VZCZCXRO8961
OO RUEHBC RUEHBZ RUEHDE RUEHDH RUEHDU RUEHGI RUEHJO RUEHKUK RUEHMA
RUEHMR RUEHPA RUEHRN RUEHROV RUEHTRO
DE RUEHNJ #0424/01 2751228
ZNR UUUUU ZZH
O 021228Z OCT 09 ZDK
FM AMEMBASSY NDJAMENA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 7269
INFO RUCNFUR/DARFUR COLLECTIVE PRIORITY
RUEHEE/ARAB LEAGUE COLLECTIVE PRIORITY
RUEHZO/AFRICAN UNION COLLECTIVE PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RHEHNSC/NSC WASHDC PRIORITY
RHMFISS/HQ USAFRICOM STUTTGART GE PRIORITY

UNCLAS SECTION 01 OF 02 NDJAMENA 000424 
 
SIPDIS 
SENSITIVE 
 
STATE FOR AF/C, S/USSES 
NSC FOR GAVIN 
LONDON FOR POL - LORD 
PARIS FOR POL - BAIN AND KANEDA 
ADDIS ABABA ALSO FOR AU 
 
E.O. 12958: N/A 
TAGS: PGOV ECON EFIN IMF PREL IBRD CBD EAID CD
SUBJECT: IMF SAYS GOC MISSES SPENDING TARGETS ON 
REVENUE-MANAGEMENT PROGRAM 
 
REF: NDJAMENA 398 
 
NDJAMENA 00000424  001.3 OF 002 
 
 
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SUMMARY 
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¶1.  (SBU) In a meeting October 1, IMF ResRep Joseph Karangwa 
told Charge and A/DCM that the IMF,s Staff-Monitored Program 
(SMP) for the GOC had gone completely off track, and that 
Chad would not meet spending targets through the end of 2009. 
 The IMF would likely agree to a GOC request to "extend" the 
SMP, he noted, with the aim of trying to encourage 
achievement of spending targets by mid-2010.  Karangwa 
indicated that IMF Managing Director Dominique Strauss-Kahn 
had delivered a strong message to President Deby at their 
meeting in Washington the previous week, but Deby,s 
recognition of the need to get spending under control could 
not be taken for granted.  According to Karangwa, the GOC was 
making budget preparations for 2010 in an acceptable manner. 
But the ResRep expressed concern about sizable loans that the 
GOC seemed to be negotiating, especially with Libya. 
 
¶2.  (SBU)  The IMF's assessment at the end of its September 
review is very negative; Karangwa appears to have decided to 
give the GOC another chance under an extended SMP because his 
only other option would be to pull the plug entirely on 
advice-giving.  The GOC's inability to practice responsible 
revenue management under the six-month SMP program calls into 
question its long-term ability to meet qualifications for 
debt relief as a Highly Indebted Poor Country.  END SUMMARY. 
 
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SMP IS COMPLETELY OFF TRACK 
--------------------------- 
 
¶3.  (SBU) IMF Resident Representative Karangwa,s 
end-September assessment of Chad,s adherence to budget 
strictures was considerably more critical than he indicated 
to us it might be when we spoke with IMF Chad chief Christian 
Josz and Karangwa at the beginning of the SMP review early in 
the month (Reftel).  Karangwa based his comments on the 
result of the IMF mission's review of end-August spending 
figures, which indicate an unusual number of extra-budgetary 
expenses. 
 
¶4.  (SBU) Karangwa claimed that the GOC had accepted the 
IMF's conclusions, but that it had requested an "extension" 
of the SMP rather than agreeing to acknowledge failure in 
public.  The IMF felt that it could be most helpful by 
claiming that the SMP was being "re-examined."  Thus the 
IMF,s currently intent was to try to hold Chad accountable 
for hitting 2010 budget spending targets at two periods in 
the future, end-March and end-June 2010.  (Note:  As the SMP 
is a six-month program, the "extension" is, in reality, a 
complete redo for the GOC.  End Note.) 
 
------------------------------------------ 
INVESTMENT SPENDING REMAINS OUT OF CONTROL 
------------------------------------------ 
 
¶5.  (SBU) Karangwa indicated that Managing Director Dominique 
Strauss-Kahn,s September 24 meeting with President Deby had 
been cordial, and that Strauss-Kahn,s message on the need 
for discipline had been very clear.  But in answer to our 
questions on whether the IMF thought Deby truly understood 
that extra-budgetary spending would have to cease, Karangwa 
acknowledged that this was far from certain.  In response to 
Deby's defense of extra expenditures on security grounds, 
Strauss-Kahn had pointed out that there had been excessive 
extra-budgetary spending in many non-security sectors. 
Karangwa said that Strauss-Kahn had emphasized to Deby that 
the IMF needed to see proof of the GOC's commitment to reform 
and that responsible revenue management was the only way for 
the GOC to earn debt relief as a Highly Indebted Poor Country 
(HIPC). 
 
¶6.  (SBU) The IMF was now waiting to see whether the GOC 
would prove capable of reining in spending in the coming 
months, said Karangwa.  He reiterated that capital investment 
 
NDJAMENA 00000424  002.3 OF 002 
 
 
spending was most seriously out of control, and that of all 
Ministers, Infrastructure Minister Adoum Younousmi -- a close 
associate of President Deby -- was most profligate and least 
concerned with respecting IFI goals.  Karangwa blamed 
President Deby for giving Younousmi carte blanche on spending 
projects designed primarily to gain political support 
(Septel). 
 
--------------------------------- 
2010 BUDGET: PROGESS AND CONCERNS 
--------------------------------- 
 
¶7.  (SBU) The ResRep was less critical of GOC planning for 
2010 spending, but added that he was waiting to see how 
allocations would be distributed among ministries.  The GOC 
needed to demonstrate that it could responsibly spend in line 
with its poverty reduction strategy would entail. 
 
¶8.  (SBU) Karangwa asked whether we had information on the 
reasons for which the GOC appeared to be negotiating a loan 
of U.S. $300 million from Libya.  He also questioned the 
advisability of GOC intent to borrow from the Chinese a 
40-percent stake in a planned Chinese-built oil refinery. 
Karangwa said he wondered whether the GOC was planning major 
military purchases from the U.S., which might explain the 
pursuit of the Libyan loan.  He also said that the IMF had 
warned the GOC that any non-concessional loans could hurt 
Chad's ability to qualify for HIPC debt relief. 
 
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COMMENT 
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¶9.  (SBU) The IMF's assessment at the end of the September 
review is more much negative than Karangwa seemed to think it 
would be when Josz and Karangwa spoke with us at the 
beginning of the month.  The GOC's inability to practice 
responsible revenue management under the six-month program 
calls into question its long term ability to meet 
qualifications for debt relief as a Highly Indebted Poor 
Country.  Successful performance under the SMP could open the 
door to additional donor assistance, which the government 
needs, particularly as the IMF believes that revenue will 
remain low into 2011.  END COMMENT. 
 
¶10.  (U)  Minimize considered. 
BREMNER