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UNCLAS SECTION 01 OF 02 NAIROBI 002398 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR AF/E AND A/S CARSON 
 
E.O. 12958: N/A 
TAGS: PGOV EFIN ECON KDEM EAID SO
SUBJECT: SOMALIA - WHAT WE KNOW ABOUT THE TFG'S FINANCES 
 
¶1. (SBU) Summary: The Somalia Transitional Federal 
Government's (TFG) finances are generally funneled through 
four accounts that we are aware of:  a UN trust fund, the 
PriceWaterhouseCoopers (PWC) mechanism, the Central Bank, and 
a government account at the Somali money transfer company 
Dahabshil. The TFG seems to be relying at the moment on the 
PWC mechanism, to which the U.S., Chinese, and the Libyans 
have given over $2 million, and on Dahabshil, where Mogadishu 
port revenues ranging from $600,000 to $1.3 million per month 
are deposited. The Dahabshil account is the most opaque 
account although steps, including the recent formation of an 
oversight committee, are being taken to improve its 
transparency. End summary. 
 
¶2.  (SBU) According to the UN, the TFG Finance Ministry, and 
other officials, the TFG relies on four separate accounts 
through which both donor money and government revenue is 
flowing.  The Central Bank of Somalia holds U.S. Dollar and 
Somali shilling cash, and also receives funds via an account 
at commercial bank Standbic (the East African division of 
South Africa's Standard Bank). The Central Bank also has a 
SWIFT international banking code.  The Bank receives its U.S. 
dollar cash via money transfer companies (known as hawalas). 
When the Central Bank requires cash from one of the TFG's 
accounts, hawalas electronically receive the money in 
Mogadishu and deliver the cash (for a hefty fee) under tight 
security. The hawalas in turn maintain reserves by flying 
cash into Mogadishu from their headquarters and branches in 
northern Somalia and the Gulf. 
 
¶3.  (SBU) The Government of Norway will soon test the 
reliability of the Central Bank and Health Ministry by 
depositing $100,000 for use on a small health initiative and 
infrastructure renovations at the Health Ministry and its 
environs.  The Norwegian Embassy believes that the money will 
be used responsibly.  If that proves to be the case, the 
Norwegian Foreign Ministry plans to undertake further funding 
via the Central Bank. 
 
¶4.  (SBU) Second, the United Nations Political Office for 
Somalia (UNPOS) maintains a trust fund for donor 
contributions to TFG security institutions. That trust fund 
has received $800,000 in funds generated during the April 
Brussels TFG security pledging conference, according to the 
UN.  Donors to the fund include Norway, Turkey and the 
Philippines.  Disappointingly, to date UNPOS has used none of 
the money for direct assistance to the security services. 
According to the UN, the money has been used instead for 
Joint Security Committee expenses and to fund a conference of 
former Somali military officers in Washington. The remainder 
may be used to host a reconciliation workshop for Somali 
clerics, and to pay the trust fund's sixteen percent overhead. 
 
¶5. (SBU) In June, the TFG entered into a contract with 
PriceWaterhouseCoopers to manage donor funds.  Under the 
agreement, PWC is obliged to certify that contributions are 
being used appropriately. PWC charges a four-percent 
commission for its services. So far China ($500,000) and the 
United Stat}73gSVQUQIj}QLdkey into the PWC 
mechanism. According to the Chinese Embassy and a TFG Finance 
Ministry official, the Chinese money was used to re-pay a 
Somali contractor for provision of food and water to TFG 
troops.  The Chinese Ambassador to Kenya told SRSG 
Ould-Abdullah that a second donation was under consideration. 
U.S. money is earmarked for vetted troops' salaries, food and 
equipment. 
 
¶6.  (SBU) Remarkably, the TFG itself has also deposited $1.6 
million in cash given by Libya into the PWC mechanism, a sign 
the government may be serious about accounting for large cash 
donations.  The TFG instructed PWC to transfer $1.37 million 
of that money to the Somali Central Bank on November 16 to 
provide the following one month's operating funds for the 
Transitional Federal Institutions: 
 
--President's Office           $95,000 
--Prime Minister's Office      $72,000 
--Parliament Speaker's office  $75,000 
--Parliamentarian's Salaries   $660,000 
--$12,000 for each of 
 39 ministries                 $468,000 
 
 
NAIROBI 00002398  002.2 OF 002 
 
 
¶7. (SBU) Per the agreement, PWC, working with the Treasury 
Ministry, Central Bank, and Accountant General's office, is 
monitoring disbursement of the funds. In addition, the 
government has publicized the infusion of money in order to 
dissuade corrupt TFG officials from denying the TFG's debtors 
and civil servants payments to which they are entitled.  We 
are urging the TFG to gain Libya's permission to publicly 
report on PWC's certification process in order to build the 
confidence of potential donors. 
 
¶8.  (SBU) A TFG account at the trusted Somali hawala 
Dahabshil may be the most important government account. In 
response to widespread graft at the Port of Mogadishu, 
Sharif's government decreed that the port's customs revenue 
would be deposited in a TFG account at Dahabshil. The 
decision was widely applauded as an attempt to reform the 
port's notoriously leaky revenue collection process. TFG 
officials tell us that only a few senior government ministers 
have the authority to withdraw money from that account. Once 
the Central Bank has opened an office at the port, the 
officials say, all port revenues will flow through the 
Central Bank only. (Note: In the interim, the TFG on November 
22 announced that it had formed a ten-person committee that 
was charged with monitoring the efficiency of port 
operations. Among the committee's responsibilities, is 
working closely with revenue collection officials to improve 
transparency.  End note.)  We have no information on the 
account's current balance but, according to a well-informed 
TFG official, the port generated an average of $600,000 per 
month from June to February, and $1.3 million per month from 
March to May. The variance in monthly revenue is due to the 
effect of seasonal winds on ship traffic into the Mogadishu 
port. 
 
¶9. (SBU) In October, the TFG released an estimated budget for 
its normal operations.  The budget justifies ministry outlays 
by listing wage costs, recurring costs, fuel, rent and other 
expenses.  (Comment: Despite an expected variation in the 
ministries' expenses, each ministries' budget totals 
precisely $12,000, which suggests that the budget does not 
truly reflect the ministries' actual operational needs. End 
Comment). The TFG estimates the armed forces' operational 
costs at $1.8 million per month. The budget document does not 
specify the size of the force that is to be funded by the 
projected budget. 
 
¶10. (SBU) Comment:  The current TFG is, perhaps belatedly, 
more transparent about its finances than its predecessors. 
There are nevertheless the inevitable rumors, a few of which 
seem credible, of other hidden government accounts, as well 
as of extremely large individual accounts in the Gulf and 
elsewhere.  The most liquid account, and the one we know the 
least about, is the Dahabshil account into which port 
revenues are deposited. It is not clear even to many insiders 
who has access to that account, and where that money is 
currently going, but the projected opening of a Central Bank 
office in the port might ultimately shed more light on the 
TFG's use of port revenues. 
RANNEBERGER