IRAQ MINISTER OF FINANCE PLEDGES HELP ON BUDGET

1. Summary: On August 9, the Ambassador met with
Minister of Finance Bayan Jabr to discuss problems in the GOI
budget execution process that were preventing GOI ministries
and provinces from carrying out their badly needed programs,
including support for the vital Baghdad Security Plan now
underway. The Ambassador recommended that the Ministry of
Finance and the Ministry of Planning work to develop a
proactive program of working groups within the cabinet,
provinces and cities (as appropriate) to identify and remove
roadblocks. Minister Jabr acknowledged the importance of
establishing an efficient budget planning and execution
process in Iraq to deliver badly needed services to the Iraqi
people. He also noted the critical role the ministries have
to play in support of the Baghdad Security Plan. Jabr
already meets weekly with most Ministers but welcomed the
idea of lower level meetings, including participation of U.S.
ministerial advisors, and pledged to begin such a program
immediately. Jabr also noted the need to build the planning,
contracting and overall budget execution capabilities of the
Iraqi government. The Ambassador expressed U.S. willingness
to continue to work together on such capacity building. End
summary.

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Solutions Needed - Iraq Minister of Finance Pledges Help on
Budget Execution
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2. (C) On August 9, the Ambassador met with Minister of
Finance Bayan Jabr to discuss problems in the GOI budget
execution process. The Ambassador was accompanied by the
Director of the Iraq Reconstruction Management Office (IRMO),
the Treasury Attache and the Deputy Econcons. The Ambassador
began by noting that officials in GOI ministries, provinces,
and cities were complaining that the MOF was failing to
release funds in a timely manner or imposing onerous
requirements that prevented them from carrying out their
badly needed programs. The Ambassador noted that the vital
Baghdad Security Plan was now underway. While the USG was
prepared to cover initial expenses for the economic aspects
of the plan for a month or two, it is vital that the GOI,
through central and local government organizations, be able
to plan and contract projects as well as disburse project
funds quickly.



3. (C) The Ambassador added that the issues were not
confined to projects in the Baghdad region but included
issues in other regions. Further, ministries have argued to
US officials that the MOF is not releasing in a timely manner
funds for operations and maintenance as well as investment
within ministries. Resolving the various intertwined issues
is vital to providing the services from health to energy to
water that the Iraqi people desperately need. For example,
the USG has supported construction or rehabilitation of water
processing plants, but the next step is providing the pipe
connections from the plants to houses. GOI officials need
the funds to carry out such projects and the funds must be
released promptly. The Ambassador emphasized that these
issues are also critical if Iraq is to be able to capitalize
on the new International Compact. If the GOI is not using
its own funds efficiently or the funds are sitting in the
MOF, other nations will not feel further donations are needed
for projects in Iraq. The Ambassador urged the Minister to
take immediate action to identify and remove roadblocks. He
suggested that the MOF set up working groups with the
ministries and local governments, beginning with Baghdad, to
identify and resolve issues immediately.

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Minister Commits to Improvements
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4. (C) Minister Jabr said that he was fully committed to
making the resources in the budget available promptly.
Timely execution of well-planned projects and delivery of
services was vital given the security situation as well as
the people,s needs. He was fully committed to the success
of the Baghdad Security Plan. He agreed that Baghdad was a
test case for the new government. He noted that the
International Compact was important for Iraq,s future and it
was unreasonable to expect others to provide aid if Iraq's
own government had budgeted unspent money.



5. (C) The Minister was aware that GOI organizations from
ministries to local governments were having difficulties at
all stages from planning to budgeting to contracting to
disbursing of funds for projects because of inexperience and

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lack of technical capability. Much more capacity building
through training was needed from top to bottom. He argued
that he did respond promptly and fully to ministerial
requests for funds already budgeted. He noted, however, that
before releasing funds, he checked the requesting ministry,s
&bank account.8 If the ministry still had significant
funds in the bank, he did not add further monies
automatically.



6. (C) Minister Jabr agreed with the Ambassador that
inter-ministerial communication was vital to ensuring the GOI
budget execution process worked as it should. He noted that
he already met with ministers weekly to ensure he and they
were aware of what needed to be done. He thought that the
idea of having working groups with officials below
ministerial rank was excellent and promised to start such
groups. He welcomed participation by US advisors as well.
The Ambassador ended the conversation by reiterating the US
commitment to working together on capacity building at all
levels to ensure the budget execution process works
efficiently for the future of Iraq.
KHALILZAD