Iraqi Spending to Rebuild Has Slowed, Report Says

By James Glanz

The New York Times
Wednesday 16 January 2008

Highly promising figures that the administration cited to demonstrate economic progress in Iraq last fall, when Congress was considering whether to continue financing the war, cannot be substantiated by official Iraqi budget records, the Government Accountability Office reported Tuesday.

The Iraqi government had been severely criticized for failing to spend billions of dollars of its oil revenues in 2006 to finance its own reconstruction, but last September the administration said Iraq had greatly accelerated such spending. By July 2007, the administration said, Iraq had spent some 24 percent of $10 billion set aside for reconstruction that year.

As Gen. David H. Petraeus, the top American commander in Iraq, and Ryan C. Crocker, the American ambassador to Iraq, prepared in September to report to Congress on the state of the war, the economic figures were a rare sign of progress within Iraq's often dysfunctional government.

But in its report on Tuesday, the accountability office said official Iraqi Finance Ministry records showed that Iraq had spent only 4.4 percent of the reconstruction budget by August 2007. It also said that the rate of spending had substantially slowed from the previous year.
The reason for the difference, said Joseph A. Christoff, the G.A.O.'s director of international affairs and trade, was that few official Iraqi figures for 2007 were available when General Petraeus and Mr. Crocker went to Congress.

So the administration, with the help of the Finance Ministry in Baghdad, appears to have relied on a combination of indicators, including real expenditures, ministries' suggestions of projects they intended to carry out, and contracts that were still under negotiation, Mr. Christoff said. But actual spending does not seem to have lived up to those estimates for spending on reconstruction, a budget item sometimes called capital or investment expenditures, he added.

"So it looked like an improvement, but it wasn't an improvement," he said.

The United States Treasury Department and State Department criticized the conclusions in comments included in the report, saying that the G.A.O. had not accounted for all places in the Iraqi budget where investment or capital expenditures had been made. But the report said those departments had not been able to identify specific places where those other expenditures had taken place.

A spokeswoman for the United States Embassy in Baghdad said Tuesday that she could not comment. The White House press office did not respond to a request for comment.

After the United States spent more than $40 billion to rebuild Iraq's faltering electricity, water, sewage, transportation and petroleum sectors, with mixed results at best, Iraq's failure to devote its own resources to continue the task brought severe criticism from Western government and technical organizations.

The reasons for that failure, Iraqi and American officials said, included the challenges of carrying out construction projects in a dangerous countryside, a lack of expertise in a nation drained of technical talent, and a fear that new anticorruption measures would be widely used to prosecute Iraqi officials accustomed to operating in a culture of bribes and financial back-scratching.

Still, after Iraq's failure to spend its own money on reconstruction was first disclosed in late 2006, Iraqi and American officials repeatedly asserted that the problems would be much less severe the next year, as the new government led by Prime Minister Nuri Kamal al-Maliki found its way.

In addition, the officials said, with the American troop increase and security improvements, security problems would lessen. And American training programs were producing more skilled Iraqi contracting and finance officials. The figures put forth in September appeared to endorse those claims.

But the accountability office figures, which Mr. Christoff said were taken directly from Finance Ministry records, show that through August 2007 the Iraqi government had spent less than half the percentage of its investment budget that it had spent in the same period in 2006.

Rick Barton, co-director of the postconflict reconstruction project at the Center for Strategic and International Studies in Washington, said all measures of economic progress in Iraq were difficult to pin down precisely. But he said the United States, taking those difficulties into account, should have been wary of touting progress before the facts were clear.

"The data in these places is hugely unreliable to begin with, primarily because nobody gets out in the field to see what's going on," Mr. Barton said. "But what is probably troubling is that when you know this, you shouldn't be using this to create wrong impressions or false impressions and pretending that you know what's going on."