On August 21, the New York Times printed a story about Baghdad’s inability to spend much of its budget. The report follows a study done by the Government Accountability Office in August 2008, discussed earlier, that also documented Iraq’s budgetary difficulties. The New York Times was able to get a hold of some new Finance Ministry numbers that showed problems with Iraqi accounting methods. The Times found that while the government claims that it has spent 57% of its 2008 budget, an analysis of the Finance numbers shows that they’ve only spent 18%, or perhaps even less.
First, the New York Times found a major problem with Iraq’s accounting methods that inflated their budget numbers. The Finance Ministry counted any money that had been appropriated as spent. The problem was in many cases there was no proof that this happened. For example, the Electricity Ministry had $231 million appropriated to it, which Finance counted as spent, when in fact, none of it had been. The Ministry also counted all money sent to the three Kurdish provinces in the north as spent, but there was no accounting for whether this happened or not.
The discrepancies led to three different percentages for Iraq’s spending. The Finance Ministry claimed that Iraq had spent 57% of its 2008 budget so far. The New York Times, after discounting appropriated monies, found that Baghdad had only spent 18%. Even worse, when the Times deducted the unaccounted for Kurdistan money, the number went down to only 8.7%.
The New York Times’ findings match earlier criticisms made by the Special Inspector General for Iraq Reconstruction (SIGIR) and the Government Accountability Office (GAO). The SIGIR found that while Iraq has increased the percentage of the budget they have spent from 22% in 2006 to 63% in 2007, most of that has been on operational costs that go towards salaries, compensations, etc., and less on capital spending that goes towards infrastructure. The provinces have also done a worse job spending their money than the central government’s ministries. Ninewa, Basra, Muthanna, Diyala, and Anbar for example, did not spend any of their 2007 or 2008 capital budgets. The GAO was even more damning. It found that from 2005-2007 Iraq was only able to spend 10% of its capital budget, and only 1% went towards maintenance of its aging and war-ravaged infrastructure. For 2007 it said that Iraq spent 80% of its operational budget, but only 28% of its capital one. From 2005-2007 Iraq did increase its spending by 13%, but most of that was because of a large increase in the security and Kurdistan budgets. The GAO actually found that the total percentage spent declined, going from 73% in 2005, to 67% in 2006, to 65% in 2007. Capital spending also went up and down from 23% in 2005, to 19% in 2006, to 28% in 2007. In the key ministries of oil, water and electricity, the percentage of capital expenditures actually decreased from 14% in 2005, to 13% in 2006, to 11% in 2007.
Iraq is currently benefiting from a boom in oil prices that has swelled its coffers to the point that it added a $22 billion supplemental budget this summer. Still, the ministries and provinces have proven incapable of spending most of their money outside of their operational costs to keep the government running. Each year Iraq has spent more money, but that is more a result of increasing budgets than an improvement in capabilities. Most importantly, all of their spending is having very little effect upon basic services for Iraq’s population that is suffering from displacement, unemployment, a drought this summer, and the ravages of the war.
Robertson, Campbell and Glanz, James, “Iraqi Figures Back U.S. View on Low Spending for Reconstruction,” New York Times, 8/21/08
Special Inspector General for Iraq Reconstruction, “Quarterly and Semiannual Report to the United States Congress,” 7/30/08
United States Government Accountability Office, “Iraqi Revenues, Expenditures, and Surplus,” August 2008
Voices of Iraq, “Iraqi gov’t approves 2008 supplementary budget-statement,” 7/8/08