance in para 5 below) -- Is the host country's annual national budget publicly available? (See guidance in para 6 below) -- Are incomes and expenditures included in the publicly-available budget? (See guidance in para 7 below) -- What is post's assessment of the extent to which the publicly-available budget accurately reflects actual government incomes and expenditures? (See guidance in para 7 below) -- Have there been any events since the 2009 review that may have affected fiscal transparency (e.g., a coup)? -- Since last year's review, what efforts has the host government undertaken to improve fiscal transparency? What progress has been made, pursuant to the 2009 demarches on the subject (reftels)? ¶4. (SBU) Posts are requested to submit responses by January 20, 2010, by cable slugged for EEB/IFD/OMA Briana Saunders, and by e-mail to SaundersB@state.gov, with a copy to the country desk and regional bureau POC (see para 15). For an example of what constitutes good post input to EEB analysis, please see 2009 YAOUNDE 369 (this can be emailed to posts upon request, if needed). -------------- GUIDANCE FOR RESPONSES -------------- ¶5. (SBU) For the purpose of answering the first question, the following guidance is provided: The legislative restriction only pertains to bilateral economic assistance and international security assistance under the SFOAA for central governments; assistance to regional, local or municipal governments is not considered assistance to the central government. Assistance for the central government would include any assistance for central ministries and their operations, and for executive, legislative, and judicial branch entities of the national government. For example, Foreign Military Financing (FMF) and International Military Education and Training (IMET) are assistance for the central government. Assistance for the central government that is provided through an NGO-implementer, e.g. training for STATE 00001923 003 OF 006 Minister of Interior officials, would also constitute assistance for the central government. Financing under the Export Import Bank Act would not be considered assistance within the meaning of this restriction. ¶6. (U) For the purpose of answering the second question, "publicly available" can be broadly interpreted to mean that the information is available on-line, on request from the ministry, for purchase at a government printing office, etc. While Executive Budget speeches are valuable, they typically do not contain sufficiently detailed information on revenues and expenditures on their own to satisfy the fiscal transparency requirement. Additional detailed publicly available information on the enacted budget ) and, ideally, an end-of-year outcomes report, audited budget reports, and information on budget support from foreign assistance ) is usually necessary for a country to be considered fiscally transparent. If the budget is posted on the internet, posts are asked to cite the relevant link in your response cable and email it to SaundersB@state.gov. ¶7. (U) For the purpose of answering the third and fourth questions, the following guidance is provided: EEB takes into account not only whether a country makes publicly available a budget that includes income and expenditures, but also whether that budget is credible and complete (not including military or intelligence spending, which many countries do not disclose for national security reasons). EEB also considers the transparency of government-affiliated enterprises that may be expected to transfer revenues to the central government ) for example, the transparency of the revenues of a national oil company. ¶8. (U) Also of note: Although the IMF promotes fiscal transparency through its engagement, the IMF typically has access to non-public budget information and the existence of an IMF program in itself does not suggest that a country will pass the fiscal transparency requirement. However, reporting on the IMF's analysis of a country's fiscal transparency is valuable to EEB's analysis. -------------- WAIVER REQUESTS -------------- ¶9. (SBU) Based on posts' input and other sources, EEB will determine which central governments do not satisfy the fiscal STATE 00001923 004 OF 006 transparency requirement for this year, as identified in the Foreign Ops legislation. For countries which do not satisfy the transparency requirement, the regional bureau will determine whether or not to seek a waiver in order to permit the obligation of foreign assistance under the FY2010 Foreign Ops legislation. The Department does not operate on the assumption that each country that fails to satisfy the requirement deserves a waiver. Should the regional bureau decide to pursue a waiver, the regional bureau will draft and submit a waiver request to D(L) no later than February 10, ¶2010. In cases where a regional bureau deems that a country should be eligible for a waiver, full justification must be submitted in the waiver request. Posts need to be able to demonstrate clearly efforts undertaken and progress made. Any extraordinary circumstances that prevent the country from making progress towards satisfying the fiscal transparency criteria should be articulated in the waiver submission. ¶10. (SBU) ACTION REQUEST: Given the possibility that action addressees' host governments may require a waiver, Posts are also asked to provide in the cable response the following input; such input is of interest generally and will assist the regional bureaus in drafting the waiver request for your country: -- Efforts by the host government to improve fiscal transparency; -- USG/Post actions and strategy to promote such efforts, including pursuant to reftels; -- Any resulting progress; -- An updated 2010 action plan for Post efforts to work with the host government to improve fiscal transparency and promote graduation out of the need for a waiver. ¶11. (SBU) The Department expects Posts to be working with countries to address fiscal transparency concerns and promote graduation out of the need for a waiver, pursuant to reftels. Unless there are extraordinary circumstances, a pattern of continued failure by countries to make progress towards satisfying the fiscal transparency criteria is unacceptable. EEB will continue working with regional bureaus following the waiver process to ensure that efforts are underway with countries to promote compliance with Section 7086(c)(1) and graduation from the need for a waiver. STATE 00001923 005 OF 006 -------------- BACKGROUND ON METHODOLOGY -------------- ¶12. (SBU) EEB's analysis relies heavily on post reporting, including the response to this cable, as well as open source information from NGOs, international institutions, etc. Where there are serious concerns about significant, non-transparent central government revenues or expenditures based on the totality of the information obtained by EEB ) even in cases where there is some form of a publicly-released budget ) EEB will make the determination that a country does not meet the fiscal transparency requirement under the SFOAA. In such a case, the respective regional bureau will decide whether to pursue a waiver to allow assistance to the central government to continue despite insufficient fiscal transparency; regional bureaus will also be responsible for the drafting the waiver request. Final approval of a waiver rests with Deputy Secretary Lew. ¶13. (SBU) For the 2010 review, EEB will analyze fiscal transparency in those countries that required waivers in 2009: Cambodia; Egypt; Lebanon; Libya; Saudi Arabia; Yemen; Afghanistan; Kyrgyzstan; Maldives; Tajikistan; Turkmenistan; Uzbekistan; Bolivia; Dominican Republic; Dominica; Nicaragua; St. Vincent; Angola; Burkina Faso; Cameroon; CAR; Chad; Congo-B; Cote d,Ivoire; DRC; Ethiopia; Gabon; Gambia; Guinea Bissau; Niger; Somalia; Senegal; Swaziland; and Zambia. ¶14. (SBU) EEB will also re-analyze the fiscal transparency of countries with borderline fiscal transparency in last year's review and countries in which fiscal transparency may have worsened. Those countries will at a minimum include: Comoros; Djibouti; Malawi; Mauritania; Nigeria; Sao Tome & Principe; Sierra Leone; Zimbabwe; Vietnam; Algeria; Ecuador; Honduras; and Venezuela. ¶15. (SBU) For more information on the fiscal transparency review process, please refer to "Fiscal Transparency8 on the Diplopedia website, to EEB Coordinator Saunders, or to the appropriate point of contact on fiscal transparency for your regional bureau: -- AF: Mary Johnson -- SCA: Aisha Sabar -- WHA: Jennifer Ceriale STATE 00001923 006 OF 006 -- NEA: Brian Grimm -- EAP: Adam West ¶16. (U) The Department greatly appreciates Missions' support for this exercise and your ongoing efforts to promote fiscal transparency. CLINTON