Volume 1 - Iraq Watch

Budgeting Iraqi ProcurementOff-budget and secret budget planning bypassedlarge government forum and was processed directlybetween the Ministry of Finance (MoF) and thePresidency, between the requesting organization andthe Presidency, or between the requesting organizationand Saddam. The former Regime relied heavilyon liquidating assets (forcing the Central Bank ofIraq to print more money) to meet its yearly budgetshortfalls.General Government BudgetThe general government budget, made up of currentand capital spending, however, does not representthe total Iraqi budget because sensitive issues, suchas defense, intelligence, and security were excluded.As a result, government expenditures and debt probablywere higher than what was listed in the budget.• In 2001, according to statistics from the CBI, theformer Regime spent over $1.1 billion (constant2001 dollars). This represents an increase of 49.5percent over 2000.• Complete data about Iraqi government budgetspending after 2001 are unavailable. A commonrefrain among government officials and detainees isthat many of these records perished during lootingand fires after the US invaded Baghdad.Because of the economic constraints following thewar with Iran (see Economics Section), it became difficultfor the Regime to draft and adhere to an accuratebudget. Figures estimated in January divergedconsiderably by the end of the fiscal year. Also,because of Saddam’s patronage policies, the Presidentialaccounts were reportedly routinely overdrawn by15 percent, and about 50 percent of the infrastructureexpenditure was spent by Saddam.Sources of Government RevenueOn-budget revenue—revenue included in the generalgovernment budget—came from sources such as:• Income and property taxes.• Customs duties and tariffs.• A percentage of the profits from government-ownedinstitutions and businesses such as banks and insurancecompanies.• The revenues of leased state properties.• The municipalities.Not all-Iraqi government revenue was accountedfor in the general government budget. Some of theseoff-budget funds included income earned through:• The Syrian, Turkish, and Jordanian trade Protocols.• Kickbacks on UN OFF Program import contracts.Supplemental Budgetary ProcessThe procurement programs supporting Iraq’s WMDprograms and prohibited conventional military equipmentpurchases were financed via a supplementalbudget process that occurred outside of the publicizednational and defense budgets (for details on thedevelopment, approval, and execution of the commonnational budgets, see Annex C: Iraq’s BudgetaryProcess). The approval process and disbursement offunds from the supplemental budget illustrate whowas distributing the money into the illicit procurementprograms and reflect, in quantitative terms, theintent of the Regime.Supplemental Budget Submission ProcedureThere were two methods for ministries and organizationsto obtain fundraising for specific projects orprocurement activities that were over and above thescope of their annual budgets:• One method was through the (EAC).• The other was to go directly to the PresidentialDiwan or the Presidential Secretariat.14