VZCZCXRO8655
RR RUEHBC RUEHDA RUEHDE RUEHDH RUEHKUK
DE RUEHIHL #0034 1141722
ZNR UUUUU ZZH
R 241722Z APR 09
FM REO HILLAH
TO RUEHC/SECSTATE WASHDC 1184
INFO RUCNRAQ/IRAQ COLLECTIVE
RUEHIHL/REO HILLAH 1257

UNCLAS HILLAH 000034 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EFIN PGOV IZ
SUBJECT: BABIL PROVINCIAL GOVERNMENT SHORT OF FUNDS 
 
¶1. (SBU)  Summary: The sharp decline in Iraq's oil revenue, 
together with an over-obligation of budget resources by the 
former provincial government, means that Babil Province faces a 
funding shortfall.  Newly elected members of the provincial 
council are still unfamiliar with budget processes and have 
sought USG assistance.  Despite an expansion of its authority 
under the Provincial Powers Act, the council will struggle to 
meet constituents' expectations of improved services.  End 
summary. 
 
 
 
Resources Halved and Budget Over-Obligated 
 
------------------------------------------ 
 
 
 
¶2. (SBU)  Babil's new provincial government faces a funding 
shortfall that will make it difficult to meet electoral 
expectations for more essential services.  Lower oil revenues 
virtually halved the budget controlled by the province in 2009, 
from about USD 235 million to USD 135 million, with the prospect 
of a further reduction on the horizon. 
 
 
 
¶3. (SBU)  In January 2009 the outgoing provincial government 
obligated virtually all 2009 funding.  The obligations may have 
been made in the expectation of a supplemental budget, although 
there were in fact no grounds for such optimism on the part of 
the then-provincial government.  The new government may be able 
to void some contracts and argue that a recent law could make 
some contracts non-binding. 
 
 
 
"We are Blind" 
 
-------------- 
 
 
 
¶4. (SBU)  Incoming new provincial council members (only eight 
members are returning incumbents) described themselves as 
"blind" on the budget.  They asked the PRT and USAID's Local 
Governance Program to educate them on the budget process and 
financial realities.  The PRT has already started discussions 
with incoming provincial council members on the need to move 
quickly on budget planning. 
 
 
 
¶5. (SBU)  Still, the outgoing provincial government may have 
done the new government, which was not seated until April 13, a 
favor.  In the absence of already-obligated funds the new 
government would likely not have had time to go through a budget 
process to expend FY 2009 funds this year.  The pre-obligation 
may therefore prevent the loss of funds for provincial projects 
since funds will not roll over from one year to the next under 
new regulations. 
 
 
 
¶6. (SBU)  Comment: The quandary for the new government, once it 
gains an understanding of the fiscal constraints it faces, will 
be how to improve the delivery of essential services.  The 
pressure to find new provincial sources of revenue, the door for 
which opened under the new Provincial Powers Act, will be high, 
even as the national Da'wa leadership seeks to increase the 
power and role of the central government vis-`-vis the provinces. 
 
HILLASKM