United States Government Accountability Office

GAO Testimony 

Before the Committee on the Budget, 

House of Representatives 

STABILIZING AND 

REBUILDING IRAQ 

Iraqi Revenues, 

Expenditures, and Surplus 

Statement of Joseph A. Christoff, Director 

International Affairs and Trade 

For Release on Delivery

Expected at 9:30 a.m. EDT

Tuesday, September 16, 2008

 

GAO-08-1144T 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

September 16, 2008

STABILIZING AND REBUILDING IRAQ

Iraqi Revenues, Expenditures, and Surplus

Highlights of GAO-08-1144T, a testimony 

before the Committee on the Budget, 

House of Representatives

Iraq has an estimated 115 billion 

barrels of crude oil reserves—the

third largest in the world. Oil 

export revenues are critical to 

Iraq’s economy, accounting for 

over half of the country’s gross 

domestic product and over 90 

percent of revenues. 

This testimony discusses (1) Iraq’s 

estimated revenues from 2005

through 2008, (2) Iraq’s estimated

expenditures from 2005 through 

2008, (3) Iraq’s financial deposits 

through 2007 and budget surpluses,

and (4) U.S. cumulative

expenditures on stabilization and 

reconstruction activities in Iraq

since 2003. 

GAO analyzed relevant data and

reviewed documents such as 

Central Bank of Iraq (CBI) export 

oil receipts data and the

International Monetary Fund’s 

(IMF) stand-by arrangement for

Iraq. GAO worked with officials 

from the Department of Treasury

and interviewed officials from the

Departments of State, Defense,

Energy’s Energy Information 

Administration (EIA), and the IMF.

GAO also reviewed translated 

copies of Iraqi documents, 

including budget and capital 

spending reports. 

Treasury agreed with GAO’s 

findings and stated that Iraq has 

adequate funds to make and 

maintain capital investments that 

deliver service and foster economic 

growth. 

From 2005 through 2007, the Iraqi government generated an estimated $96

billion in cumulative revenues, of which crude oil export sales accounted for 

about $90.2 billion or 94 percent. For 2008, Iraq could generate an estimated 

$73.5 billion to $86.2 billion in revenues, with oil exports accounting for $66.5

billion to $79.2 billion. Projected 2008 oil revenues could be more than twice 

the average annual amount Iraq generated from 2005 through 2007. 

Iraqi Revenues, Expenditures, and Surpluses, 2005-2007, with Projections for 2008 

(Billions of U.S. dollars)

2008 Projections

2005 2006 2007 Total,

2005-2007 

Low High 

Total Revenues 24.1 32.0 39.9 96.0 73.5 86.2

MoF Expenditures 17.6 22.8 26.6 67.0 35.3 35.9

Surplus 6.5 9.2 13.3 29.0 38.2 50.3

Source: GAO analysis of data from the Central Bank of Iraq, International Monetary Fund, and Iraqi 

Ministry of Finance (MoF) Budget. 

From 2005 through 2007, the Iraqi government spent an estimated $67 billion 

on operating and investment activities. Ninety percent was spent on operating 

expenses, such as salaries and goods and services, and the remaining 10 

percent on investments, such as structures and vehicles. The Iraqi 

government spent only 1 percent of total expenditures to maintain Iraq- and 

U.S.-funded investments, such as electricity installations and weapons. 

From 2005 through 2007, Iraq had an estimated cumulative budget surplus of 

about $29 billion. For 2008, we estimate that Iraq will have an additional 

surplus of between $38.2 billion to $50.3 billion, which could result in a 

cumulative budget surplus of $67 billion to $79 billion. Iraq’s 2008 budget 

surplus could be reduced by expenditures from its $22.3 billion supplemental 

budget, which Iraq’s Council of Representative passed in August 2008. 

However, based on Iraq’s past expenditure performance, the government may

not be able to spend all that it has budgeted for 2008. 

Since fiscal year 2003, the United States has appropriated about $48 billion 

for stabilization and reconstruction efforts in Iraq; it had obligated about

$42 billion of that amount, as of June 2008. U.S. agencies spent about 

$23.2 billion on four critical sectors—security, oil, electricity, and water. 

As of June 2008, the United States had spent 70 percent of the amount it 

allocated for these four sectors from fiscal year 2003 through June 2008. 

Iraq spent 14 percent, or $4.3 billion, of the $30 billion it allocated for 

similar activities in these sectors from 2005 through June 2008. 

Iraq’s large oil reserves coupled with higher oil prices offer the government of 

Iraq the potential to increase its contributions to the country’s reconstruction 

efforts and thereby enhance essential services to the Iraqi people. 

To view the full product, including the scope 

and methodology, click on GAO-08-1144T. 

For more information, contact Joseph A. 

Christoff at 202-512-8979 or

christoffj@gao.gov. 
Mr. Chairman and Members of the Committee: 

I am pleased to be here today to discuss the report GAO issued last month 

on the revenues, expenditures, and surpluses Iraq has generated since 

2005.

1

 This report discussed (1) Iraq’s estimated revenues from 2005 

through 2008, (2) Iraq’s estimated expenditures from 2005 through 2008, 

(3) Iraq’s financial deposits through 2007 and budget surpluses, (4) U.S. 

cumulative expenditures on stabilization and reconstruction activities in 

Iraq since 2003, and (5) factors affecting Iraq’s efforts to accelerate 

spending. 

Iraq has an estimated 115 billion barrels of crude oil reserves—the third 

largest in the world. Oil export revenues are critical to Iraq’s economy, 

accounting for over half of the country’s gross domestic product and over

90 percent of revenues. Iraq’s large oil reserves coupled with higher oil 

prices offer the government of Iraq the potential to contribute to the 

country’s reconstruction efforts and thereby enhance essential services to 

the Iraqi people. 

To address the report’s objectives, we analyzed relevant data and reviewed

documents such as Central Bank of Iraq (CBI) export oil receipts data and

the International Monetary Fund’s (IMF) stand-by arrangement for Iraq. 

We worked extensively with officials from the Department of Treasury and 

interviewed officials from the Departments of State, Defense, Energy’s 

Energy Information Administration (EIA), and the IMF. We also reviewed 

translated copies of Iraqi documents, including budget and capital 

spending reports. 

We conducted this performance audit from May to August 2008, in 

accordance with generally accepted government auditing standards. Those 

standards require that we plan and perform the audit to obtain sufficient, 

appropriate evidence to provide a reasonable basis for our findings and 

conclusions based on our audit objectives. We believe that the evidence 

obtained provides a reasonable basis for our findings and conclusions 

based on our audit objectives. Our report builds upon GAO’s extensive 

body of work on Iraq, also conducted according to generally accepted 

government auditing standards. These reports include our May 2007 report 

on Iraq’s energy sector, our January 2008 report assessing Iraq’s efforts to 

 1

GAO, Stabilizing and Rebuilding Iraq: Iraqi Revenues, Expenditures, and Surplus,

GAO-08-1031 (Washington, D.C.: Aug. 5, 2008). 

Page 1 GAO-08-1144T 
spend its budget, and our June 2008 report assessing progress in meeting 

key goals of The New Way Forward.2

From 2005 through 2007, the Iraqi government generated an estimated $96

billion in cumulative revenues, of which crude oil export sales accounted 

for about $90.2 billion or 94 percent. For 2008, we estimate that Iraq could 

generate between $73.5 billion and $86.2 billion in total revenues, with oil 

exports accounting for between $66.5 billion to $79.2 billion. Projected 

2008 oil revenues could be more than twice the average annual amount 

Iraq generated from 2005 through 2007. Iraq revenues, expenditures, and 

budget surpluses are displayed in table 1. 

Summary 

Table 1: Iraqi Revenues, Expenditures, and Surpluses, 2005-2007, with Projections

for 2008 

(Billions of U.S. dollars)

2008 Projections

2005 2006 2007

Total, 

2005-2007 Low High

Total Revenues 24.1 32 39.9 96.0 73.5 86.2

MoF Expenditures 17.6 22.8 26.6 67.0 35.3 35.9

Surplus 6.5 9.2 13.3 29.0 38.2 50.3

Source: GAO analysis of data from the Central Bank of Iraq, International Monetary Fund, and Iraqi Ministry of Finance (MoF) Budget. 

Note: GAO projections for 2008 are based on actual prices and volume of crude oil exports over the 

first 6 months of 2008 and varied price and export volume for the last 6 months of 2008. 

From 2005 through 2007, the Iraqi government spent an estimated $67 

billion on operating and investment activities. Ninety percent was spent on 

operating expenses, such as salaries and goods and services, and the 

remaining 10 percent on investments, such as structures and vehicles. The 

Iraqi government spent only 1 percent of total expenditures to maintain 

Iraq- and U.S.-funded investments, such as buildings, water and electricity

installations, and weapons. While total expenditures grew from 2005 

through 2007, Iraq was unable to spend all of its budgeted funds. For 

 2

See GAO, Rebuilding Iraq: Integrated Strategic Plan Needed to Help Restore Iraq’s Oil 

and Electricity Sectors, GAO-07-677 (Washington, D.C.: May 15, 2007); Iraq 

Reconstruction: Better Data Needed to Assess Iraq’s Budget Execution, GAO-08-153

(Washington, D.C.: Jan. 15, 2008); and Securing, Stabilizing, and Rebuilding Iraq: 

Progress Report: Some Gains Made, Updated Strategy Needed, GAO-08-837 (Washington,

D.C.: June 23, 2008). 

Page 2 GAO-08-1144T 
example, in 2007, Iraq spent 80 percent of its $29 billion operating budget

and 28 percent of its $12 billion investment budget. 

From 2005 through 2007, Iraq had an estimated cumulative budget surplus 

of about $29 billion. For 2008, we estimate that Iraq will have an additional 

surplus of between $38.2 billion to $50.3 billion, which could result in a 

cumulative budget surplus of $67 billion to $79 billion for 2005 through 

2008. Iraq’s 2008 budget surplus could be reduced as a result of 

expenditures from the $22.3 billion supplemental budget Iraq’s Council of 

Representative passed in August 2008. However, based on Iraq’s past 

expenditure performance, the government may not be able to spend all 

that it has budgeted for 2008. 

Since fiscal year 2003, the United States has appropriated about $48 billion 

for stabilization and reconstruction efforts in Iraq; it had obligated about

$42 billion of that amount, as of June 2008.3

 U.S. agencies spent about 

$23.2 billion on four critical sectors—security, oil, electricity, and water. 

As of June 2008, the United States spent 70 percent of the amount it 

allocated for these four sectors from fiscal year 2003 through June 2008. 

Iraq spent 14 percent, or $4.3 billion, of the $30 billion it allocated for 

similar activities in these sectors from 2005 through June 2008. 

U.S. government, coalition, and international officials have identified a 

number of factors that have affected the Iraqi government’s ability to 

spend more of its revenues on capital investments. These factors included 

the shortage of trained staff; weak procurement and budgeting systems; 

and violence and sectarian strife. The United States has funded activities 

to help build the capacity of key civilian and security ministries to improve 

Iraq’s ability to execute its capital project budget. 

The Department of the Treasury agreed with the findings of our report and 

stated that the report accurately highlights the substantial growth of Iraq’s 

revenues in recent years. Treasury also stated that the increase in Iraqi 

revenues places the government of Iraq in a stronger position to shoulder 

the full burden of its development, reconstruction, and security programs. 

 3

This amount includes $2 billion appropriated in June 2008 for reconstruction and 

stabilization activities in Iraq in the Supplemental Appropriations Act, 2008, P.L. 110-252 

(June 30, 2008). This amount does not include $1.1 billion appropriated in the same Act for 

similar activities in Iraq after October 1, 2008. 

Page 3 GAO-08-1144T 
Iraq possesses the third largest crude oil reserve in the world, estimated at 

a total of 115 billion barrels. Only Saudi Arabia and Iran have larger 

proved4

 world oil reserves. Iraq’s oil infrastructure has deteriorated over 

several decades due to war damage, inadequate maintenance, and the 

limited availability of spare parts, equipment, new technology, and 

financing. This situation was further affected by looting after Operation 

Iraqi Freedom and continued attacks on crude oil and refined product 

pipelines. 

Iraq’s crude oil production and exports have recovered since 2003. As of 

June 2008, Iraq’s crude oil exports averaged 2.01 million barrels per day 

(mbpd), according to Iraqi oil export receipt data. Iraq generally receives a 

discounted export price for its crude oil, in part due to its relatively lower 

quality compared with key crude oils such as the U.S. West Texas 

Intermediate (WTI) and Brent—benchmarks for world oil prices. 

According to CBI data, for January through June 2008, Iraqi crude oil was 

priced at an average of $96.88 per barrel. During the same period, WTI and 

Brent’s prices averaged $110.95 and $109.17 per barrel, respectively.

From 2005 through 2007, the Iraqi government generated an estimated $96

billion in cumulative revenues.5

 This estimate is based on actual crude oil

export sales of about $90.2 billion as reported by the CBI and Iraqi taxes, 

interest, and other revenues of about $5.7 billion, as estimated by the IMF. 

Crude oil export revenues increased an average of about 30 percent each 

year from 2005 to 2007, due to increases in oil exports and price. 

Background 

Iraq’s Estimated 

Revenues from 2005 

through 2008 

For 2008, we estimate that Iraq could generate between $73.5 billion to 

$86.2 billion in total revenues. Table 2 displays the projected total 

revenues, based on six scenarios projecting oil export revenues by varying 

price and volume of exports. 

 4

Proved reserves are estimated quantities that analysis of geologic and engineering data

demonstrates with reasonable certainty are recoverable under existing economic and

operating conditions. 

5

We are reporting Iraqi revenues as estimates because we use IMF-reported estimates of 

$5.7 billion for net domestic revenues from oil-related public enterprises, taxes, and other 

revenues, which is about 6 percent of Iraq’s estimated total revenues for 2005 through 2007. 

Page 4 GAO-08-1144T 
Table 2: Projections for 2008 Iraqi Total Revenues 

(Billions of U.S. dollars) 

Revenues 1 2 3 4 5 6

Export oil revenues $66.5 $68.7 $73.3 $75.9 $76.4 $79.2

Tax and other revenues 6.9 6.9 6.9 6.9 6.9 6.9

Total $73.5 $75.7 $80.2 $82.8 $83.3 $86.2

Source: GAO analysis of CBI and IMF data. 

Note: Totals may not add due to rounding. 

These scenarios assume that tax and other revenues (a small portion of 

total revenues) will be $6.9 billion for 2008 but that export oil revenues 

will vary based on the price Iraq receives for its oil and the volume it 

exports.6

 As a result, we project that Iraq could generate between $66.5 

billion and $79.2 billion in oil revenues in 2008, more than twice the 

average annual amount Iraq generated from 2005 through 2007. These 

scenarios use the actual prices and volume of crude oil exports over the 

first 6 months of 2008, as reported by the CBI. For the last 6 months of 

2008, we varied the volume exported from 1.89 to 2.01 mbpd and the price 

received from $96.88 to $125.29 per barrel. 

From 2005 through 2007, the Iraqi government spent an estimated $67 

billion on a variety of operating and investment activities, as reported by 

the Ministry of Finance. As displayed in table 3, Iraq spent 90 percent of 

the $67 billion on operating expenses, including salaries and pensions, and 

10 percent on investment expenses, such as structures, machinery, and 

vehicles.7

Iraq’s Estimated 

Expenditures from 

2005 through 2008 

 6

The IMF reported estimates of $6.9 billion in tax and other revenues for Iraq in 2008.

7

We use “investment expenditures” here to refer to expenses for capital goods and capital 

projects. Capital projects represent almost 90 percent of the Iraqi investment budget. 

Page 5 GAO-08-1144T 
Table 3: Government of Iraq Expenditures and Annual Growth Rates, 2005 through 2008 

(Millions of U.S. dollars)

Types of Expenditures 2005 2006 2007

Total

2005-07

Jan.- June

2008

Percentage

share 

of total 

2005-07 

Annual 

average 

growth rate

2005-07 

dollars

Annual 

average 

growth rate

2005-07 

Iraqi dinars

Total expenditures $17,583 $22,788 $26,599 $66,970 $19,127 100 23 13

I. Operating expenditures 16,151 21,173 23,164 60,489 16,528 90 20 10

A. Employee compensation 6,062 7,087 9,936 23,085 7,534 34 28 17

B. Goods and services 1,195 1,445 3,327 5,967 1,912 9 67 53

1. Goods 565 663 1,794 3,021 1,048 5 78 63

2. Services 392 433 1,174 1,998 594 3 73 59

3. Maintenance 238 349 360 947 269 1 23 13

C. Other operating 

expendituresa

8,894 12,642 9,901 31,437 7,082 47 6 -3

II. Investmentb1,432 1,615 3,434 6,482 2,599 10 55 42

Source: GAO analysis of Iraqi Ministry of Finance budget expenditure data. 

Notes: The 2005 through 2007 time frame represents fiscal year spending for January through 

December. 

The government of Iraq adopted a new chart of accounts in 2007. To make comparisons over time, 

we combine various budget categories to make them comparable over time. 

a

Other operating expenses include interest payments, grants and transfers, subsidies to public and 

private enterprises, war reparations, and social benefits. 

b

Investment includes grants for reconstruction activities primarily for provinces and regions for 2007 

and 2008. 

Our analysis of Ministry of Finance expenditure data found: 

• Iraq’s dollar expenditures grew by about 23 percent per year, from $17.6 

billion to $26.6 billion, largely due to increased spending on Iraqi security 

personnel. However, annual average growth rates computed in Iraqi dinars

were 13 percent per year. Growth rates in dinars may be more informative 

since Iraq spends its budget in dinars. Using dollar-denominated 

expenditures inflates growth rates because the dinar appreciated 19

percent against the dollar in 2007.

8

 8

The Iraq dinar-U.S. dollar exchange rate was 1,500 per dollar in 2005 and 2006; 1,260 per 

dollar in 2007; and 1,200 per dollar in 2008.

Page 6 GAO-08-1144T 
• The Iraqi government spent about $947 million, or 1 percent of its total 

expenditures for the maintenance of Iraqi- and U.S.-funded investments. 

These expenses included maintenance of roads, bridges, vehicles, 

buildings, water and electricity installations, and weapons. 

• Investment expenditures increased at an annual rate of 42 percent in Iraqi 

dinars. However, most of this increase occurred in 2007 and was due 

primarily to the increase in investment by the Kurdistan Regional 

Government (KRG), not by the central ministries responsible for providing 

critical services such as oil, water, electricity, and security to the Iraqi 

people. For example, of the $1.8 billion increase in investment 

expenditures in 2007, $1.3 billion, or more than 70 percent was due to a 

reported increase in KRG investment. 

For 2008, we estimate that the Iraqi government could spend between 

$35.3 billion and $35.9 billion of its $49.9 billion 2008 budget. This estimate 

is based on the assumption that the expenditure ratio in 2008 will be the 

same as the average expenditure ratios from 2005 to 2007. This assumption 

results in a more than 21-percent increase in dinar expenditures in 2008, 

compared with the annual average of 13 percent over the past 3 years. 

As of December 31, 2007, the Iraqi government had financial deposits of 

$29.4 billion held in the Development Fund for Iraq (DFI) at the New York 

Federal Reserve Bank, 9 central government deposits at the CBI, and 

central government deposits in Iraq’s commercial banks, which includes 

state-owned banks such as Rafidain and Rasheed (see table 4). 

Iraq’s Financial 

Deposits through 2007 

and Budget Surpluses

 9

DFI deposits consist of cash balances of $2.5 billion in U.S. dollars and $7.4 billion in U.S.

Treasury bills that the Iraqi government has purchased. As a U.S. creditor, Iraq has received 

$435.6 million in interest on those bills since 2003. Iraq central government deposits in the

CBI consist of U.S. dollar- and dinar-denominated accounts. 

Page 7 GAO-08-1144T 
Table 4: Financial Deposits of the Iraqi Government, as of December 31, 2007 

(Billions of U.S. dollars) 

Location 

Amount

(as of Dec. 31, 2007)

Development Fund for Iraq $9.9

Central government deposits at the CBI 5.7

Central government deposits in the banking sector 13.8

Total $29.4

Source: GAO analysis of Ernst & Young International Advisory and Monitoring Board audit and IMF’s International Financial Statistics. 

The balance of these deposits is, in part, the result of an estimated budget 

surplus of about $29 billion from 2005 to 2007. For 2008, we estimate that 

Iraq’s budget surplus could range from $38.2 billion to $50.3 billion, based 

on the six scenarios we used to project export oil revenues and assuming 

Iraq’s expenditure ratio will be the same as the average expenditure ratios 

from 2005 to 2007. (see table 5). This estimate is based on Iraq’s regular 

budget of $49.9 billion for 2008. As of the end of May 2008, Iraq spent $14.5 

billion, or 29.1 percent, of the regular 2008 budget of $49.9 billion. 

Table 5: Estimated Total Revenues, Expenditures, and Surplus, 2005 through 2008 

 (Billions of U.S. dollars) 

2005-2007 2008 2008 2008 2008 2008 2008

1 2 3 4 5 6

Estimated total revenues $96.0 $73.5 $75.7 $80.2 $82.8 $83.3 $86.2

Estimated total 

expenditures 67.0 35.3 35.4 35.6 35.8 35.8 35.9

Estimated budget surplus 29.0 38.2 40.3 44.6 47.1 47.6 50.3

Source: GAO analysis of EIA, IMF, Ministry of Finance, and Central Bank of Iraq data.

Iraq may accumulate a budget surplus of $67 billion to $79 billion by the 

end of 2008. This surplus could be reduced as a result of its expenditures 

of the $22.3 billion supplemental budget that Iraq’s Council of 

Representatives passed in August 2008. The government allocated $14.3

billion of the total supplemental budget for operating expenditures and $8 

billion for investment. Iraq’s amended budget projects that the government 

will spend the entire supplemental and regular budget and end 2008 with a 

$5.1 billion deficit. Iraq made similar assertions in 2005 through 2007, 

projecting budget deficits of $3.5 billion in 2005, $4.1 billion in 2006, and 

$8.1 billion in 2007. (see fig. 1). However, as we previously displayed, Iraq 

ended each of these years with budget surpluses of $6.5 billion in 2005, 

Page 8 GAO-08-1144T 
$9.2 billion in 2006, and $13.3 billion in 2007 because it was unable to 

spend its entire budget. Accordingly, the government may not be able to

spend its entire 2008 budget. 

Figure 1: Comparison of Iraq’s Proposed and Actual Budget Balances for 2005 

through 2007 and Projected 2008 Balance 

Page 9 GAO-08-1144T 
Since fiscal year 2003, Congress has appropriated about $48 billion to U.S. 

agencies to finance stabilization and reconstruction efforts in Iraq, 

including developing Iraq’s security forces, enhancing Iraq’s capacity to 

govern, and rebuilding Iraq’s oil, electricity, and water sectors, among 

others.10 As of June 2008, about $42 billion (88 percent) had been obligated

and about $32 billion (68 percent) had been spent.11

Over two-thirds of the $32 billion spent, or $23.2 billion, have supported 

reconstruction and stabilization activities in four critical sectors—security, 

oil, water, and electricity. Table 6 compares the allocations and spending 

of comparable activities by the United States and Iraq in these sectors. 12

The Iraqi government developed its first annual budget in 2005. 

Table 6: Comparison of Iraq and U.S. Allocations and Spending for Selected

Sectors 

U.S. Cumulative 

Expenditures on 

Stabilization and 

Reconstruction 

Activities in Iraq Since 

2003 

(Billions of U.S. dollars) 

Government of Iraq U.S. Government

2005-2008a

2005-

June 2008

Fiscal year 2003-

June 2008

 Fiscal year 

2003-June

2008

Sectors Allocated Spent

b

Allocated Spent

b

Securityc$12.8 $3.1 $22.5 $13.7 

Oil

d 10.8 0.4 2.7 2.5

Water resourcesd1.3 0.4 2.9 2.2

Electricityd5.2 0.4 5.3 4.8

Total $30.0 $4.3 $33.4 $23.2

Source: GAO analysis of Iraq Ministry of Finance budgets and expenditures and State, DOD, USAID, and Treasury data.

Note: Totals may not sum due to rounding. 

 10This includes Iraq-specific appropriations for the Iraq Reconstruction and Relief Fund,

Iraq Security Forces fund, Economic Support Fund, Commander’s Emergency Response 

Program, Iraq Freedom Fund, Democracy Fund, other agency program funds used for Iraq

activities, and operating expenses for the Coalition Provisional Authority. This amount 

includes $2 billion appropriated in June 2008 for reconstruction and stabilization activities 

in Iraq in the Supplemental Appropriations Act, 2008, P.L. 110-252 (June 30, 2008). This

amount does not include $1.1 billion appropriated in the same Act for similar activities in 

Iraq after October 1, 2008.

11For U.S. funds, we use the term “spent” for funds that have been disbursed. 

12Allocations are a portion of appropriated funds provided to U.S. agencies. 

Page 10 GAO-08-1144T 
a

These amounts include $2.1 billion that has been allocated for investments in these four sectors as

part of Iraq’s $22.3 billion supplemental budget that Iraq’s Council of Representatives passed in 

August 2008. 

b

This refers to funds disbursed by U.S. agencies and funds expended by the respective Iraqi 

ministries. 

c

For security ministries, the Iraq figures for allocated and spent exclude employee compensation. 

d

For oil, water, and electricity ministries, the Iraq figures refer to investment. 

As of June 2008, the United States had spent 70 percent of the amount it 

allocated for these four sectors from fiscal year 2003 through June 2008. In

contrast, as of June 2008, Iraq had spent 14 percent of the $30 billion it 

allocated from 2005 through 2008. 

U.S. government, coalition, and international officials have identified a 

number of factors that have affected the Iraqi government’s ability to 

spend more of its revenues on the capital investments needed to rebuild its 

infrastructure. First, Iraq has a shortage of trained staff with budgetary 

experience to prepare and execute budgets and a shortage of staff with 

procurement expertise to solicit, award, and oversee capital projects. 

Second, Iraq has weak procurement, budgetary, and accounting systems. 

These systems must balance efficient execution of capital projects while 

protecting against reported corruption. Third, violence has contributed to 

a decrease in the number of workers available, increased the amount of 

time needed to plan and complete capital projects, and has hindered U.S. 

advisors’ ability to provide the ministries with assistance and monitor 

capital project performance. 

As we previously reported,13 since 2005, the United States has funded 

activities to help build the capacity of key civilian and security ministries 

and thereby improve the Iraqi government’s ability to execute its budget 

for capital projects. However, we found multiple U.S. agencies leading 

individual efforts and recommended that Congress consider conditioning 

future appropriations on the completion of an integrated strategy for U.S. 

capacity development efforts. 

Factors Affecting 

Iraq’s Efforts to 

Accelerate Spending 

 13See GAO, Stabilizing and Rebuilding Iraq: U.S. Ministry Capacity Development Efforts 

Need An Overall Integrated Strategy To Guide Efforts and Manage Risk GAO-08-117 

(Washington, D.C.: Oct. 1, 2007). 

Page 11 GAO-08-1144T 
Iraq, with the third largest oil reserve in the world, has benefited from the 

recent rise in oil prices and generated billions of dollars in revenues. In

2008, Iraq will likely earn between $67 billion and $79 billion in oil sales—

at least twice the average annual amount Iraq generated from 2005 through 

2007. This substantial increase in revenues offers the Iraqi government the 

potential to better finance its own security and economic needs. 

Mr. Chairman, this concludes my statement. I would be pleased to answer 

any questions that you or other members may have at this time. 

For questions regarding this testimony, please call Joseph A. Christoff at 

(202) 512-8979. Key contributors to this testimony include Godwin Agbara, 

Assistant Director; Bruce Kutnick, Assistant Director; Pedro Almoguera; 

Monica Brym; Lynn Cothern; Gergana Danailova-Trainor; Justin Monroe; 

and Beth Hoffman-Leon. 

Conclusion 

GAO Contact and 

Acknowledgments 

Page 12 GAO-08-1144T (320634) 
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Ralph Dawn, Managing Director, dawnr@gao.gov, (202) 512-4400 

U.S. Government Accountability Office, 441 G Street NW, Room 7125 

Washington, DC 20548 

Chuck Young, Managing Director, youngc1@gao.gov, (202) 512-4800 

U.S. Government Accountability Office, 441 G Street NW, Room 7149 

Washington, DC 20548

Obtaining Copies of 

GAO Reports and 

Testimony

Order by Mail or Phone 

To Report Fraud,

Waste, and Abuse in 

Federal Programs 

Congressional 

Relations 

Public Affairs 

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