Iraq's Unused Billions

In early November I discussed some of the key findings of a report put out by the
Special Inspector General for Iraqi Reconstruction. One of the more interesting finds
was that the Iraqi government had spent a negligible amount on reconstruction despite
having a budget of $6 billion. Certainly an odd revelation considering the urgent need Iraq has for more funding.

Today the New York Times examines the Iraqi government's inability to spend money and
offers a very interesting explanation.

"The country is facing this national failure to spend even as American financial
support dwindles. Among reasons for the problems...is a strange new one: bureaucrats are so fearful and confused by anticorruption measures put in place by the American and Iraqi governments that they are afraid to sign off on contracts.

...the stringent measures they had favored to slow the rampant corruption may be
especially daunting for bureaucrats who have little experience with Western-style
regulations and oversight. Those officials say that Iraqis who have seen their
colleagues arrested and jailed in anticorruption sweeps are reluctant to put their own name on a contract."

Other factors include a high government turnover, security problems, actual corruption and a lack of Iraqis skilled at writing contracts and managing complex projects. As the New York Times notes, these are the same issues that plague the US reconstruction effort.

This problem, if not addressed, will surely undermine future international fund-
raising efforts as countries and organizations will understandably be reluctant to provide Iraq with funds if they believe Iraq will be unable to use them.

Thus far, the government has been able to spend only 20% of its 2006 budget.