VZCZCXYZ0010
PP RUEHWEB

DE RUEHGB #3049/01 3231019
ZNR UUUUU ZZH
P 191019Z NOV 09
FM AMEMBASSY BAGHDAD
TO RUEHC/SECSTATE WASHDC PRIORITY 5501
INFO RUEATRS/DEPT OF TREASURY WASHDC PRIORITY

UNCLAS BAGHDAD 003049 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EFIN ECON IZ
SUBJECT: IRAQ - 2010 BUDGET ISSUES: INITIAL VIEW FROM THE 
COR 
 
REF: BAGHDAD 3028 
 
¶1. (SBU) Summary: On November 16, the Chairman of the Council 
of Representatives' (CoR) Finance Committee discussed issues 
in the draft 2010 budget with Emboffs. She confirmed the 
Committee is trying to get final CoR passage of the budget 
before mid-December so it can be signed by the Presidency 
Council and published in the Gazette by the end of the year. 
Contrary to the Committee's preliminary report, she stressed 
that the Finance Committee agrees that the Ministry of 
Finance (MoF) should be authorized in the budget law to 
borrow from the International Monetary Fund (IMF) and World 
Bank if necessary to cover a financial gap. The passage 
suggesting that this authority be deleted was inserted by a 
consultant as the report was rushed to the CoR for its second 
reading. She would like to use the Committee's report on the 
legislation to inform CoR members of the conditions under 
which the MoF would borrow and the policy measures required 
under these programs. While the KRG share of budgeted 
expenditures will remain at 17 percent, she suspects that 
certain KRG-related issues in the proposed budget are likely 
to spark debate. The Chair recognizes the need for the CoR to 
pass the 2010 budget in early December so the GOI will have a 
new budget in 2010 rather than operating on a continuing 
resolution. As the second reading was concluded on November 
17, the next step will be the final vote. End Summary 
 
2010 Budget and IMF 
 
¶2. (SBU) Emboffs and the local World Bank manager of the 
Public Finance Management project met with the Chair of the 
Finance Committee, Ms. Ala'a A. Alsadon, to gain her views on 
potential issues with respect to the 2010 proposed budge. She 
immediately raised the commentary in the Committee's 
preliminary report to the CoR proposing deleting the 
provision that would authorize the MoF to borrow from the IMF 
and World Bank. She claimed that the provision had been 
inserted by a consultant as the report was rushed to the 
floor for the CoR's second reading of the budget. The 
Committee does not agree with the language and it will not be 
included in the Committee's final report. Ms. Ala'a said that 
she had discussed the issue with the Finance Minister and the 
Deputy Governor of the Central Bank and that the Committee 
would retain the original language as submitted by the MoF to 
authorize the borrowing. The Minister assured her that the 
MoF would borrow only if needed to finance the programmed 
2010 budget deficit. 
 
¶3. (SBU) Ms. Ala'a reported that some CoR members were 
concerned about possible conditions for the loans that could 
adversely affect the Iraqi people, such as terminating the 
public distribution system (PDS). The World Bank rep assured 
her that measures envisaged with respect to the PDS were not 
different from the Committee's own objectives, e.g. a 
political statement about the need for the PDS to be more 
targeted to meet the needs of the truly poor. The World Bank 
rep suggested that she obtain the list of policy measures 
from the MoF, noting that the measures are set but would not 
be considered final until the loan agreement is signed with 
GOI authorities. The Chair said that her idea is to include 
the policy measures and the conditions under which the MoF 
would borrow from the Bank and the Fund in the Committee's 
final report. This, she thought, would assuage concerns of 
some of the parliamentarians. 
 
KRG in the Budget 
 
¶4. (SBU) Ms. Ala'a confirmed that the proposed 2010 budget 
provides for 17 percent of expenditures to be transferred to 
the KRG, net of national expenses, as last year. The 2010 
Qthe KRG, net of national expenses, as last year. The 2010 
proposed budget contains some provisions that are likely to 
draw the attention of the Kurdish CoR members. For example, 
the budget proposes that the Minister of Finance be permitted 
to deduct the cost of damages caused by a region or province 
as a result of not delivering crude oil to the Ministry if 
Oil for export or domestic consumption. In addition, the MoF 
includes the cost of the Bakhman dam in KRG's expenditures 
even though the dam will benefit the entire country, not just 
the Kurdish areas. According to Ms. Ala'a, the first measure 
is already being studied in another context and should not be 
included in the budget. With respect to dam costs, she 
believes those should be included as a national expenditures, 
not KRG expenditure. (Comment: Her strategy seems to be to 
avoid these controversial issues in the CoR as they could 
delay the final vote on the budget.) 
 
Timing 
 
¶5. (SBU) The Chair still has the goal of having the budget 
published in the Official Gazette by the end of the year. She 
is disappointed that the relevant CoR committees have not yet 
 
met with the ministries for which they have oversight and 
sent reports to the Finance Committee. Nonetheless, the CoR 
concluded the second reading of the budget on November 17. 
The upcoming Eid holiday will delay work on the budget until 
early December. Ms. Ala'a recognizes that passage of the 
proposed budget would need to take place in the first two 
weeks of December since by mid-month CoR members will drift 
away to begin campaigning. Passing the proposed 2010 budget 
would allow the GOI to increase expenditures in areas 
important to the people of Iraq. Operating on the basis of a 
continuing resolution would mean using 2009's lower 
expenditures and priorities. 
 
¶6. (SBU) Getting the final vote on the budget by mid-December 
will be a close call. The Finance Committee recognizes the 
need to pass the legislation. The Chair senses a 'positive' 
atmosphere in the CoR about the budget, particularly since 
they are considering on schedule. If the budget is passed by 
the CoR, signed by the Presidency Council, and published in 
the Official Gazette so it becomes law by the end of the 
year, it would mark the first time this GOI had passed a 
budget before the beginning of a new fiscal year. 
HILL