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.)