A US audit has found that the Pentagon cannot account for more than 95 percent of US$9.1 billion in Iraq reconstruction money, spotlighting Iraqi complaints that there is little to show for the massive funds pumped into their cash-strapped, war-ravaged nation.
The US$8.7 billion in question was Iraqi money managed by the Pentagon, not part of the US$53 billion that Congress has allocated for rebuilding. It’s cash that Iraq, which relies on volatile oil revenues to fuel its spending, can ill afford to lose.
“Iraq should take legal action to get back this huge amount of money,” said Sabah al-Saedi, chairman of the Parliamentary Integrity Committee. The money “should be spent for rebuilding the country and providing services for this poor nation.”
The report by the Special Inspector General for Iraq Reconstruction accused the US Defense Department of lax oversight and weak controls, though not fraud.
“The breakdown in controls left the funds vulnerable to inappropriate uses and undetected loss,” the audit said.
The Pentagon has repeatedly come under fire for apparent mismanagement of the reconstruction effort — as have Iraqi officials themselves.
Seven years after the US-led invasion, electricity service is spotty, with generation capacity falling far short of demand. Fuel shortages are common and unemployment remains high, a testament to the country’s inability to create new jobs or attract foreign investors.
Complaints surfaced from the start of the war in 2003, when soldiers failed to secure banks, armories and other facilities against looters. Since then, the allegations have only multiplied, including investigations of fraud, awarding of contracts without the required government bidding process and allowing contractors to charge exorbitant fees with little oversight, or oversight that came too late.
However, the latest report comes at a particularly critical time for Iraq. Four months after inconclusive elections, a new government has yet to be formed, raising fears that insurgents will tap into the political vacuum to stir sectarian unrest.
In a sign that insurgents are still intent on igniting sectarian violence, at least six people were killed and dozens more wounded when a female suicide bomber blew herself up near a checkpoint in the holy city of Karbala, local police said. They spoke on condition of anonymity because they were not authorized to speak to the media.
Thousands of Shiite pilgrims are converging on the city, 80km south of Baghdad, for an important religious holiday marking the birth of a Shiite saint known as the “Hidden Imam” who disappeared in the ninth century. Such mass displays of devotion by Shiites have often been targeted by Sunni extremists.
Iraqi lawmakers met on Tuesday, but for the second time this month failed to convene a parliament session, leaving wide open the question of when the new government will take shape.
Underscoring its financial challenges, the IMF in March approved a US$3.6 billion loan to help Iraq meet its obligations. Iraq is projected to run a deficit through next year, analysts said, with a possibility of a surplus following that hinging on oil prices.
Iraq took a financial hit in 2008 as oil prices plummeted on the back of the global financial meltdown. While those prices have since rebounded, Iraq remains at the mercy of international oil markets, with revenues from petroleum sales accounting for more than 90 percent of its government budget.
The US$9.1 billion in question came from the Development Fund for Iraq (DFI), which was set up by the UN Security Council in 2003. The DFI includes revenues from Iraq’s oil and gas exports, as well as frozen Iraqi assets and surplus funds from the defunct, Saddam Hussein-era UN oil-for-food program.
Iraq had given the US authorization to tap into the fund for humanitarian and reconstruction efforts, withdrawing that approval in December 2007.
With the establishment of the Coalition Provisional Authority, which ran Iraq shortly after the start of the US invasion in 2003 until mid-2004, about US$20 billion was placed into the account. The US$9.1 billion audited were funds withdrawn from that account between 2004 and 2007.
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