FY 2009 IRAQI BUDGET -- INITIAL NUMBERS

C O N F I D E N T I A L BAGHDAD 000643 SIPDIS E.O. 12958: DECL: 03/11/2019 TAGS: EFIN ECON PGOV IZ SUBJECT: FY 2009 IRAQI BUDGET -- INITIAL NUMBERS REF: BAGHDAD 585 Classified By: Economic Minister Counselor Marc Wall for reasons 1.4(b) and (d) ¶1. (C) The GOI has yet to complete an accounting of the impact of the last minute amendments to the 2009 Iraqi budget, which was approved on March 5 (reftel). The bill has yet to be sent from the Council of Representatives (CoR) to the Presidency for formal approval. Debate continues within the GOI over the amendments discussed in reftel, many of which are seen as attacks on the prime minister's authority. For instance, the Electricity Minister reports that a cabinet meeting on March 17 will discuss additional funding to meet the obligations of contracts signed last year to purchase generating equipment from GE and Siemens (an amendment to the budget explicitly restricted funding for these contracts). ¶2. (SBU) While a full assessment requires the Finance Ministry to rework the budget numbers to account for the last minute revisions, we have gathered several top level figures from the Finance Ministry. The USD 59 billion 2009 budget has two components: investment (capital) expenditures and operating expenditures that include items such as salaries for government and public sector salaries, social welfare safety-net spending, operations and maintenance, and allotments to the provinces, including 17 percent of non-sovereign expenditures for the Kurdistan Region. The investment and operations budgets are approximately USD 13 billion and USD 46 billion, respectively. The GOI's proposed operating budget (as approved by the Council of Ministers on February 3) was USD 50 billion; investment expenses do not appear to have been significantly changed. ¶3. (SBU) The CoR did not make any significant changes on the revenue side. The budget anticipates government revenue in 2009 to be approximately USD 43 billion, of which oil exports account for USD 36.5 billion based on an export rate of 2 million barrels per day (mbd) and an average price of USD 50 per barrel. The other USD 6.5 billion in revenue is expected to be earned through other taxes, tariffs, licenses, public sector company profits, etc. Under the budget revenue assumptions, the GOI anticipates a USD 16 billion deficit (down from USD 20 billion in the GOI proposal). This deficit "shall be covered by cash funds carried over from the 2008 Central Budget," according to Article 2 of the Budget Law. Given Iraqi oil exports have been, and continue to be, below 2 mbd and the price that Iraq earns per barrel of export has not yet reached USD 50 per barrel in 2009, the budget deficit is likely to be larger than anticipated in the budget, assuming the GOI is able to full execute the 2009 budget, which is likely given performance in 2008. Both the Minister of Finance and Council of Representatives have said that they will likely pass a "negative supplemental" or rescissions bill later this year. ¶4. (C) Under Article 48 of the Budget, the Minister of Finance "shall issue the necessary instructions to facilitate the implementation of the provisions of this law." Employees at the Ministry of Finance are still sorting through the details of the budget as passed by the CoR. Since the budget passed, senior Finance Ministry staff have been out of country for consultations with the IMF. While Minister Jabr returned to Baghdad on March 11, his senior advisors are expected to be out of country for several more weeks. We do not expect to have a full read on the 2009 budget figures before the end of March. BUTENIS