COUNCIL OF MINISTERS APPROVES BUDGET EXECUTION

UNCLAS BAGHDAD 000551 SIPDIS SENSITIVE SIPDIS E.O. 12958: N/A TAGS: ECON EFIN IZ SUBJECT: COUNCIL OF MINISTERS APPROVES BUDGET EXECUTION REFORMS ¶1. (SBU) Late 15 February an animated Minister of Planning and Development Cooperation Ali Baban told Coordinator for Economic Transition Carney that the Council of Ministers meeting that day had approved two documents submitted by the MoPDC making proposals for reforming and improving Iraq's budget execution processes. He cited new guidelines for implementing capital projects generally, and new, internationally-discussed rules for capital project contracting. Baban described these documents as important accomplishments. (Comment: While we are seeking further detail on the substance of the documents, from previous discussions we believe they are likely to contain useful reforms.) ¶2. (SBU) Pressed on prospects for early provincial execution of the first tranche of 10 percent of the capital budged, Baban described most provinces as having no real capacity to execute capital projects. He added that to address this deficiency, the MoPDC had proposed establishing MoPDC budget execution units in each province consisting of staff with relevant expertise (e.g. engineers, lawyers, accountants) who will provide technical assistance on capital project planning and execution and serve as an interface with the MoPDC. Baban said that it will probably take three to six months to provide initial training for these teams. Amb. Carney suggested that in the interim the MoPDC consider one or more mobile units that can provide timely assistance to multiple provinces. Baban agreed that this is a good idea worth pursuing. Carney and Senior Consultant to the MoPDC Martin both stressed that PRTs would offer their expertise to local governments to assist project development. Baban welcomed that prospect. ¶3. (SBU) Baban also expressed concern about the GOI's limited ability to perform government functions generally, due to the security situation, to partisan conflicts, to sectarian conflicts, to limited remaining skilled personnel and to a mindset among both the public and government officials that the government should provide everything without any expectation of productivity. He estimated that the ministries and provinces would probably only be able to execute 40-50% of the newly-passed capital budget. While pleased with the approval of the budget execution documents, Baban noted that they do address these more fundamental problems, but are part of an effort that he compared to treating a serious illness with aspirin. He said had recently become convinced that the only real solution is for the role of the government to be dramatically changed so that the functions that the government has not been able to provide can be performed by other entities such as the private sector. KHALILZAD