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[casi-analysis] CPA 2004 Budget

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Dear casi-analysis,

I have only just got around to reading the 2004 Iraq budget, an outline (I
assume) of which can be seen at

I have a number of questions for members of the list more familiar with the
budget than me. Apologies if they betray my ignorance.

1) Generally, what was the consultation process regarding the budget - how
it was drawn up with CPA, Ministry of Finance, IGC officials etc?

2) Since the budget's fiscal framework requires that deficits not be funded
either through borrowing or through printing more money, what is the legal
basis for using Oil for Food funds to finance the 2004 budget deficit (of
886.3 bn NID - p. 5, Budget Financing). I am assuming that this is separate
from transferring OfF funds to the Development Fund for Iraq, as provided
for by UNSCR 1483 - is this the case?

3) How realistic is it to expect that Iraq's budget will be able to balance
as early as 2005? (and, indeed, to run a small surplus, according to the

4) The budget contains, for little apparent reason, a long historical
section on economic mismanagement under Saddam Hussein (pp.7-9). The graphs
of p.c. GDP and capital formation nicely show rises up to 1989, despite the
assertions that Iraq's economic problems can be entirely attributed to
'decades' of mismanagement during the regime's rule. I am more interested,
however, in the basis for a series of assertions regarding this
mismanagement. Is there any published evidence to substantiate the

(i) that 10% of the face value of OfF contracts was required to be paid
directly to the regime for funding palaces and military expenditure, and
enabled by artificially inflating prices

(ii) That substantial quantities of OfF goods were on-sold or smuggled by
state-owned enterprises (this seems, on the face of it, more plausible)

(iii) that the Iraqi budget "mainly funded the military and the presidency)
(p. 9), an assertion made in spite of the fact that "a key challenge in
preparing the 2004 Budget was the lack of a clear base on where funds were
spent by the previous regime....little detail exists on how or where
military or Presidency appropriations were spent." (p.14)

5) The budget shows an increase in a number of user-pay charges, including
"fees from emergency services", "Social Security Rental Income", and
"Pharmaceutical Scrip charges", this last being one of the largest at an
anticipated 30 bn NID. Revenues from all of these are expected to increase
in 2005 and 2006. Does anyone know if this is because charges are being
introduced/increased, or because of anticipated better collection of
charges? Certainly some are new, including the Prescription charges, at
1500 NID. In addition, does anyone have any information about whether such
charges are likely to introduce any significant hardship, and what the
exemption structure is likely to be - the CPA was supposed to have
published details of the ministerial review of these charges by 31st
December, but I couldn't find that document anywhere.

6) Are there any more detailed published details of the 'Economic
Restructuring Programme', budgeted at a (relatively small?) 160.5 bn NID
for 2003, and 750 bn NID for 2004 (although an additional 750 bn is to be
spent on supporting State-Operated Enterprises as they are phased out). I
am unsure whether this is a large or small figure, given that it is to
cover reduncancy payments and retraining programmes for what I assume will
be quite a large proportion of the workforce?

I'd be grateful for any information or thoughts people might have on these.

All the best for the New Year,

Mike Lewis

Michael Lewis
Christ's College,
University of Cambridge

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