VZCZCXRO3401
PP RUEHMA RUEHPA
DE RUEHDK #1011/01 2461709
ZNR UUUUU ZZH
P 021709Z SEP 08
FM AMEMBASSY DAKAR
TO RUEHC/SECSTATE WASHDC PRIORITY 1061
INFO RUEHAD/AMEMBASSY ABU DHABI PRIORITY 0062
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC
RUEHLMC/MCC WASHDC
RUEHZK/ECOWAS COLLECTIVE

UNCLAS SECTION 01 OF 02 DAKAR 001011 
 
SIPDIS 
SENSITIVE 
 
DEPT FOR AF/W, AF/EPS, EB/IFD 
ABU DHABI FOR TREASURY/GRIFFERTY 
TREASURY FOR RHALL AND DPETRES 
 
E.O. 12958: N/A 
TAGS: EFIN ECON PGOV ETRD EAID KCOR SG
SUBJECT: PRESIDENT WADE FIRES BUDGET MINISTER AFTER REVELATIONS OF 
IMPROPER PAYMENTS 
 
REFS:  A. DAKAR 661, B. DAKAR 813 
 
DAKAR 00001011  001.2 OF 002 
 
 
¶1.  (SBU) Summary:  During an August 7 cabinet meeting, President 
Wade fired Budget Minister Ibrahima Sarr and named Mamadou Abdoulaye 
Sow, a career Senegal Treasury official, as the new Minister.  The 
Presidential decree to remove Sarr -- which came just hours after 
Wade met the IMF Resrep -- followed an internal audit that revealed 
the disbursement of unauthorized and unjustified funds to several 
Ministries and Agencies.  The appointment of the respected 
technocrat Sow as Budget Minister should strengthen the hand of 
Finance Minister Diop in his efforts to assure that all GOS 
financial commitments are reflected in the government's actual 
budget.  End Summary. 
 
A DECREE TO CLEAN UP TREASURY "BLACK HOLE" 
------------------------------------------ 
¶2.  (U) On August 7, President Wade fired his Minister of Budget, 
Ibrahima Sarr, for committing Senegal's Treasury to finance 
unbudgeted expenditures and taking on other funding obligations in 
excess of CFA 109 billion (USD 259 million).  According to 
Senegalese law, such extra-budgetary disbursements require specific 
approval by the National Assembly.  The decision to fire Sarr came 
after an audit carried out by the Ministry of Finance's Inspectors 
General division, which had been requested by Minister of Finance 
Abdoulaye Diop and IMF Resrep Alex Segura in reaction to Senegal's 
increasing budget deficit and revelations of a larger than reported 
stock of unpaid invoices owed to private suppliers and contractors. 
Though reports differ on the total amount of unjustified expenses, 
with some claiming it could be as high as CFA 450 billion (USD 1.07 
billion), Minister Diop publically stated that the situation was 
"manageable," but he declined to comment directly on the size of the 
"financial black hole." 
 
¶3.  (SBU) Sources from the Ministry of Finance claimed that Sarr 
took a significant portion of funds previously obligated to pay 
private suppliers and also committed additional unbudgeted 
expenditures to finance the extra-budgetary spending of a number of 
ministries and national agencies.  Sarr apparently planned to pay 
the private suppliers with the proceeds from the sale of bonds 
issued in June 2008.  Unfortunately, as reported in Ref B, the June 
bond issuance fell short with only CFA 65 billion (USD 155 million) 
purchased out of the total offering of CFA 100 billion (USD 238 
million), and, in the end, the money was not used to pay the 
arrears.  Our sources confirmed that out of the CFA 65 billion 
collected from the bond sale, CFA 35 billion was used to help with 
the recapitalization of the state electricity company Senelec, CFA 
10 billion was for food subsides, and the remaining CFA 20 billion 
for the government operating budget, including the payment of civil 
service salaries. 
 
¶4.  (SBU) According to MinFin sources, ANOCI (the National Agency 
for the Organization of the Islamic Conference, which is run by 
President Wade's son Karim Wade) was a major recipient of these 
extra-budgetary expenses, receiving perhaps as much as CFA 200 
billion (USD 476 million), purportedly for costs associated with the 
infrastructure projects leading up to the March 2008 OIC Summit in 
Dakar.  The Ministry of Infrastructure and Transportation received 
CFA 12 billion (to support infrastructure projects), and the 
Ministry of Interior CFA 3 billion (for the OIC Summit and the 2007 
presidential and legislative elections).  The Ministries of 
Education, Habitat and Urban Development, Health, Water/Hydrology, 
Environment, Handicraft, and Maritime Economy all signed contracts 
that did not conform to Senegal's formal budget.  President Wade 
reportedly ordered the Ministries which received these irregular 
funds -- but not ANOCI -- to submit explanations and justifications 
of their actions. 
 
APPOINTMENT OF A TREASURY VETERAN 
--------------------------------- 
¶5.  (SBU) At the same August 7 cabinet meeting, President Wade 
announced without comment the appointment of Abdoulaye Sow as the 
new Minister of Budget.  Sow, who is known strictly as a technocrat, 
is reported to have been the Finance Minister's choice.  Sow will 
likely play a carefully subservient role to Minister Diop, unlike 
Sarr, who reportedly acted without the MinFin's consent on the 
extra-budgetary expenditures, and perhaps in other areas.  [Note: 
The budget portfolio is actually designated as a Junior Ministry 
under the Finance Ministry.  End note.] 
 
¶6.  (SBU) Bio note:  Abdoulaye Sow is a 30-year treasury service 
"veteran" who is among the most senior career civil servants at the 
Ministry of Finance.  Sow graduated from the National School of 
Administration and Magistracy with a degree in economics.  He was 
 
DAKAR 00001011  002.2 OF 002 
 
 
most recently the Finance Minister's Director General of the 
Treasury and prior to that was the Director of Public Accounting. 
 
COMMENT 
------- 
¶7.  (SBU) The lack of a complete audit of extra-budgetary 
commitments and the need to formulate a plan for the payment arrears 
have been some of Senegal's most troublesome issues for the IMF (and 
donors).  Authorizing the audit was a very good first step. 
Dismissing Sarr was probably also necessary.  In an August 25 
meeting with the Ambassador (reported Septel), Finance Minister Diop 
expressed his apparent relief that Sarr had been dismissed.  While 
Sarr was a respected Ministry of Finance official, he is also 
reportedly close to Karim Wade and ruling party politicians.  To the 
extent that Sarr was able to operate outside of MinFin oversight, 
the political pressure on him to authorize payments for pet projects 
for ministries would have been intense.  The next question is 
whether all the firms who signed contracts with the various 
ministries and agencies, many knowing that the contracts did not 
have Ministry of Finance approval, will be paid.  A large number of 
these firms are facing serious liquidity problems as a result of the 
arrears, and this fiscal knot could continue to have a negative 
impact on Senegal's GDP growth and business climate for months to 
come. 
 
BERNICAT