VZCZCXRO9994
RR RUEHDBU RUEHIK RUEHYG
DE RUEHBUL #5373 3100132
ZNR UUUUU ZZH
R 060132Z NOV 06
FM AMEMBASSY KABUL
TO RUEHC/SECSTATE WASHDC 3944
RUEATRS/DEPT OF TREASURY WASHINGTON DC 0204
INFO RHEHAAA/NSC WASHINGTON DC
RUEKJCS/SECDEF WASHINGTON DC
RUEKJCS/OSD WASHINGTON DC
RUEKJCS/JOINT STAFF WASHINGTON DC
RUCPDC/USDOC WASHDC
RUCNAFG/AFGHANISTAN COLLECTIVE
RUCNIRA/IRAN COLLECTIVE
RUEHZG/NATO EU COLLECTIVE
RHMFIUU/HQ USCENTCOM MACDILL AFB FL
RUEAIIA/CIA WASHINGTON DC
RHEFDIA/DIA WASHINGTON DC

UNCLAS KABUL 005373 
 
SIPDIS 
 
SENSITIVE, SIPDIS 
 
DEPT FOR SCA FRONT OFFICE (DAS GASTRIGHT), SCA/A, AND EB/ODF 
DEPT FOR ISN/ECC:JCOLLINS 
DEPT PASS AID/ANE, USTR, AND OMB:PCALBOS 
TREASURY FOR LMCDONALD, JCIORCIARI, AND ABAUKOL 
NSC FOR AHARRIMAN 
 
E.O. 12958:N/A 
TAGS: EAID EFIN AF
SUBJECT:  DEPUTY FINANCE MINISTER SHAHRANI - BUDGET 
      EXECUTION IMPROVED, BUT COULD BE BETTER 
 
 
(U) This cable contains SENSITIVE BUT UNCLASSIFIED Information. 
Please protect accordingly.  Not for Internet Distribution. 
 
 
1.(SBU) SUMMARY: Deputy Finance Minister Wahidallah Shahrani told 
ECON Counselor on October 30 that the Finance Ministry recognizes 
the GOA's budget execution problem and is proactively engaged to 
improve the capacity of line-ministry procurement and financial 
management staff.  He blamed poor leadership in certain line 
ministries and ineffective donor technical assistance for the poor 
rate of disbursement of donor contributions to the GOA's development 
budget.  Nonetheless, he stressed that the GOA is spending money 
faster than last year's pace.  Budget execution will be a central 
theme of the upcoming November 12 Joint Coordination and Monitoring 
Board (JCMB) meeting.  Despite Shahrani's attempt to shape the 
discussion, we anticipate that the finance ministry will face some 
criticism for its slow disbursement rates to line ministries.  END 
SUMMARY. 
 
2.(SBU) DFM Shahrani acknowledged to ECON Counselor that development 
budget execution would be a central issue in the upcoming November 
12 JCMB (i.e., joint Afghan-Donor London Compact coordination) 
meeting.  While the government got off to a slow start because of 
parliament's delayed passage of the budget, some line-ministries, 
and the government as a whole, are outperforming last year's 
procurement pace, he stated.  For the first four months of this 
year, the GOA has spent 27% of its development budget, compared to 
12.5% of the development budget spent over the same period last 
year.  For this entire fiscal year, Shahrani projected a 60% 
expenditure rate, compared to 44% last year.  Afghanistan's fiscal 
year begins in March. 
 
3.(SBU) Shahrani assured ECON Counselor that the Finance Ministry is 
fully aware of the seriousness of the perception among donors that 
the GOA is not moving its development budget quickly enough.  MOF 
officials have been working closely with underperforming line 
ministries, like the Energy Ministry, on procurement and financial 
management, and are seeing some improvement.  The Finance Ministry, 
he said, also conducted two training seminars for procurement 
officials earlier in the year. 
 
4.(SBU) Shahrani stressed that capacity building in the line 
ministries and the Finance Ministry itself is a major challenge.  He 
commented that too many foreign advisors provided by donor countries 
work independently of Afghan employees in the ministries, and never 
train these Afghan colleagues.  When they leave the ministry, the 
Afghans are unable to replace the foreigner.  He reiterated Finance 
Minister Ahady's preference that donors pay for regional advisors 
(e.g., Indians or Sri Lankans) who are more likely to stay for 
longer periods and work more closely with local staff.  Shahrani 
also made a pitch to be allowed to pay higher salaries to younger, 
better-educated Afghans to retain them in government jobs, noting 
that GoA retention of employees following training is a critical 
issue.  Finally, he said that capacity is improving in ministries, 
like Communications and Rural Development, where ministers are 
showing strong leadership. 
 
5.(SBU) COMMENT: Shahrani, one of the GOA's sharper senior economic 
officials, recognized the opportunity to try to shape the coming 
JCMB debate on the GOA's poor performance on budget execution by 
trying to lay blame on poor donor and line-ministry performance, 
while emphasizing the finance ministry's proactive approach to the 
problem and appealing for donor support.  However, we believe the 
Finance Ministry shares responsibility for not disbursing funds to 
line ministries' requests for payment as quickly as it could, and 
needs to play a strong leadership role in engaging with and 
developing capacity with line Ministries. We will explore ways to be 
supportive, including shaping discussion with UNAMA and other donors 
through the JCMB process, and notably at the November 12 JCMB 
meeting. END COMMENT.