Oil sends Iraq's surplus soaring

The Iraqi government could end the year with as much as a $79 billion budget surplus as ever-increasing oil revenues pile on top of leftover income the Iraqis still haven't spent on their national rebuilding effort, congressional auditors say.

A report by the Government Accountability Office made public Tuesday prompted renewed calls from senators that Baghdad pay more of the bill for its own reconstruction, which has been heavily supported with U.S. funds.

The projected Iraq surplus, including unspent money from 2005 through 2008, has been building because of rising world oil prices, increasing Iraqi oil production, the government's inability to execute budgets for spending its money and persistent violence in the country, the GAO said.

The report was requested by Sen. Carl Levin, D-Mich., and Sen. John Warner, R-Va., the chairman and ranking member, respectively, of the Senate Armed Services Committee.

“The Iraqi government now has tens of billions of dollars at its disposal to fund large-scale reconstruction projects,” Levin said in a statement. “It is inexcusable for U.S. taxpayers to continue to foot the bill for projects the Iraqis are fully capable of funding themselves.”

“It is time for the sovereign government of Iraq, using its revenues, expenditures and surpluses, to fully assume the responsibility to provide essential services and improve the quality of life for the Iraqi people,” Warner said.

The GAO said Iraq had an estimated cumulative budget surplus of about $29 billion from 2005 to 2007 and could have another surplus of up to $50 billion this year.

The expected surplus could be lower if Iraq passes stalled legislation for a $22 billion supplemental budget for 2008 – and if the government then executes the budget.

But the report noted oft-repeated factors holding the government back on its spending plans.

“First … (the) relative shortage of trained budgetary, procurement and other staff with the necessary technical skills as a factor limiting the Iraqi government's ability to plan and execute its capital spending,” the GAO said, adding that a second problem is the government's weak accounting systems.

“Third … violence and sectarian strife remain major obstacles to developing Iraqi government capacity,” it said.

The report also estimated that this year Iraq could generate $67 billion to $79 billion in oil sales. Other U.S. officials previously had said they expected the oil windfall to be about $70 billion.

“This substantial increase in revenues offers the Iraqi government the potential to better finance its own security and economic needs,” the GAO said.

Since 2005, the United States has funded a number of efforts to teach civilian and security ministries how to effectively execute their budgets.

The efforts included programs to advise and help Iraqi government employees develop the skills to plan programs and to effectively deliver government services such as electricity, water and security.

Before the U.S.-led invasion in 2003, then-Deputy Defense Secretary Paul Wolfowitz declared that Iraq's oil proceeds would cover the cost of the war and the expense of rebuilding the country after Saddam Hussein was removed from power.

“To assume we're going to pay for it all is just wrong,” Wolfowitz told the House Budget Committee on Feb. 28, 2003.

The Bush administration didn't refute the GAO's assertions. In a request from the GAO for comment, Deputy Assistant Treasury Secretary Andy Baukol acknowledged that increased oil revenues put Iraq in a stronger position to shoulder its own burdens.

“Nonetheless, the pace of spending has been held back by various factors, including deficiencies in capacity and security,” Baukol, the chief treasury official for the Middle East, said in a written response.

McClatchy Newspapers contributed.