VZCZCXRO0823
RR RUEHBC RUEHDA RUEHDE RUEHIHL RUEHKUK
DE RUEHGB #1247 1010727
ZNR UUUUU ZZH
R 110727Z APR 07
FM AMEMBASSY BAGHDAD
TO RUEHC/SECSTATE WASHDC 0674
INFO RUCNRAQ/IRAQ COLLECTIVE

UNCLAS BAGHDAD 001247 
 
SIPDIS 
 
SIPDIS 
 
SENSITIVE BUT UNCLASSIFIED 
 
E.O. 12958:  N/A 
TAGS: ECON EFIN IZ
SUBJECT:  BUDGET PROCESS FOR SULAIMANIYAH PROVINCE, IRAQI KURDISTAN 
 
 
This is a Kurdistan Regional Reconstruction Team (RRT) cable. 
 
¶1.  (SBU) SUMMARY. Local officials face a complex environment for 
budget execution in the Kurdistan Region.  Project funding is 
through one of two Ministries of Finance, depending on the project 
location.  The Ministry of Finance for Sulaimaniyah Province, 
Patriotic Union of Kurdistan (PUK) feels it is not getting its fair 
share of the KRG investment budget.  It complains of delays in 
receiving partial budget allocations from the central government in 
Baghdad, which sends it to the province via the KRG in Erbil.  Erbil 
Province is controlled by the Kurdistan Democratic Party (KDP).  The 
PUK-led Ministry of Finance in Sulaimaniyah notes it has a back-log 
of projects waiting for funding.  END SUMMARY. 
 
¶2.  (SBU) On April 8, RRT Off met with Maleha Rasul Khider, the 
Director General (DG) for Sulaimaniyah Province General Directorate 
of Financial Affairs, Ministry of Finance. 
 
¶3.  (U) By way of background, the Kurdistan Regional Government 
(KRG) has two ministries of finance, one for the PUK responsible for 
Sulaimaniyah Province and another for the KDP, covering Dohuk and 
Erbil Provinces.  For project funds, all provincial ministries - 
some unified others are separated PUK and KDP - have to work with 
the finance ministry of the province in which the project is 
located.  This situation can be complex because neither party 
controls completely the province in which it is dominant.  For 
instance, Taq Taq city is located in Erbil province but is 
controlled by the PUK for its administration, budget, and security. 
Therefore, projects for Taq Taq are budgeted and managed through the 
Ministry of Finance in Sulaimaniyah (PUK) not Erbil Province (KDP). 
 
THE PROVINCIAL BUDGET 
 
¶4.  (SBU) The DG told RRT Off that the 2007 KRG budget was approved 
in March by the central government in Baghdad.  The Ministry of 
Finance in Sulaimaniyah Province received 50 percent of the 2007 
general expense budget allocated for Sulaimaniyah Province for the 
first quarter of 2007.  This amount is about 55 million dollars and 
will only cover running costs and administrative expenses, to 
include salaries.  She said Sulaimaniyah Province is going on the 
assumption that it will not receive additional funds under the 2007 
budget. 
 
THE INVESTMENT BUDGET 
 
¶5.  (SBU) When asked if Sulaimaniyah Province received the proper 
amount of the 2007 investment budget to initiate services, the DG 
replied that 10 percent of the budget that had been allocated for 
investments for Sulaimaniyah Province had been received by the KRG 
in Erbil but the province had not yet received the money. 
 
¶6.  (SBU) The DG expressed her frustration over the lack of money 
for funding projects in Sulaimaniyah Province.  There is a build-up 
of unfunded local projects of the provincial development program 
that dates back to 2003 and which coincides with the start of US 
reconstruction and capacity-building efforts in Iraq.  Local 
officials would like the full amount of the 2007 investment budget 
for the first quarter to cover the provincial development program. 
 
 
FISCAL RELATION WITH THE CENTRAL GOVERNMENT 
 
¶7.  (SBU) The DG stated that the proposed budget for Sulaimaniyah 
Province is sent to the seat of the KRG in Erbil.  The KRG then 
forwards it to the central government for approval.  The central 
government releases the budget to the KRG in Erbil which then 
transfers the portion allocated to Sulaimaniyah Province to the 
branch office of the Central Bank of Iraq (CBI) for disbursement. 
Although the central government forwards to the KRG in Erbil one 
sum, the DG noted the central government considers the KRG as three 
distinct provinces each having a budget amount.  There are no direct 
budget transfers from the central authorities to the provinces. 
(Note: Emboffs have been told separately that the regional KRG 
government finds it politically useful to blame the central 
government for not funding provincial requests, whether or not these 
requests are in line with revenue projections. End note.)