VZCZCXRO3515
PP RUEHBZ RUEHDU RUEHGI RUEHJO RUEHMA RUEHMR RUEHPA RUEHRN RUEHTRO
DE RUEHDK #0852/01 2041703
ZNR UUUUU ZZH
P 221703Z JUL 08
FM AMEMBASSY DAKAR
TO RUEHC/SECSTATE WASHDC PRIORITY 0852
INFO RUEHAD/AMEMBASSY ABU DHABI PRIORITY 0060
RUEHTC/AMEMBASSY THE HAGUE 0150
RUEHOT/AMEMBASSY OTTAWA 0131
RUEHMT/AMCONSUL MONTREAL 0001
RUEATRS/DEPT OF TREASURY WASHDC
RUEHLMC/MCC WASHDC
RUEHZO/AFRICAN UNION COLLECTIVE

UNCLAS SECTION 01 OF 02 DAKAR 000852 
 
SIPDIS 
SENSITIVE 
 
DEPARTMENT FOR EBB/IFD/ODF, A/EPS, AND AF/W 
ABU DHABI FOR TREASURY/GRIFFERTY 
TREASURY FOR RHALL AND DPETERS 
 
E.O. 12958: N/A 
TAGS: EFIN EAID EAIR ECON PGOV SG
SUBJECT: SENEGAL ASKS DONORS TO SPEED BUDGET SUPPORT AND TAXES 
INTERNATIONAL AIRLINES 
 
REF:  A. DAKAR 813 (notal) 
  ¶B. DAKAR 661 (notal) 
       ¶C. DAKAR 601 (notal) 
 
DAKAR 00000852  001.2 OF 002 
 
 
¶1.  (SBU) SUMMARY:  The Government of Senegal (GOS) appears 
increasingly desperate to find the means to cover its current 
accounts deficit. At the request of the Minister of Finance, on July 
10 the IMF Resrep sent an email to a number of donors imploring them 
to accelerate their disbursements of direct budget assistance.  The 
IMF states that without this money, Senegal must make swift and 
serious budget cuts with "disastrous" consequences.  Following 
Senegal's recent undersubscribed bond issuance (Ref A), the 
government's scramble for money is also impacting the prolonged 
fight between the GOS and ASECNA regarding the rights to aviation 
overflight fees.  Delta Airlines is also facing new taxes. 
President Wade has yet to admit that his country is facing a 
financial crisis.  END SUMMARY 
 
SENEGAL GOES TO INTERNATIONAL COMMUNITY FOR FUNDING 
--------------------------------------------- ------ 
¶2.  (SBU) On July 10th, the IMF representative to Senegal, Alex 
Segura, wrote an email to representatives of the donor community 
imploring them, on behalf of the GOS, to accelerate their direct 
budget support to the government citing a drastic fiscal deficit 
without such funds.  In particular, the GOS hopes that Canada, the 
Netherlands, and the European Union will quickly provide their 
pledged contribution.  In his message, Segura asked donors to 
provide their timetable for providing the funds.  [Note:  The USG 
does not provide budget support to Senegal.  End note.]  As outlined 
in Ref. B, Segura has been quite public in expressing his concerns 
about the GOS' current accounts deficit and has pushed for some 
immediate budget cuts.  In his current message, Segura claimed that 
without the funds from the international community the GOS would 
face a financial crisis and be forced to cut funding to programs 
beyond the IMF's requests. 
 
¶3.  (SBU) Segura assured donors that the IMF would strictly oversee 
the budget contributions to ensure that the money was not used to 
subsidize commodities but rather to support the most desperate of 
the population directly.  He also said that the GOS would shortly 
make difficult decisions regarding its subsidies program.  To date, 
however, no sign of such a tough decision has emerged from the 
government.  Rather, the Minister of Commerce publicly stated the 
government plans to maintain its subsidies on staple commodities. 
Segura has highlighted for donors and the government that the food 
and energy subsidies are generalized, and are not targeted to 
relieve the poorest segments of society, and are more aligned to 
assuage possible urban discontentment. 
 
¶4.  (SBU) We have heard from a number of contacts, both in and out 
of government that the GOS's budget situation is indeed grave. 
Subsidies have actually increased lately, and new unpaid bills are 
being added to the government's stock of arrears.  One contact 
stated that the near term deficit could be as much as CFA 100 
billion (USD 238 million).  If the budget deficit is not brought 
under control, it could derail Senegal's Policy Support Instrument 
(PSI) program with the IMF when the next review takes place in 
September. 
 
SQUEEZING INTERNATIONAL AVIATION FOR REVENUE 
-------------------------------------------- 
¶5.  (SBU) With the government's recent bond issuances falling USD 83 
million short of expectations, the government appears to be 
targeting civil aviation for additional revenue.  It continues to 
collect overflight fees over the objections of the regional civil 
aviation Agency for Navigation Security in Africa and Madagascar 
(ASECNA) that Senegal has no right to those fees since it remains a 
member of the organization (Ref. C).  We have also recently learned 
that the government is imposing a new and unannounced tax on 
passengers transiting Dakar's LLS airport, and the most implicated 
flights are Delta Airlines routes between South Africa and the U.S., 
which include service to Dakar. 
 
COMMENT 
------- 
¶6.  (SBU) The pledged budget support by certain donors is clearly 
needed to head off significant budget cuts.  The IMF's Segura has 
played a positive role in publically raising the alarm about 
Senegal's weakening public finances, but even under the PSI, the IMF 
has not yet been able to adequately monitor budget payments or 
 
DAKAR 00000852  002.2 OF 002 
 
 
convince the GOS to rationalize its massive food and energy 
subsidies.  In its scramble for money, the government is facing a 
threatened lawsuit by ASECNA, and perhaps a reassessment by Delta 
Airlines of its Dakar stops. 
 
¶7.  (SBU) Although the nitty-gritty of the GOS's potential budget 
crisis has largely been kept out of the public eye, discontent is 
growing as suppliers are not being paid for subsidies, companies are 
still awaiting payments for arrears owed them, and many government 
services are in stopgap mode awaiting funds.  Increasingly, 
Senegalese are asking why President Wade continues to circle the 
globe to promote his personal diplomatic and development agendas 
rather than remain in Dakar to deal with the difficult realities 
facing the government. 
 
   SMITH