US embassy cable - 03OTTAWA2461

UNCLAS OTTAWA 002461 
 
SIPDIS 
 
SENSITIVE 
 
DEPT FOR EUR/RPM, EB/IFD, WHA/CAN AND WHA/EPSC 
TREASURY FOR OASIA/IMI - HARLOW, MATHIEU 
USDOC FOR 4320/MAC/ON/OIA/JBENDER 
PARIS ALSO FOR USOECD 
 
E.O. 12958:    N/A 
TAGS: MCAP, PGOV, EFIN, ECON, ETRD, CA, Budget 
SUBJECT: CANADIAN FY 03-04 BUDGET: DEFENSE CONTINGENCY 
FUNDS USED FOR ISAF 
 
1.  This message is sensitive but unclassified.  Please 
treat accordingly. 
 
2. Summary:  Finance Minister Manley has asked government 
departments to cover unforeseen expenditures in 2003 from 
reallocation of existing funds.  Canada is using C$200 
million in "contingency reserve" funds earmarked for 
defense expenditures (over and above the C$800 million 
increase budgeted for FY 2003/04) to cover its 
participation in ISAF.  End summary. 
 
3. (SBU) Front-page headlines in Canada's major 
newspapers on August 27 erroneously stated that Finance 
Minister Manley planned to cut $200 million from defense 
spending and C$130 million from foreign aid.  Senior 
sources at the Department of Finance said this was 
inaccurate.  They explained to Mission officers that 
Manley is committed to maintaining a balanced budget and 
in February confirmed that government departments were 
expected to do the same; that unforeseen expenses would 
be covered from reallocation of existing funding.  His 
office also confirmed "Defense will get what it needs for 
Afghanistan." 
 
4. (SBU) The FY2003-04 federal budget increased defense 
spending by C$800 million over the next 3 years, with an 
additional C$200 million earmarked for contingency 
expenditures in FY2003-04.  Manley expects the 
Department of Defense to use its $200 million 
contingency reserve to cover costs associated with 
sending troops to Afghanistan. 
 
5.  (SBU) The same holds true for foreign aid:  the 
Canadian International Development Agency (CIDA) has not 
had its funding reduced; it has been asked to stay within 
its initial (generous) budget. 
 
6.  (SBU) Comment: The newspaper headlines did not seem 
credible.  Canada's federal government still enjoys a 
budget surplus and the GOC had not indicated any need to 
dig into its emergency funds or the money set aside for 
fiscal prudence.  Therefore, spending cuts, especially 
in defense and foreign aid, which comprise a relatively 
small share of the federal budget, made no sense. 
Finance officials confirmed our suspicions.  End 
Comment. 
 
Cellucci