Baghdad generated an estimated cumulative budget surplus of $52.1bn in the six-year period to the end of 2009, according to a report by the US Government Accountability Office (GAO) titled Iraqi-US Cost-sharing

The surplus figure however falls to $11.8bn after adjusting for $40.3bn in advances, which have been committed for future expenditure.

The surpluses will be particularly important when Washington reviews its budget requests for securing and stabilising Iraq in 2011.

Since launching its 2003 invasion, the US has spent $642bn on military operations in Iraq and provided approximately $24bn for training, equipment, and other services for the Iraqi security forces.

According to the GAO, Iraqi budgets are unreliable indicators of the country’s fiscal balance at the end of each year.

From 2005 to 2009 Iraq began each year with budgets projecting government spending would exceed revenue. If spending matched the budget and revenue expectations, Iraq could have expected to see cumulative deficits of more than $35bn.

“Actual expenditures for the past 5 years have consistently fallen short of budget projections, while actual revenues, in general, have met or exceeded projections”, says the report.

Oil export revenues in 2009 stood at $39bn, accounting for 83 per cent of Iraq’s total revenues.

In February Iraq secured a $3.6bn arrangement with International Monetary Fund (IMF), to help it cope with budget deficits over the next two years. Under the terms of the deal the government agreed to reform various aspects of its public finance management system including preparing a report on its outstanding advances, identifying those advances that are recoverable and could be used for future spending and setting a timetable for their recovery. The report is set to be completed by 30 September (MEED 25:2:10).

In its recommendations, the GAO says the US State Department and Treasury should work with the Iraqi government “to further identify available resources, including by assisting Iraq in completing IMF-required reviews of outstanding advances and deposits in central government accounts”.

Estimate of cumulative outstanding advances recorded by the Iraqi government, 2004-September 2009  
Year $bn
2004 6.4
2005 10.0
2006 11.9
2007 16.7
2008 30.4
2009 40.3
Source: GAO