Very Little of Iraq Oil Surplus Goes to Rebuilding

Budget & Tax, National Security, | Analysis

Aug 6, 2008 | 2 min read | Print Article

The Government Accountability Office (GAO) released a report tabulating U.S. and Iraqi expenditures on rebuilding efforts ( click here for the report ).

As lawmakers debate strategies and timelines for withdrawing from Iraq, they should be talking about a shifting more of the Iraqi infrastructure spending burden on them as well. While Iraq has significant needs and debt, the country also possesses great oil wealth that if managed effectively, can pay for the rebuilding of their country. Rather than paying for contractors to rebuild water, electricity and oil infrastructure, we should be working with the Iraqi government so that they can effectively budget and contract for these services themselves.

A few highlights from a report released today:

Over the last several years, the U.S. has invested tens of billions of dollars ($48 billion appropriated; $42 billion obligated) in Iraq reconstruction. 70 percent ($23 billion) of this funding went to security, oil, electricity and water investments. Over a slightly shorter period, Iraq spent only $3.9 billion (out of $28 billion allocated) in the same areas.
Aided in part by the rapid increase in oil prices, Iraq crude oil sales are on the rise. GAO estimates that they could generate between $67 billion and $79billion in 2008 which represents a doubling of the average annual income of previous years.
Iraq has significant capital reserves ($29.4 billion) but also has significant outlying debt (loans and war reparations to Kuwait). The reserves include $9.9 billion (as of Dec. 31, 2007) of Development Fund for Iraq funding (from Iraqi oil revenue) held at the New York Federal Reserve Bank.