VZCZCXRO1765
RR RUEHGI RUEHMA RUEHROV
DE RUEHKH #1824/01 3561441
ZNR UUUUU ZZH
R 211441Z DEC 08
FM AMEMBASSY KHARTOUM
TO RUEHC/SECSTATE WASHDC 2571
INFO RUCNFUR/DARFUR COLLECTIVE

UNCLAS SECTION 01 OF 02 KHARTOUM 001824 
 
DEPT FOR AF/SPG, EEB/IFD/OMA AND EEB/IFD/ODF 
NSC FOR HUDSON AND PITTMAN 
DEPT PLS PASS USAID FOR AFR/SUDAN 
DEPT PLS PASS TREASURY FOR OIA, USED IMF AND USED WORLD BANK 
ADDIS ABABA ALSO FOR USAU 
 
SENSITIVE 
SIPDIS 
 
E.O.12958: N/A 
TAGS: PREL PGOV EFIN ECON EAID SOCI SU
SUBJECT: FY 2009 GOVERNMENT OF NATIONAL UNITY BUDGET:  REVENUES 
DOWN, DEFICIT WAY UP 
 
REF:  KHARTOUM 1718 
 
¶1.  (U) SUMMARY.  Sudan's FY 2009 budget reflects the impact of 
falling global oil prices.   Revenues are projected to decline about 
15 percent, to 18.4 billion Sudanese Pounds (SDG), which is entirely 
the result of dropping oil revenues.  Total expenditures are to 
remain unchanged from FY 2008 at approximately SDG 26 billion, but 
despite  this, transfers to the Government of South Sudan (GoSS) and 
to regional states will fall 14 percent (from SDG 10.8 billion to 
9.3 billion.)  The fiscal deficit will almost double to 6.2 percent 
of GDP.  The budget is based on forecasted oil revenues that already 
may be too optimistic, and it may have to be revised in the new 
year.   Septel will provide IMF/World Bank analysis of the broader 
impact the global recession is having on Sudan's macro-economic 
situation.  END SUMMARY. 
 
¶2.   (U) On December 1, 2008 Sudan's National Assembly approved the 
Government of National Unity's (GNU) FY 2009 budget (January 
1-December 31, 2009). The FY '09 Budget projects total revenues of 
SDG 18.37 billion (approx. USD 8.35 billion), expenditures of SDG 
25.8 billion (USD 11.73 billion), and a net deficit of SDG 6.7 
billion (6.2 percent of the country's GDP,) an 81 percent increase 
from FY 2008.  55 percent of the deficit is to be financed by 
foreign borrowing and 45 percent through domestic borrowing. Despite 
 criticism by  opposition parties, the National Congress Party (NCP) 
succeeded in getting approval of  the FY 2009 budget using a 
party-line majority vote. 
 
Policy Objectives 
----------------- 
¶3.  (U) In his November 17 message introducing the FY 2009 budget to 
the National Assembly, Minister of Finance and National Economy Dr. 
Awad Ahmed Al-Jaz stated that the FY 2009 budget will meet  the 
following policy objectives: 
 
- The budget aims at maintaining a positive economic growth rate of 
8 percent; 
- Maintaining an  annual inflation rate at 8 percent, with the 
flexibility and stabilization of the national currency exchange 
rate; 
- The continued decoupling of Sudan's economy from the U.S. dollar 
and conversion to other currencies; 
- Establishing new Comprehensive Peace Agreement (CPA) commissions; 
South Sudan Referendum Commission. 
- The budget will not increase taxes that will affect the ordinary 
citizens; it will  continue to  subsidize electricity. 
- Liquidation of the government's shares in public companies. 
- To compensate for the sharp decline in oil prices, the budget will 
raise duties on imported vehicles and indirect taxes on 
telecommunication services. 
 
Summary of the 2009 Budget 
-------------------------- 
¶4.  (U) (Figures in billions of Sudanese Pounds at the exchange rate 
of U.S. $1:2.2 SDG) 
 
Projetd Total FY 2009 Revenue  SDG 18.37 billion 
 
Of which: 
 
 Taxes      SDG  8.15 billion 
 Grants      SDG  0.85 billion 
 Oil revenues     SDG  7.94 billion 
 Non-oil revenues    SGD  1.48 billion 
 
Total FY 2009 Expenditures   SDG  25.8 billion 
 
Of which: 
 
 Wages/salaries/insurance   SDG  6.85 billion 
 Procurement of goods and services SDG  2.46 billion 
 Subsidies      SDG  0.29 billion 
 Grants      SDG  9.53 billion 
 
Transfers to: 
Northern States     SDG 3.45 billion 
GOSS        SDG 3.23 billion 
 
¶5.  (U) The FY 2009 budget allocates SDG 108,247.887 for the various 
CPA Commissions and the post-conflict construction/rehabilitation 
funds: 
 
-CPA Commissions   = SDG 107,023.487 
                 million 
-Darfur Development/Rehabilitation  = SDG 484 million 
 
KHARTOUM 00001824  002 OF 002 
 
 
-East Fund      = SDG 374 million 
-Unity Fund      = SDG 366.4 million 
 
Revenues Take a Hit 
------------------- 
¶6.  (SBU) According to the World Bank, the projected FY 2009 
revenues of SDG 18.4 billion are a 15 percent drop from the previous 
year (SDG 22 billion).  This is the result of a projected 30 percent 
decline in oil revenues (from SDG 11.3 billion in FY 2008 to SDG 7.9 
billion.)  At SDG 10.4 billion, total non-oil revenues will remain 
virtually unchanged from FY '08. 
 
¶7.  (U) Dr. Babiker M. Tom, Chair of the Economic Committee oft the 
National Assembly, expects that the FY 2009 budget may have to be 
revised due to the successive decrease in oil prices.  The FY 2009 
budget is based on oil prices of $50/barrel for blocks 1, 2 and 
$30/barrel for blocks 3/7.  Sudan sells its oil at a discount from 
the benchmark price of Brent crude, which already is below 
$50/barrel. 
 
Total Expenditures Steady, While Deficit Climbs Sharply 
----- ----- -----  ----- -----  ----- ----- ----- ----- 
¶8.  (U) While total GoS expenditures will remain unchanged from FY 
'08 at SDG 26 billion, Government of National Unity (GNU) 
expenditures will increase by 12 percent, to SDG 17.2 billion. 
Simultaneously, however, transfers to the GoSS and to the 16 
northern state governments will fall to SDG 6.68 billion (-14 
percent).  The FY' 09 net deficit will balloon to SDG 8.5 billion, 
or 81 percent larger that FY '08. 
 
Security Trumps Peace Dividends 
------------------------------- 
¶9.  (U) Suliman Hamid, from the Sudan Communist Party and the chair 
of the Democratic National Alliance (NDA) Parliamentary  bloc, 
criticized the budget.  He noted  that the GOS continues to heavily 
fund its security services at the expense of development and 
post-conflict reconstruction spending.  He stated that the 
government's gross expenditure has increased from SDG 26 billion in 
FY 2008 to SDG 26.91 billion, with gross deficit of SDG 8.54 
billion. The defense and security budget has increased by 40% from 
SDG 4.8 billion in FY 2008 to SDG 6.7 billion in FY 2009.  Defense 
and security expenditures are 15 times, 13 times, and 67 times more 
than that allocated for health, education and services respectively. 
 
 
Comment 
------- 
¶10.  (SBU) The FY '09 budget reflects the difficult choices facing 
Sudan as its oil bonanza ends (reftel).  Finance Minister Al-Jaz is 
considered a capable administrator, and he can be expected to 
execute the budget as well as is possible under the circumstances. 
But with the sharp drop in GoS revenues, his freedom to maneuver is 
limited.  With oil prices already below the estimates on which the 
budget is based, it may require some significant revision in the 
coming months.  Faced with multiple challenges in the coming year, 
the National Congress Party will find one of its key tools in 
maintaining control - buying domestic support with generous largesse 
- severely constrained. 
 
ASQUINO