Iraq spending less than it earns

A recent report from the United States Government Accountability Office (GAO) analysing Iraq's revenue and expenditure data and U.S. expenditures in Iraq found the following:

From 2005 through 2007, the Iraqi government generated an estimated $96
billion in cumulative revenues, of which crude oil export sales accounted
for about $90.2 billion, or 94 percent. For 2008, the GAO estimates that Iraq could
generate between $73.5 billion and $86.2 billion in total revenues, of which
oil exports will account for between $66.5 billion to $79.2 billion.

Projected oil revenues for 2008 could be more than twice the average
annual amount Iraq generated from 2005 through 2007. The 2008
projections are based on actual sales through June 2008 and projections
for July to December that assume an export price for Iraqi oil ranging from
$96.88 to $125.29 per barrel and oil export volumes ranging from 1.89 to
2.01 million barrels per day.

From 2005 through 2007, the Iraqi government spent an estimated $67
billion on a variety of operating and investment activities. According to
Iraqi Ministry of Finance data, Iraq spent 90 percent of the $67 billion on
operating expenses, such as salaries and pensions; goods, services, and
maintenance;2 social benefits; and interest payments. The remaining 10
percent was spent on investment expenditures, such as structures,
machinery, and vehicles. The Iraqi government spent only 1 percent of
total expenditures on maintaining Iraq- and U.S.-funded investments,
which includes the maintenance of roads, bridges, vehicles, buildings,
water and electricity installations, and weapons. Although total
expenditures grew from 2005 through 2007, the Iraqi government was
unable to spend all the funds it budgeted, especially for investment
activities. For example, in 2007, Iraq spent 80 percent of its $29 billion
operating budget and 28 percent of its $12 billion investment budget. For
2008, the GAO estimates that the Iraqi government could spend between $35.3
billion and $35.9 billion of its $49.9 billion budget.

As of December 31, 2007, the Iraqi government had accumulated financial
deposits of $29.4 billion, held in the Development Fund for Iraq and
central government deposits at the Central Bank of Iraq and Iraq's
commercial banks. The balance of these deposits was, in part, the result of
an estimated budget surplus of about $29 billion from 2005 to 2007. For
2008, we estimate a budget surplus of between $38.2 billion to $50.3 billion
based on our projections for revenue and expenditures. If spent, a
proposed Iraqi budget supplemental of $22 billion, with about $8 billion
dedicated to capital spending, could reduce this projected surplus.

Since fiscal year 2003, the United States has appropriated about $48 billion
for stabilization and reconstruction efforts in Iraq; it had obligated about
$42 billion of that amount, as of June 2008.3 U.S. agencies spent about
$23.2 billion on four critical sectors—security, oil, electricity, and water.
As of June 2008, the United States spent 70 percent of the amount it
allocated for these four sectors from fiscal year 2003 through June 2008.
Iraq spent 14 percent, or $3.9 billion, of the $28 billion it allocated for
similar activities in these sectors from 2005 through April 2008.

U.S. government, coalition, and international officials have identified a
number of factors that have affected the Iraqi government's ability to
spend more of its revenues on capital investments intended to rebuild its
infrastructure. These factors include Iraq's shortage of trained staff, weak
procurement and budgeting systems, and violence and sectarian strife. As
we have previously reported, the United States has funded, since 2005,
activities to help build the capacity of key civilian and security ministries
and thereby improve the Iraqi government's ability to execute its budget
for capital projects.

Iraq possesses the third largest oil reserve in the world, estimated at a total
of 115 billion barrels. Iraq's ability to extract these reserves has varied widely over time and Iraq's oil infrastructure has deteriorated over several decades due to war damage, inadequate maintenance, and the limited availability of spare
parts, equipment, new technology, and financing. In addition, Iraq's crude
oil production and export capacities were further affected by considerable
looting after Operation Iraqi Freedom and continued attacks on crude oil
and refined product pipelines. Nonetheless, crude oil production and
exports have recovered since 2003. As of June 2008, Iraq's crude oil export
averaged 2.01 million barrels per day (mbpd), according to Iraqi oil export
receipt data .