Cash Dwindles for Rebuilding Iraq

By Jonathan Finer
Washington Post Foreign Service
Tuesday, January 31, 2006

BAGHDAD, Jan. 30 -- The U.S. official who oversees reconstruction spending in Iraq has called for money beyond $18.4 billion originally earmarked, saying postwar funds will be exhausted by the end of 2006 with many projects likely to be unfinished.

Iraq's water supply, electrical capacity and oil production -- three primary targets of reconstruction -- are functioning below prewar standards, said Stuart W. Bowen, Jr., the inspector general for Iraq reconstruction, in a quarterly report to Congress published Monday.

"The need for more funding has reached a critical point," Bowen wrote. "There is a compelling basis to increase support for sustainability."

The report, and an audit released separately by Bowen's office Monday, concluded that the uncertainty of funding that would allow projects to be continued and infrastructure maintained could disrupt a smooth transition if the United States hands off reconstruction responsibilities to the Iraqi government this year, as projected.

U.S. money allocated to reconstruction has been depleted by steeper-than-anticipated security costs. As a result, U.S. officials have said in recent months that the Iraqi government and foreign donors will have to bear more of the burden of rebuilding the war-ravaged nation. Reconstruction administrators have said there will be no further funding requests in the Bush administration's budget, which will be presented to Congress next month.

"It was never our intention to completely rebuild Iraq," said Brig. Gen. William McCoy, the Army Corps of Engineers commander overseeing reconstruction, in a recent interview.

But while foreign donors, along with the International Monetary Fund and the World Bank pledged more than $13 billion toward that effort during an October 2003 conference in Madrid on aid to Iraq, much of the money remains undelivered.

"The change of governance authority on June 28, 2004, led several Persian Gulf nations to initiate discussions with Iraqi authorities about fulfilling their Madrid pledges," Bowen wrote. "Furthermore, the recent election of the current Iraqi government provides an opportunity for the Gulf States to develop the personal relationships that may encourage action."

On Monday, Ashraf Qazi, the top U.N. official in Iraq, said donors would be "encouraged" to make good on their pledges at their next conference, to be held in February or March in Istanbul or the northern Iraqi city of Irbil.

Qazi suggested that some countries may balk at supporting Iraq's rebuilding effort because they think the government is receiving a boost from the recent run of record-high oil prices. Totaling roughly $2 billion a month, Iraq's oil exports account for at least 95 percent of government revenue and were once expected to fund Iraq's reconstruction. Insurgent attacks and dilapidated infrastructure have held back production, however, forcing the country to spend nearly $500 million a month to import refined fuels.

That spending, and heavy subsidies for fuel and food have eaten away at oil profits. The International Monetary Fund has said that scaling back the subsidies is a condition for forgiving Iraq's foreign debt, but the political costs are high. Violent riots broke out in December when the government announced steep increases in gas prices.

Still, "there is the sense that with oil prices being what they are, Iraq may be better placed to finance some of its own reconstruction activity," Qazi said. "It is hoped that at the next donors conference there will be additional pledges. But the perception is that Iraq is essentially not a poor country and can generate revenues on its own. Iraq might suffer on that account."

The documents published Monday were the latest in a string of disclosures by Bowen of the myriad difficulties facing U.S. reconstruction in Iraq. Previous audits have shown efforts to be hundreds of projects behind schedule, hamstrung by unanticipated security costs and marred by occasional but egregious mismanagement and corruption.

The quarterly report, the eighth published by the special inspector general's office, was the first to focus on how far reconstruction efforts have missed targets for provision of basic services outlined by the Coalition Provisional Authority, the U.S.-administered body that governed Iraq after the 2003 invasion.

"After 18 months of intense reconstruction activity, many services have not returned to prewar levels," Bowen wrote.

Iraq was generating 4,500 megawatts of electricity before the invasion, and reconstruction officials said in 2003 their target was 6,000 megawatts, Bowen wrote. Iraq's current generating capacity is 3,995 megawatts.

Before the war, Baghdad residents received an average of 16 to 24 hours of electricity a day. They currently receive 3.7, the report said. Outside the capital, however, the situation has improved to 10.2 hours per day from four to eight hours before the war.

While Iraq produced 2.6 million barrels per day of crude oil before the war, it now produces 2.1 million, the report said.

And 8.25 million Iraqis currently have access to potable water, compared with 12.9 million before the war. Reconstruction officials had aimed to bring potable water to 23.4 million citizens.

© 2006 The Washington Post Company