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Tue 19 Feb 2008 10:40 AM

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Corruption to eat away Iraq's $48bn budget

Misplanning and misimplementation will convert 'millions into beggars' experts warn.

Corruption will eat away at Iraq's $48 billion budget, which is unlikely to bring much relief to the hard-hit Iraqi in the street and will turn the jobless into an army of beggars, economists say.

The gloomy prognosis is based on patterns of administering the budget in the past four years, which, they say, has been bedevilled by a lack of planning and technical expertise and an inability by provinces to spend allocated moneys.

The budget, passed on Wednesday after months of wrangling by the deeply divided parliament, devotes the lion's share to the security forces, which gets 8.85 billion dollars - up from $7.5 billion in 2007 - and to education, which gets $4.13 billion.

Other major allocations include $1.92 billion to the health ministry and $1.37 billion to electricity - much of the latter expected to go towards upgrading infrastructure in a country still mostly in the dark.

Despite the healthy figures - more than double what they were before the overthrow of the regime of Saddam Hussein - economists believe not enough will filter down to ordinary Iraqis.

"The problem is not the size of the budget but whether it will be spent properly and free of financial and administrative corruption," said Baghdad economic expert Walid Khalid.

"What have citizens seen of last year's budget, which was also large? Approving the budget is not the problem; the problem is how much Iraqis will benefit from it," Khalid told AFP.

Economic researcher and financial journalist Husam Al-Samook said that Iraq's economic governance since the US-led invasion in 2003 has been badly affected by lack of expertise.

"For four years in a row, we have not had the technical experts who know how to draft a budget or even how to implement one," said Samook. "There is mis-planning and mis-implementation."

Provincial administrations, in particular, have performed poorly, he said.

"The most effective rate of implementation of the budget in the provinces was only 60% (in 2007), while in some of the more volatile provinces it was only 10%," he said.

"Those who drafted the budget did not take into account the urgency of the need to create job opportunities nor design adequate investment programmes.

"They burdened the budget by setting aside more than $720 million for the social sector to pay two million unemployed," said Samook.

"In fact what they are doing is converting two million people to beggars instead of putting this money towards investment programmes and projects that create jobs."

Economic expert in the finance ministry, Hilal al-Taan, acknowledged that the budget did not "wholly" meet the needs of Iraqis.

"The allocations for the defence ($4.99 billion) and the interior ($3.86 billion) ministries are the greatest because the security forces are at the forefront of ensuring security," said Taan.

"The budget is not ideal, we hope to do better in the coming years - if the price of oil is increased."

Revenue projections for the budget were based on oil priced at $57 a barrel, whereas prices are now projected to average $85 a barrel this year.

Iraq's oil production reached an average of 2.38 million barrels a day in the fourth quarter of 2007, the highest level since 2003 but still short of pre-war levels of 2.5 million barrels a day.

Vice President Tareq al-Hashemi acknowledged defects in the government's financial and monetary policies, but said a committee of experts was being set up "to resolve the economic shortcomings."

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