Friday, March 26, 2010

Breakdown of Iraq’s 2010 Budget

Iraq’s Presidential Council approved the 2010 budget on February 11, 2010. It is for $71.29 billion, the second largest amount since Iraq regained its sovereignty in 2005. A breakdown of spending shows that operational spending, which goes towards salaries, pensions, and the food ration system, is again almost ¾ of the budget, and that electricity appears to be the priority of the government in the new year.

Iraq has a large and inefficient state-run economy with a bloated bureaucracy. It should be no surprise then that the majority of the country’s budgets since 2005 have gone towards operational costs. In 2010, $51.59 billion, 72.3% of the total, is for the operations budget. Back in 2005, the operations budget was only for $16.1 billion. One major reason for the dramatic increase is that the number of people working for the government has doubled since then, making it the largest employer in the country. Many extra workers have been hired as part of patronage systems and to keep people out of the insurgency. The food ration system, which is the largest in the world, has also increased in cost over the last two years because of declining agricultural output and the on-going drought has led to increased imports. Iraq spent $7.3 billion on the program in 2008. The government has traditionally spent a large percentage of its operational budget.

The capital budget in 2010, which is for investment, is for $19.7 billion. That’s an increase from the previous year when it was $12.73 billion. The Electricity Ministry is getting the largest increase with $3.49 billion in 2010 compared to $1.08 billion in 2009. It has big plans this year to boost output, and build a series of new power plants. Unspecified “other” spending is also going up from $4.73 billion in 2009 to $7.89 billion this year. The Kurdistan Regional Government (KRG) is also getting an increase from $1.95 billion to $2.72 billion. Kurdistan gets a set 17% of the budget however, so the growth in their capital budget is due to the larger budget overall. The other parts of the government are not gaining as much. The Defense, Interior, and Justice Ministries, which deal with security are only getting modest improvements in their budgets. Defense is getting $380 million compared to $270 million last year. The Interior Ministry is going from $220 million to $260 million, and the Justice Ministry is getting $140 million this year compared to $110 million. Iraq’s eighteen provinces are also getting only $10 million more in 2010. The Iraqi government has never been good at spending its investment budget however, so only around 50-60% of this money may get spent.

The 2010 budget shows where Baghdad’s priorities are for the new year. First, they want to dramatically increase spending after the 2009 budget had to be cut due to the world recession. Second, electricity and discretionary spending are the focus of investment this year. Last, the bloated government is still eating up the majority of the budget. Baghdad needs to vastly improve its ability to spend its capital budget, and could cut thousands of unneeded workers off the payroll. Both are unlikely to happen however as Iraq’s bureaucracy lacks trained staff and people are use to going to the government for employment.

Iraqi Budgets
2005: $24.4 bil
2006: $34.0 bil
2007: $41.1 bil
2008: $72.2 bil
2009: $58.6 bil
2010: $71.3 bil

2010 Revenue Projections And Budget
Oil Revenue: $47.91 bil
Other Revenue: $4.86 bil
Total: $52.77 bil
2010 Budget: $71.3 bil
Projected Deficit: $18.53 bil

Breakdown Of 2010 Budget
Total: $71.3 bil
Operational Budget: $51.59 bil (72%)
Capital Budget: $19.7 bil (28%)

Operational Budget
Other: $15.82 bil
Finance: $10.55 bil
Kurdistan Regional Government: $6.03 bil
Interior: $5.89 bil
Defense: $4.52 bil
Education: $4.31 bil
Trade: $4.03 bil
Justice: $450 mil

Capital Budget
Other: $7.89 bil
Electricity: $3.49 bil
Kurdistan Regional Government: $2.72 bil
Oil: $2.65 bil
Provinces: $2.18 bil
Defense: $380 mil
Interior: $260 mil
Justice: $130 mil


Abbas, Mohammed, “Iraq investors face bloated workforce dilemma,” Reuters, 8/10/09

Aswat al-Iraq, “Presidential Board approves 2010 budget,” 2/11/10

Department of Defense, “Measuring Stability and Security in Iraq,” 2/15/10

Inter-Agency Information and Analysis Unit, “Iraq Labour Force Analysis 2003-2008,” United Nations Office for the Coordination of Humanitarian Affairs, January 2009

IRIN, “IRAQ: Government moves to rationalize food aid system,” 6/17/09

Special Inspector General for Iraq Reconstruction, “Quarterly Report and Semiannual Report to the United States Congress,” 1/30/10

United States Government Accountability Office, “Iraqi Revenues, Expenditures, and Surplus,” August 2008


AndrewSshi said...

I have two questions, which may or may not be pretty silly: the first is, does the unspent money just sit in a bank drawing interest? And if so, isn't there some sort of means to draw on this money to make up for where its needed elsewhere?

The second question is if the government could actually talk to advisers who are, say, somewhat more competent than the CPA was to make the bureaucracy more efficient? I mean, in a system as heavily based on patronage and with the need to give people a paycheck as a disincentive to make mischief with guns and IEDs there's only so much you can do, but surely at least some politicians have at least suggested such a step.

Joel Wing said...

The surplus from previous years just goes to the Central Bank and collects interest. When parliament was putting together the 2009 budget and thought they would have a large deficit they said they could draw on this reserve but the bank told them no. Again this year the budget has a projected deficit and parliament said they could draw on the budget surplus again, so apparently they don't listen.

As for advisers there are still tons of American ones throughtout the government. They give training sessions, etc to the Iraqi staff. Besides the politics, patronage and corruption a major problem is that the government just lacks enough competent staff. I remember reading an article a couple years ago where Iraq was trying to negotiate some major economic deal and they only had something like 3 people working on it because no one else was qualified. Iraqis have also largely rejected working with computers, and the government is heavily top down managed so both slows everything down tremendously.

I also found an error in this article. I forgot to include the 2009 budget, which was for $58.6 bil. I listed the $71.3 bil 2010 budget by mistake. Have to fix it when I get home.

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