In September 2010 the United States Government Accountability Office (GAO) issued a report that Iraq had built up a $52.1 billion surplus from 2005 to 2009. At the same time Baghdad had accumulated an estimated $40.3 billion in outstanding advances, which left Iraq with $11.8 million in unclaimed funds. That amount was unclear however, since the Board of Supreme Audit, the main financial watchdog within the government, couldn’t account for all of the advances. The GAO couldn’t determine what happened with 40% of the advances since Baghdad wouldn’t provide any details about them. Finally, the state-run banks that hold a large amount of the government’s money didn’t have reliable records either.
The International Monetary Fund (IMF) signed an agreement with Baghdad in February to help reform its budgeting, spending, and accounting measures. It too was curious about Iraq’s unspent money after the GAO report, and asked the Finance Ministry to clarify the matter. The IMF gave the ministry until September 30 to explain what the $40.3 billion in advances had been spent on. The Ministry of Finance never responded.
This is just the latest example of how poorly Baghdad keeps its books. Despite its security and political issues, Iraq still has large amounts of money flowing through its coffers due to its oil industry. The problem starts there, as no one knows exactly how much petroleum is produced because of the lack of meters, a weak bureaucracy, theft, and corruption. Once the oil is sold and deposited, the trail gets murkier as the banks lack an efficient book keeping system. When the funds are distributed to the various ministries things get no better because of the paper-based system, the lack of trained and qualified staff, and political appointees. The IMF and United States have been pushing reform for several years now, but progress has been slow and uneven. They can only go as far as the Iraqis allow them, and so far, that’s only been in small increments. Until Baghdad wants real change, its finances will remain a wreck.
Amies, Nick, “Potential oil windfall raises concerns over Iraq’s financial black hole,” Deutsche Welle, 10/11/10
United States Government Accountability Office, “Iraqi-U.S. Cost-Sharing Iraq Has a Cumulative Budget Surplus, Offering the Potential for Further Cost-Sharing,” September 2010