VZCZCXRO1242
OO RUEHROV RUEHTRO
DE RUEHKH #0983/01 2380829
ZNR UUUUU ZZH
O 260829Z AUG 09
FM AMEMBASSY KHARTOUM
TO RUEHC/SECSTATE WASHDC IMMEDIATE 4320
INFO RUCNIAD/IGAD COLLECTIVE
RUEHGG/UN SECURITY COUNCIL COLLECTIVE
RHMFISS/CJTF HOA

UNCLAS SECTION 01 OF 02 KHARTOUM 000983 
 
NSC FOR MGAVIN, LETIM 
DEPT PLS PASS USAID FOR AFR/SUDAN 
ADDIS ABABA ALSO FOR USAU 
 
SENSITIVE 
SIPDIS 
E.O. 12958: N/A 
TAGS: PGOV PREL PHUM PTER PINR KDEM MOPS ECON EFIN ENRG
SOCI, AU-1, UNSC, SU 
 
SUBJECT: GOSS FINANCE MINISTER OUTLINES PLANS, NEEDS FOR ASSISTANCE 
TO SE GRATION 
 
¶1. (SBU) SUMMARY: In a meeting with Special Envoy Scott Gration, the 
Government of Southern Sudan's (GOSS) Minister of Finance and 
Economic Planning, David Deng Athorbei expressed serious concerns 
regarding Southern Sudan's immediate financial challenges.  Painting 
a grim picture of the South's ongoing fiscal crisis, Athorbei said 
that the GOSS needs a $500 million infusion of cash in both 2010 and 
2011 to cover its costs.  Athorbei expressed particular frustration 
with the South's nearly depleted reserves of foreign exchange, and 
he requested U.S. intervention in support of the Southern position. 
Athorbei was confident that Southern Sudan's financial situation 
will rebound should it secede in 2011. END SUMMARY. 
 
----------- 
HIT HARD BY ECONOMIC CRISIS, FOREIGN CURRENCY NEARLY DEPLETED 
------------ 
 
¶2. (SBU) Athorbei told Gration that the global economic crisis and 
the GOSS's failure to set aside reserves had "crushed" Southern 
Sudan, saddling it with an unsustainable deficit in operating costs. 
 The GOSS is responding in the short term, he said, by freezing 
contracts, reducing spending, and cleansing public payrolls, as well 
as undertaking other reforms agreed in the GOSS's compact with 
donors.  Athorbei told Gration that Khartoum has been trying to 
undermine the South's efforts by cutting off its access to hard 
currency and fomenting insecurity. 
 
¶3. (SBU) The Bank of Southern Sudan's current reserves of hard 
currency will last only through the end of October, Athorbei said. 
The Central Bank of Sudan is violating the CPA, he claimed, by 
refusing to provide the South's oil revenues in hard currency.  The 
National Congress Party, he said, has a "policy to starve us of 
cash."  The lack of hard currency is already preventing the South 
from obtaining the bank guarantees needed for investment.  Athorbei 
rejected the idea that the Bank is obliged to provide foreign 
exchange only for specific purchases, insisting that the South needs 
to control its own money. 
 
¶4. (SBU) Gration noted that the National Congress Party (NCP) and 
the Sudan People's Liberation Movement (SPLM) had agreed to invite 
the IMF to review the implementation of the CPA's central banking 
system.  Athorbei asked him to raise the issue with NCP in the 
trilateral talks.  (COMMENT: Different GOSS and SPLM officials have 
communicated different positions to USG representatives on the 
South's entitlement to the hard currency flowing from Sudan's oil 
sales.  This was the first time that an official has told the USG a 
specific date by which the South's hard currency reserves would be 
depleted. ) 
 
--------------- 
THINKING OF THE FUTURE, BUT DESPERATE FOR CASH IN THE SHORT TERM 
--------------- 
 
¶5. (SBU) Athorbei also outlined his thinking on a longer-term 
approach to promoting southern economic growth.  His first target is 
to ensure food security by promoting increased cultivation of 
cereals and rice for sustenance as well as export and creating the 
requisite supporting infrastructure.  He reported several recent 
trade missions to and from Southern Sudan.  Athorbei also noted that 
he was taking steps to strengthen government systems, including 
ending his predecessor's practice of allowing businessmen to line 
the halls of the ministry to queue for contracts. 
 
¶6. (SBU) Asked about his top priority for assistance from the United 
States, Athorbei responded that he needed $500 million in cash, in 
both 2010 and 2011, to cover the government's operating costs. 
"Short of that," he said, "we will crash."  Athorbei was sanguine, 
however, about the South's finances in the years after 2011.  He 
told Gration that secession, if it occurred, would allow the South 
access to 100 percent of the revenue from southern oil and would 
give it the opportunity to sell concessions in additional oil 
production blocks.  Continued wealth-sharing with the north would 
not be politically possible after 2011, Athorbei argued.  Only John 
Garang could have persuaded the South to continue sharing its wealth 
in the interest of facilitating "a clean divorce."  (COMMENT: 
Athorbei's confidence in the South's ability to immediately close 
the financial gap after the referendum seems unjustified, given the 
contentious debate over pipeline access that would undoubtedly 
follow secession.) 
 
---------- 
SKEPTICISM ON NORTHERN INTENTIONS, CONFIDENCE IN U.S. SUPPORT 
---------- 
 
¶7. (SBU) Raising the subject of U.S. sanctions, Athorbei expressed 
 
KHARTOUM 00000983  002 OF 002 
 
 
doubt that Khartoum would "do anything good" if sanctions were 
lifted, though he added that there should be a "right way" to make 
sanctions smarter.  He acknowledged that some in the South had been 
made "jealous" by the perception of Washington's engagement with 
Khartoum.  Athorbei said that there remains a feeling on the street, 
however, that the North will not mistreat the South again because 
the U.S. will come to its aid.  Athorbei added that he is confident 
that the U.S. would not enter any agreement with the North that 
would hurt the South. 
 
¶8. (SBU) COMMENT:  Athorbei's assessment of the South's financial 
straits was grim, and his request for assistance stunning.  The size 
of the request is a powerful statement that Athorbei does not 
believe the GOSS has brought its fiscal crisis under control, even 
with the austerity measures agreed in the recent compact with 
donors.  Other GOSS officials were keenly aware that Gration was 
meeting with Athorbei, but it was not immediately clear whether his 
request - delivered off-the-cuff and in response to a question - had 
been coordinated throughout the GOSS.  END COMMENT. 
 
WHITEHEAD