WSJ wrote:Iraq Isn't Spending Oil Windfall
On Infrastructure
U.S. Says About 1%
Of $80 Billion Goes
To Roads, Bridges
By IAN TALLEY
August 6, 2008; Page A11
Iraq is generating revenue of about $80 billion a year, mainly from its vast reserves of crude oil, but spending only about 1% of the total on maintaining critical infrastructure projects such as roads, bridges and sanitation, the U.S. government auditor said.
Meanwhile, the U.S. has appropriated around $48 billion in the past several years to help reconstruction efforts, the U.S. Government Accountability Office said.
FIGHT FOR IRAQ
See continuing coverage of developments in Iraq, including an interactive map of day-to-day events in Iraq and a tally of military deaths.
The Iraqi government -- which controls the fourth-largest conventional reserves in the world, with an estimated 115 billion barrels of crude -- gets approximately 90% of its revenue from oil sales, which have jumped in value with this year's rise in prices.
The increased revenue puts the government of Iraq "in a much stronger position to ultimately shoulder the full burden of its development, reconstruction and security programs," said Andy Baukol, deputy assistant secretary of Middle Easy and Africa at the U.S. Treasury Department, in comments on the GAO report.
"Iraq has more than adequate funds to make and maintain capital investments that deliver services and create conditions that foster economic growth," Mr. Baukol said.
The GAO, which is the investigative arm of Congress, estimates that for 2008, Iraq could generate between $73.5 billion and $86.2 billion in total revenue, of which oil exports will account for between $66.5 billion to $79.2 billion. That is based on Iraqi oil ranging from $96.88 to $125.29 a barrel and oil export volumes ranging from 1.89 million to 2.01 million barrels a day.
That figure is up significantly from the oil-export sales from 2005-2007 that accounted for about $90.2 billion for both years. In that period, Iraq spent 90% of its $67 billion in expenditures on operating costs such as salaries, pensions and services. Most of the remainder was spent on investment expenditures, such as structures, machinery and vehicles.
Just 1% of the Iraqi government expenditures went to maintenance of roads, bridges, vehicles, buildings, water, sanitation and electricity installations, oil pipelines and weapons.
"It does seem like a low percentage," said GAO Director of International Affairs and Trade Joseph Christoff. "It's quite a bit of investment that we [the U.S.] have made and the need for maintenance is pretty substantial as well," he said in an interview.
The GAO estimates that Iraq had an estimated cumulative budget surplus of about $29 billion from 2005 to 2007. For 2008, the GAO estimates Iraq will have a budget surplus between $38.2 billion to $50.3 billion.
Officials say Iraq's shortage of trained staff, weak procurement and budgeting systems, and violence and sectarian strife affect the government's ability to spend more of its revenue on capital investments intended to rebuild its infrastructure.
In the relatively calmer northern region of Iraq where the Kurdistan regional government rules, investment expenditures for critical infrastructure have surged, while investment by the central ministries declined in 2007, the GAO said.
Write to Ian Talley at ian.talley@dowjones.com
Well, well. Isn't that surprising?
