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

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RESTRICTIONS ON ASSISTANCE -- POST INPUT NEEDED
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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

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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).

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GUIDANCE FOR RESPONSES
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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

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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.

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WAIVER REQUESTS
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9. (SBU) Based on posts' input and other sources, EEB will
determine which central governments do not satisfy the fiscal

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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.

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BACKGROUND ON METHODOLOGY
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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

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-- 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