Iraq on track for $79 billion surplus

Rising price of oil pours in revenue

August 06, 2008|By New York Times News Service

Soaring oil prices will leave the Iraqi government with a cumulative budget surplus of as much as $79 billion by year's end, according to an American federal oversight agency. But Iraq has spent only a minute fraction of that on reconstruction costs that are now largely borne by the United States.

The unspent windfall, which covers surpluses from oil sales of 2005 through 2008, appears likely to reinforce growing debate about the roughly $48 billion in American taxpayer money devoted to rebuilding Iraq since the U.S.-led invasion.

In one comparison, the United States has spent $23.2 billion in the critical areas of security, oil, electricity and water since the invasion, the report said. But from 2005 through April 2008, Iraq has spent just $3.9 billion on similar services.

Overall, the report from the Government Accountability Office estimates, Iraqi oil revenue from 2005 through the end of this year will amount to at least $156 billion. And in an odd financial twist, a large amount of the surplus money is sitting in an American bank in New York - nearly $10 billion at the end of 2007, with more expected this year, when the GAO estimates a skyrocketing surplus.

The report was requested by two senior senators, Carl Levin, a Michigan Democrat, and John W. Warner, a Virginia Republican, and they were quick to express strong dissatisfaction yesterday over the contrast between American spending on reconstruction and the weak record of spending by Iraq itself.

"The Iraqi government now has tens of billions of dollars at its disposal to fund large-scale reconstruction projects," said Levin, who is chairman of the Senate Armed Services Committee, in a joint statement with Warner. "It is inexcusable for U.S. taxpayers to continue to foot the bill for projects the Iraqis are fully capable of funding themselves. We should not be paying for Iraqi projects, while Iraqi oil revenues continue to pile up in the bank."

From the beginning of the conflict, American officials assured taxpayers and the world that Iraq would use oil money to pay for reconstruction, but that has not happened. Several senior Iraqi officials were either traveling yesterday or declined to comment, saying they were not familiar with the report.

Sinan al-Shabibi, governor of the Central Bank of Iraq, which the report said held $5.7 billion of the surplus at the end of 2007, said that while he could not speak for the government, problems with spending money often had to do with security problems and a shortage of expertise in Iraqi ministries.

"Yes, there are problems, but that does not mean those problems are going to continue. ... [The government is] determined to spend this money on development," al-Shabibi said.

Levin and Warner pointed out that in 2007, for example, Iraq spent only 28 percent of its $12 billion reconstruction budget, according to the GAO, and even that figure could overstate the success rate in most of Iraq, since $2 billion of the spending took place in the relatively peaceful confines of the northern Kurdish region.

The deposit at the Federal Reserve Bank is so large that the U.S. has been obliged to pay $435.6 million in interest to Iraq through the end of last year, according to the new report.

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