Iraq’s planned budget divisive too

It’s budget time in Iraq, and the lively debates that have erupted would strike a familiar chord for observers of such talks in any American statehouse or European parliament.

But war-ravaged Iraq is no ordinary country, and the murkiness surrounding many items in the proposed 2007 budget has contributed to the general distrust between sectarian factions as well as widespread doubts about the ability of the government of Prime Minister Nouri Maliki to manage the nation.

Nearly $2 billion of the budget is allocated to agencies beyond the oversight of the central government at a time when potential international donors have balked at tossing more money into what has been viewed as a black hole.

The potential for abuse is high. Most ministries get multimillion-dollar discretionary funds known as “social benefits” with few spending safeguards, Iraqi officials say.

Item of contention

The $41-billion budget, a copy of which was obtained by the Los Angeles Times, also includes money to assist the families of those killed and imprisoned under the regime of the late Saddam Hussein. The Shiite Muslim-sponsored provision has proved so offensive to Sunni Arab lawmakers that they have threatened to loudly condemn the entire spending plan unless benefits are also provided to prisoners who were abused by American troops at the Abu Ghraib prison and to those killed in U.S. military operations since the toppling of Hussein’s Sunni-dominated government in 2003.

“If they do not change this particular law, we will not vote for the budget,” said Alaa Saddoun, a Sunni lawmaker in the sect’s main parliamentary bloc.

Iraq’s budget is loaded with potentially divisive expenditures, some with sectarian overtones, as well as vaguely worded spending items that have raised the eyebrows of Iraqi lawmakers.

The budget debate comes as the U.S. proposes to pour an additional $1 billion into Iraqi reconstruction efforts and has been pressuring skeptical international donors to pitch in financially. At a time when suspicions are rife about government graft, the proposed budget trims the office of the Public Integrity Commission by 13%.

Maliki this week sent lawmakers a letter urging them to approve the budget quickly, and a vote could come next week.

But even the prime minister’s closest political allies have raised tough questions about the proposed budget, which is 21% larger than last year’s. The budget does not include $8 billion allocated to ministries last year that have yet to be spent on reconstruction projects around the country held up because of security worries. It also fails to incorporate funds donated by the international community, including the U.S.

Iraqi budget planners complained that they simply couldn’t get figures such as how much Washington was contributing to Iraqi agriculture, even when they asked for them.

The budget, which would be largely funded with a projected $30 billion in oil revenue, about $1 billion in taxes and fees and the $8 billion left over from last year, does call for an ambitious 60% increase, to $10 billion, of funds for improving infrastructure.

“We don’t want to spend all the government’s income on paying salaries and handouts,” Maliki told reporters this week. “We want to encourage investment -- especially in the field of electricity and oil.”

But many observers scoffed at the reconstruction figure, arguing that it would be impossible to spend so much money amid the daily gunfights, banditry and terrorism afflicting eight of the country’s 18 provinces and its three largest cities.

Gross incompetence has also been a factor in the failure to spend allocated funds.

“Many key ministries have been unable to expend budget resources on capital improvements and are running large surpluses due in part to an ineffective procurement process and the inability to carry out fair, competitive contracting,” a report by the U.S. Government Accountability Office said.

Some said the Iraqi government would be better off pumping money into services and salaries, giving jobs to needy youths.

“I think first the budget wasn’t based on pure mathematics but merely opinion,” said Hassan Senaid, one of Maliki’s staunchest parliamentary supporters. “I think that many of the ministries will not be able to spend all their money.”

The biggest chunk

The security forces account for the biggest chunk of Iraq’s proposed budget. Year-to-year spending for the Sunni-led Defense Ministry would stay the same, at about $4 billion; whereas funds for the Shiite-dominated Interior Ministry, which oversees the police, would rise 25%, to $2.6 billion.

“This reflects our economic strategy,” said Kamal Basri, a financial advisor to the Iraqi government. “The most important thing is security.”

The budget would double, to $200 million, the allocation for the Kurdish-controlled Foreign Ministry, increasing the payroll of embassies ninefold as the country attempts to re-integrate itself into the international community.

Health and education spending would go up more than 50% as Iraq attempts to address its vast social problems. But the country would spend a mere $6 million on handling the burgeoning problem of families displaced by the country’s sectarian civil war, about the same figure as last year.

Lawmakers were most perplexed at the 100% increase in the budget of national security advisor Mowaffak Rubaie. His title, many say, dwarfs the tiny role he plays.

“I think that he wants 10 undersecretaries and 30 director-general positions while he only has three rooms for offices, which is insufficient for all the people to sit,” Senaid said.

Government officials say they have made a serious effort to be more transparent.

Much of the $2 billion in unspecified spending would go toward paying off Iraq’s debt as well as for people’s daily food rations and subsidies for provincial governments, the officials say. But many lawmakers worry that the funds come without safeguards.

“It’s cloudy, unclear,” said Bassem Sharif Hocheimi, a Shiite lawmaker and outspoken reformer. “This might lead to problems and corruption. We want to allocate more money for the governorates [provinces]. They’re in bad shape. But how can we monitor corruption in those governments?”

Lawmakers also have questioned the “social benefits” funds in the budget proposal. Basri said they were discretionary accounts that ministers could use to reward exemplary employees. But worried about their potential for abuse, he sent out a memo to ministers saying that no single employee could receive more than $190 a month from the funds. “That made me a rather unpopular person,” he said.

The proposed budget allocates $126 million for religious foundations, with equal amounts for Sunni and Shiite Muslim charities even though the country’s Shiites make up the majority of the nation’s population. But that goodwill gesture was offset by the most explosive item in the budget, the $230 million allocated to victims of the Hussein government.

Critics argue that the law creating the restitution agencies was passed before the permanent government of Iraq was elected in December 2005 and needs to be revisited by the current batch of lawmakers.

They also wonder about oversight. Iraq’s ministries typically appoint an inspector general who looks out for corruption and favoritism. But the proposed organizations, known as the Martyrs Institute and the Prisoners Institute, for doling out money to victims of the former regime may not have such monitors.

“We have a problem with this,” said Salim Abdullah Jabouri, a spokesman for the Sunni bloc. “Who has been harmed? Who’s defining the prisoners? This is a huge amount of money.”

Still, even having such discussions shows genuine democratic progress, Iraqi government officials say. And most acknowledge that the budget battle could have been much worse, given the charged sectarian atmosphere.

Budget planners in the prime minister’s office successfully resisted pressure by Shiite hard-liners to allocate funds to provinces based on a formula that would take into account not just population figures, but also the amount of suffering each region endured under Hussein’s government.

“How do you calculate suffering?” said Basri, the government advisor, who is a British-educated economist and also the head of an economic think tank. “That was the problem.”

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daragahi@latimes.com

roug@latimes.com