VZCZCXRO6874
PP RUEHBC RUEHDA RUEHDBU RUEHDE RUEHGI RUEHJS RUEHKUK RUEHLH RUEHPW
RUEHROV
DE RUEHDK #1987/01 2771604
ZNR UUUUU ZZH
P 041604Z OCT 07
FM AMEMBASSY DAKAR
TO RUEHC/SECSTATE WASHDC PRIORITY 9316
INFO RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RUEHLMC/MCC WASHDC
RUCNISL/ISLAMIC COLLECTIVE

UNCLAS SECTION 01 OF 02 DAKAR 001987 
 
SIPDIS 
 
SIPDIS 
SENSITIVE 
 
DEPT FOR AF/W, AND AF/EPS 
TREASURY FOR OIASA/ED BARBER 
 
E.O. 12958: N/A 
TAGS: EFIN ECON PGOV SG
SUBJECT: SENEGAL SUPPLEMENTAL BUDGET FOR OIC PROJECTS, PARASTATAL, 
AND PRSP 
 
REF:  A. DAKAR 588 
  ¶B. DAKAR 1925 
 
DAKAR 00001987  001.2 OF 002 
 
 
¶1.  (SBU) SUMMARY:  On September 28, Senegal's National Assembly 
approved a supplemental budget for the current fiscal year, 
augmenting targeted expenditures by eleven percent following the 
successful issuances of treasury bonds in June and August 2007, 
recent announcements of new loans from Saudi Arabia and Kuwait, and 
greater than expected revenues from import duties.  Budget Minister 
Sarr explained that the new funds would target the Agency for the 
Islamic Conference Organization's (ANOCI) infrastructure projects, 
help for Senegal's electricity parastatal's budget woes, and 
undefined goals under Senegal's PRSP.  This supplement does not take 
into account the proceeds from the sale of the third telephone 
license to Sudatel (Ref B), the revenues collected from airline 
passenger tickets to support Senegal's new airport project, nor the 
anticipated proceeds from the sale of GOS's shares in Sonatel and 
ICS, announced to take place in the near future.  This plan may help 
the Wade administration meet its political agenda, but is not 
sufficient for its poverty reduction requirements.  END SUMMARY. 
 
WHERE'S THE MONEY COMING FROM, WHERE'S IT GOING? 
--------------------------------------------- --- 
¶2.  (U) In presenting his goals for a supplemental budget to the 
National Assembly on September 28, Budget Minister Ibrahima Sarr 
explained that the treasury had available CFA 174 billion 
(approximately USD 348 million) in extra revenues which represents 
11 percent of the total expenditures of the original FY (and 
calendar) 2007 budget.  Sarr outlined the sources of the additional 
revenue as:  CFA 132 billion (USD 264 million) from the successful 
June and August offering of Treasury bonds, a new CFA 26 billion 
"concessional" loan (USD 52 million) from Saudi Arabia, a new CFA 5 
billion loan from Kuwait (USD 10 million), and CFA 11 billion (USD 
22 million) in excess revenue from import duties. 
 
¶3.  (U) Sarr told the Deputies that CFA 10 billion (USD 20 million) 
will be allocated to ANOCI to speed up the constructions of hotels 
and the conference center for the Organization of Islamic 
Conferences (OIC) summit scheduled for March 2008.  The government 
has recently admitted that it is behind schedule on constructing new 
hotel space for the summit, and has recently committed to spending a 
reported USD 200 million on renovations to Dakar's premier hotel, Le 
Meridien President, (including shutting the place entirely from 
mid-October to Mid-November), on new "presidential villas" for heads 
of state, and two new mosques. 
 
¶4.  (U) Senelec, Senegal's debt-ridden, ineffectual electricity 
parastatal will receive an infusion of CFA 65 billion (USD 130 
million), which should help it get current on accounts (but is not 
enough to help with transmission problems and the lack of generating 
capacity). 
 
¶5.  (U) Sarr also noted that the revised budget will allocate CFA 99 
billion (USD 198 million) to support the country's 2006-2010 Poverty 
Reduction Strategy Paper (PRSP) goals, which call for combating 
rural poverty and improving health care, education, and governance. 
He did not specify how the allocation would be divided or what 
sectors would receive money. 
 
¶6.  (U) Sarr insisted that Senegal is not bankrupt and the treasury 
bond issuances do not mean that the budget deficit is critical.  He 
admitted that Senegal's fiscal deficit is severe but manageable. 
[Note:  The GOS does have a serious fiscal deficit of close to USD 
600 million, almost six percent of GDP, up from about three percent 
in 2004-2005, to 5.5 percent in 2006-2007.  The IMF recently raised 
the alarm that Senegal's budget deficit could reach ten percent of 
GDP in 2008.  The government has been roundly criticized by donors, 
the IMF, and Senegalese commentators for its funding choices that 
include a new Senate, civil service wage increases and perks, and 
the commitment of significant resources for preparations for the OIC 
summit.  End Note.] 
 
MORE MONEY IN THE PIPELINE 
-------------------------- 
¶7.  (U) Minister Sarr was silent on what the government plans to do 
with new, unbudgeted resources headed its way, although he 
speculated that these would be included in the FY 2008 budget. 
These include USD 200 million from the sale of a third telephone 
license to Sudatel (a Sudanese consortium) and the collection of 
taxes from passenger airline tickets to support the building of a 
new international airport, whose dedicated account is currently 
estimated at USD 58 million.  In addition, President Wade recently 
confirmed that the government planned to sell its holdings in some 
of the country's largest firms, including its 25 percent stake in 
the major telephone company Sonatel, worth perhaps USD 600 million, 
as well as government shares in the phosphates mining company ICS, 
 
DAKAR 00001987  002.2 OF 002 
 
 
and a major public transportation company. 
 
COMMENT 
------- 
¶8.  (SBU) While the GOS has a good record of presenting its budget 
plans and outlining its revenue sources, the Wade administration has 
routinely been criticized for its spending priorities and lack of 
transparency with its public expenditures.  If used wisely, an extra 
USD 198 million on poverty reduction activities could benefit the 
less well-off citizens of Senegal.  The money to help recapitalize 
Senelec may give the company a bit of breathing space to get 
organized and better address the country's frequent power outages if 
it is used to good effect.  The allocation of funds for renovating 
luxury hotels in preparation for the OIC is less justifiable.  While 
the government is very much under the gun to meet expectations for 
the March gathering, many of the projects and priorities for the OIC 
summit have been poorly and opaquely managed.  Moreover, we question 
why a country that is struggling to fill a $4 billion gap needed to 
implement its poverty reduction strategy should instead spend $200 
million to renovate a hotel. 
 
¶9.  (SBU) Though not included in this supplemental budget, Sudatel 
is scheduled to deposit USD 100 million before January 2008.  If 
that happens, we anticipate it being committed to some of President 
Wade's priorities right away, rather than wait for the 2008 budget. 
All the same, we hope that budget planning for 2008, currently being 
finalized, will demonstrate that the government understands it can 
no longer postpone critical reforms to lower its fiscal deficit and 
will demonstrate a new commitment to improving the effectiveness of 
its public finances. 
 
¶10.  (SBU) Visit Embassy Dakar's intranet site at: 
http://dakar.state.gov/htdocs/section/econsec tion.aspx and Embassy 
Dakar's SIPRNET Web site at http://www.state.sgov.gov/p/af/dakar. 
 
PIAZZA