BUDGET PROCESS FOR SULAIMANIYAH PROVINCE, IRAQI KURDISTAN

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.)