NEW YORK—Ahead of a deadline for the transfer of power, the Coalition Provisional Authority’s reporting of Iraqi finances falls short of international standards of accounting and transparency, said a report by the Open Society Institute’s Iraq Revenue Watch project. The report, "Opening the Books: Transparent Budgeting for Iraq," urges the CPA and the Iraqi Governing Council to make further improvements in accordance with these standards before a new Iraqi government is elected in 2005.
"Budgetary transparency and accountability can help ensure that Iraq does not revert to Saddam Hussein’s tyranny of secrecy," said Anthony Shorris, Frederick H. Schultz Professor of International Economic Policy at the Woodrow Wilson School of Public and International Affairs at Princeton University, who authored the report. “The people of Iraq—as well as the global financial community—must understand the sources and uses of their country’s resources.”
The CPA has an opportunity to leave behind practices that depart from decades of financial mismanagement. Iraq Revenue Watch’s first report on the CPA’s emergency budget for 2003 outlined how the CPA could develop a rudimentary framework for sound financial reporting in future budgets. But while the CPA has made progress over the past year, this is not nearly enough to set Iraq on a road to meeting the standards expected of a nation seeking to return to active participation in the global economy. Sound financial management is essential for the CPA and the Iraqi Governing Council.
Iraq’s 2004 budget, produced by the CPA and Iraq’s Ministries of Finance and Planning, is the country’s first full-year financial plan since Saddam Hussein’s removal. However, it lacks key information about state-owned enterprises, financing for sub-national governments, and contingencies that pose significant risks to Iraq’s public purse. There is no contingency planning for what Iraq will do if oil prices fall or exports are disrupted, if hostilities resume, or foreign aid fails to materialize.
Further, there is little public involvement in the allocation of Iraq’s resources, and the report urges the CPA to create opportunities for public input. This includes increased action on the part of Iraqi audit institutions.
With only 18 months to draft a constitution for a fully sovereign Iraq, the CPA and the Iraqi Governing Council must take immediate action to reverse these trends. “Now is the time to lay the ground for a more stable, prosperous Iraq,” said Isam al Khafaji, director of Iraq Revenue Watch.
The report calls on the CPA and interim government to develop contingency plans for the many risks to the Iraqi budget, and suggests they develop templates that a future government can use in reporting on the budget. It also calls for the International Advisory and Monitoring Board and the Iraqi Board of Supreme Audit to take on the important task of monitoring Iraq’s oil revenues.
Iraq Revenue Watch is part of OSI's Central Eurasia Project (CEP). The report is available online through the CEP website and also through the Iraq Revenue Watch website.