COR FINANCE CHAIR ON SUPPLEMENTAL CONFUSION

C O N F I D E N T I A L SECTION 01 OF 02 BAGHDAD 001578

SIPDIS

E.O. 12958: DECL: 05/23/2018
TAGS: ECON EFIN EAID PGOV IZ
SUBJECT: COR FINANCE CHAIR ON SUPPLEMENTAL CONFUSION

Classified By: Economic Counselor Todd P. Schwartz for reasons 1.4 (b)
and (d)

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Summary
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1. (C) During an introductory meeting with Econoffs May 21,
Dr. Ayad Samarraie, Council of Representatives (CoR) Finance
Committee Chair, noted that multiple plans for the Government
of Iraq's (GOI) proposed supplemental budget have engendered
confusion. He cited DPM Barham Salih's proposal to allocate
USD 5 billion for strategic infrastructure projects and
explained that part of the confusion arises because some
proponents of the DPM's plan have called for an
extra-budgetary allocation that would permit added
flexibility to spend the funds, including continuing
authority over a multi-year period. Ayad did not know whether
Barham's plan would ultimately be part of the supplemental
budget bill. He told us he received an invitation to attend
the May 29 High Level International Compact with Iraq (ICI)
Annual Review Conference in Stockholm but complained that he
had not yet received a copy of the Conference report from the
GOI. (Note: The report in question was published on the ICI
website on May 19, 2008. End Note) When asked how 2009
federal budget negotiations would be affected in the absence
of a new general census, Ayad demurred, and offered no
predictions. Ratification of two new Japanese soft
loan-financed projects may be delayed unless the Japanese can
allay concerns within the CoR that their projects are
"fairly" distributed throughout Iraq in accordance with the
constitution. End Summary.

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Supplemental Concerns
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2. (C) In a wide-ranging discussion with Econoffs, Dr. Ayad
Samarraie noted an abundance of confusion within the GOI and
the CoR concerning plans for a supplemental budget. He
referred to Deputy Prime Minister (DPM) Barham Salih's
proposal for a USD 5 billion allocation that would fund
strategic infrastructure projects, with spending authority of
up to five years. Ayad said that the GOI needed to determine
whether the DPM's planned allocation would be "on-budget" or
"off-budget." If it were the latter, Ayad asserted the GOI
would have greater flexibility in spending the funds,
including extending spending authority beyond the fiscal
(calendar) year. Furthermore, according to Dr. Ayad, if the
supplemental budget were to remain "on-budget," the Kurdistan
Regional Government (KRG) would need to be allocated its 17
percent as outlined in the 2008 federal budget law. He
claimed that he had seen three separate plans including a
draft law that the GOI sent to the CoR, after which the Prime
Minister's office notified him that the draft in question was
in fact not final. Ayad confessed, "We need to spend the
money, but we don't know how."


3. (C) Note: Confusion regarding proposed supplemental
budgets extends beyond the CoR to ministries and provinces.
We have pressed Finance Minister Jabr to unite the three
potential supplemental budget requests (MoF capital, DPM
strategic infrastructure, and Trade Ministry PDS procurement)
into an omnibus bill that might reduce confusion and broaden
support for these equally important measures. However,
Minister Jabr has thus far refused to take such a bold
stroke, focusing instead on passage of his capital program
supplement. End Note.

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Donor Issues
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4. (C) Ayad noted he recently received an invitation to
attend the ICI ministerial in Stockholm. He preferred having
an independent authority assess the GOI's progress on meeting
ICI benchmarks but provided no additional details on setting
up such a mechanism. When asked about the proposal to adopt a
co-financing scheme for new donor assistance, Ayad told us he
had yet to see it.


5. (C) Econoff noted the forthcoming agreement on two
additional Japanese soft loan-financed projects and urged
Ayad to ensure the smooth passage of the loan ratification
upon eventual referral to the CoR. Ayad said he appreciated
the need for expedient passage, but noted that he takes
seriously the CoR's duty to ensure the projects are "fairly,
not equally" distributed in accordance with the constitution.
Highlighting his role in convincing VP al-Hashimi to lift a
veto of an earlier bill ratifying four separate projects,
Ayad lauded the Government of Japan as the "best" donor
because of Japan's willingness to reallocate projects in
response to Iraqi concerns. He welcomed a meeting with the

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Japanese to discuss his constitutional concerns.


6. (C) When asked about the status of a package of USD 1
billion loans from Iran, Ayad confirmed that the CoR has yet
to receive a draft bill ratifying the loan agreement. Until
then, "It is just a promise," he said.

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Finance Committee Legislation
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7. (C) Ayad reviewed legislation for which his committee had
oversight, including the civil service pay raise. He claimed
he had seen an early estimate of the cost of a law increasing
public sector salaries (which the Presidency Council endorsed
May 4) at approximately USD 1.5 billion, but stressed that it
was not an official estimate. He complained that a number of
different groups including judges and agricultural and civil
engineers were lobbying the CoR for their own pay raise
following the successful passage of a university service law,
which specified pay increases for higher education officials.
In his view, the CoR should have passed one law that would
uniformly increase all groups' salaries. Similarly, Ayad said
that the CoR should not consider legislation governing the
Social Safety Net alone, but rather draft a unified bill
addressing all welfare concerns for the most vulnerable
segments of society.

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Comment
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8. (C) Ayad's opinions underscore the continuing development
of the CoR as an independent and co-equal branch of the Iraqi
government, which is positive. He noted that a team of
USAID-funded Iraqi BearingPoint advisors assigned to assist
his committee's work were providing much needed expertise.
His (lack of) response to our question about 2009 budget
negotiations bodes ill for the prospects of speedier passage,
but affirmed our suspicions concerning the consequence of the
GOI's inability to conduct a general census until late summer
2009 (as GOI officials have recently stated to the media). In
spite of repeated assurances by GOI officials to the
contrary, Ayad's characterization of the current status of
the budget supplemental may forebode protracted negotiations
upon the bill's introduction to the CoR. End Comment.
CROCKER