VZCZCXYZ0000
RR RUEHWEB

DE RUEHEG #5337 2361539
ZNR UUUUU ZZH
R 241539Z AUG 06
FM AMEMBASSY CAIRO
TO RUEHC/SECSTATE WASHDC 0887
INFO RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC 0186

UNCLAS CAIRO 005337 
 
SIPDIS 
 
SIPDIS 
SENSITIVE 
 
STATE FOR NEA/ELA, NEA/RA, EB/IDF/OMA 
USAID FOR ANE/MEA MCCLOUD AND DUNN 
USTR FOR SAUMS 
TREASURY FOR NUGENT AND HIRSON 
COMMERCE FOR 4520/ITA/ANESA/TALAAT 
 
E.O. 12958:  N/A 
TAGS: ECON EFIN ETRD EINV EG
SUBJECT: CBE GOVERNOR EL OKDAH PROPOSES "AUDIT" SOLUTION 
 
 
Sensitive but Unclassified.  Not for Internet distribution. 
 
¶1.  (U) URGENT ACTION REQUEST:  See para 5. 
 
¶2.  (SBU) In an animated discussion with Central Bank Governor El 
Okdah, the Ambassador and USAID Mission Director Ellis repeated the 
U.S. position, already conveyed in a letter from the Ambassador to 
the Minister of Finance, regarding use of the term "full financial 
due diligence" versus "audit" in the DSP-II Monitoring Program for 
the Financial Sector MOU.  The Ambassador noted that the USG was 
willing to accept "full financial due diligence" for the FY 2005 
financial analysis of the public banks, but believed that for all 
subsequent years, the banks in question should issue formal 
"financial audits."  The GOE would have sufficient time between now 
and the due date of the next financial analysis to address the legal 
impediment preventing use of the term "audit" for FY 2005. 
 
¶3.  (SBU) El Okdah made the case that the MOU benchmarks were aimed 
at solving the problem of non-performing loans (NPLs) and expanding 
credit to the private sector.  He suggested that for purposes of the 
DSP-II Monitoring Program, the required annual financial analyses 
could be partial audits of only these two areas of the public banks' 
books, i.e., NPLs and credit to the private sector.  An 
international firm would conduct the partial audits, using 
international accounting standards.  This would prevent legal 
problems with the GOE's Central Audit Board, which is required by 
law to conduct an annual audit of the public banks according to 
Egyptian, not international, standards.  El Okdah noted that 
legislation was already before parliament to revise Egypt's 
accounting standards, but that the revisions would not necessarily 
bring Egypt's standards into full concordance with international 
standards. 
 
¶4.  (SBU) El Okdah repeated the request for a DVC with the USG 
actors involved in reaching agreement on the terms of the DSP-II 
Monitoring Program.  Alternatively, he would welcome U.S. Treasury 
visitors to Cairo or travel to Washington himself, as soon as U.S. 
Treasury officials might wish.  He emphasized his determination to 
sign the Monitoring Program in the next two weeks, well before the 
end of the U.S. fiscal year on September 30.  The Ambassador 
undertook to look into the possibility of arranging a DVC or visits 
in either direction during the week of August 27 or September 3. 
 
¶5.  (U) ACTION REQUEST:  Post would appreciate NEA/ELA identifying a 
date and time when the appropriate Treasury and USAID officials in 
Washington could be gather for a DVC with Egyptian counterparts. 
 
RICCIARDONE