I’ve now read in full the report released today by the Government Accountability Office of the United States Congress on Iraqi-US cost sharing. The subtitle of this report, Iraq has a cumulative budget surplus, clearly elucidates the Obama administration’s policy that the US has done enough for Iraq and that it should now proceed on its own.
The general ‘let the Iraqis shoulder all the costs now’ attitude is regularly seen among American commentators especially those who have started to openly call for a dictator to return to rule Iraq and that it was a big mistake for the US to topple Saddam Hussein. Some of the titles of these articles begging for billions, sitting on billions and Iraq posting massive surplus thanks to US taxpayers are frankly insulting and hostile. Yes, the Iraqi governments so far have been corrupt, weak and ineffective, but that does not mean the Iraqi people owe the US any debt whatsoever, for whatever financial assistance they have provided.
The United States supported the Baath coup that brought Saddam to power. The US provided the billions for Saddam to build his army and to fight Iran and subsequently Kuwait. It allowed him to crush the rebellion of 91 and then imposed sanctions which destroyed the country. It was a major factor behind Iraq’s spiralling debt and even post-2003 it has been reluctant to remove the chapter 7 provisions sanctioned by the United Nations Security Council. Why should America continue to pay for Iraq’s reconstruction? Because it is an accomplice in the crimes committed against the Iraqi people over the last four decades.
Below is a summary of what the GAO study found, which can be read in full at this link
What GAO Found
GAO analysis of Iraqi government data showed that Iraq generated an estimated cumulative budget surplus of $52.1 billion through the end of 2009. This estimate is consistent with the method that Iraq uses to calculate its fiscal position. Adjusting for $40.3 billion in estimated outstanding advances as of September 2009 reduces the amount of available surplus funds to $11.8 billion. In April 2010, a senior Ministry of Finance official stated that advances should be deducted from the budget surplus because they are committed for future expenditures or have been paid out. According to this official and Board of Supreme Audit reports on Iraq’s financial statements, advances include funds for letters of credit, advance payments on domestic contracts, and other advances. However, Iraq’s Board of Supreme Audit has raised concerns that weaknesses in accounting for advances could result in the misappropriation of government funds and inaccurate reporting of expenditures. Furthermore, the composition of some of these advances is unclear; about 40 percent of the outstanding advances through 2008 are defined as “other temporary advances.” Under the terms of a February 2010 International Monetary Fund (IMF) arrangement, Iraq agreed to prepare a report on its outstanding advances, which will identify those advances that are recoverable and could be used for future spending, and set a time schedule for their recovery. This Iraqi report is to be completed by September 30, 2010.
Another means of assessing Iraq’s fiscal position is to examine its financial deposit balances. Iraqi government data and an independent audit report show that, through the end of 2009, Iraq had accumulated between $15.3 billion and $32.2 billion in financial deposit balances held at the Central Bank of Iraq, the Development Fund for Iraq in New York, and state-owned banks in Iraq. This range reflects a discrepancy between the amount of government-sector deposits reported by the Central Bank of Iraq to the IMF and the amount that the Ministry of Finance asserts is available for government spending. In November 2009, the Ministry of Finance reclassified $16.9 billion in state-owned banks as belonging to state-owned enterprises and trusts, leaving $15.3 billion of $32.2 billion available to the Iraqi government for other spending. The IMF is seeking clarification on the amount of financial deposits that is available for government spending. Under the terms of Iraq’s 2010 arrangement with the IMF, the Ministry of Finance is required to complete a review of all central government accounts and return any idle balances received from the budget to the central Iraqi Treasury by March 31, 2010. As of August 2010, according to the IMF, this review was still under way.
Iraqi government data show that Iraq’s security ministries—the Ministries of Defense and Interior—increased their spending from 2005 through 2009 and set aside about $5.5 billion for purchases through the U.S. Foreign Military Sales program. However, over this 5-year period, these ministries did not use between $2.5 billion and $5.2 billion of their budgeted funds that could have been used to address security needs. The administration is requesting $2 billion in additional U.S. funding in its fiscal year 2011 budget request to support the training and equipping of Iraq’s military and police.