Recognizing the importance of a transparent budget process for societies in postconflict transition, the Coalition Provisional Authority outlined a process that continues to guide federal budgeting in Iraq, according to this new report. However, a focus on the rate of investment spending as a measure of success exacerbated problems with corruption and accountability.

Summary

  • Good budgeting that promotes democratic governance and effective administration requires a transparent and inclusive process that is responsive and accountable to elected public officials. In this sense, Iraq is no different from any other state.
  • Under Saddam Hussein, Iraq’s budget remained a state secret, and the government divided budget formulation responsibilities between its Ministry of Finance and Ministry of Planning. The U.S.-led coalition that invaded Iraq discovered a budgetary process that reflected Ottoman, British, and Baathist origins.
  • Coalition officials worked successfully with Iraqis to pay civil servants and pensioners in the months following the invasion and later drafted Iraq’s 2003 and 2004 budgets. Criticized as rudimentary and incomplete, these were the first publicly accessible budgets available since the 1990 Gulf War.
  • The coalition’s most important, lasting contribution came in the form of Coalition Provisional Authority (CPA) Order 95, which outlined a new budgetary process. The order called for parliamentary approval of the budget and enhanced the powers of the Finance Ministry, returning it to the coordinating role it had played during the British Mandate; set a timetable for formulating and approving the budget; promoted budgetary transparency; and initiated a rudimentary system of fiscal federalism.
  • In 2007, the seventeenth of eighteen U.S. benchmarks that evaluated Iraqi progress called for the Iraqis to boost their budget allocations and spending of investment funds.
  • To promote Iraqi budgeting, the coalition initiated various capacity-building programs that proved to be of mixed success. The seventeenth benchmark’s focus on Iraqi investment spending became the metric for evaluating many of these programs.
  • Iraqis took ownership of the CPA budgeting process and have used it to formulate their budgets since 2005.
  • Iraqi budgeting suffers from delays in budget formulation and approval, deficiencies in transparency and accountability, effective budget execution, and endemic corruption.

About the Report

This report, sponsored by the Center for Conflict Management at the U.S. Institute of Peace (USIP), examines coalition efforts to strengthen the Iraqi government, provide essential services and infrastructure, and counter the insurgency by building Iraq’s budgetary system. The budgetary process provides Iraq with a significant source of political and institutional stability in the midst of ongoing political tension and violence. These recommendations are consistent with USIP’s findings that effective systems of public finance contribute significantly to the success of postconflict stabilization efforts.

About the Author

James D. Savage is a political science professor at the University of Virginia and an expert in government budget policies and budget theory. He was a 2011–12 Jennings Randolph Fellow. Savage is best known for three books on American and comparative budgeting and fiscal policy: Balanced Budgets and American Politics, Funding Science in America, and Making the EMU.

Related Publications

Iraq’s Provincial Council Elections: The Way Forward in Nineveh Province

Iraq’s Provincial Council Elections: The Way Forward in Nineveh Province

Wednesday, December 13, 2023

By: Osama Gharizi;  Yomnna Helmi

On December 18, Iraqis will elect members of the provincial councils, the highest oversight bodies of subnational government and key providers of public services. The elections are the first at the provincial level in over a decade and come in the wake of the 2019 anti-government protests that resulted in the dissolution of the provincial councils following demands from the protesters who accused them of corruption. Recent findings from the U.S. Institute of Peace’s Conflict and Stabilization Monitoring Framework in Nineveh Province reveal that candidates are facing a distrustful electorate that is lacking confidence in state institutions.

Type: Analysis

Democracy & Governance

Climate Adaption Key to Iraq’s Stability and Economic Development

Climate Adaption Key to Iraq’s Stability and Economic Development

Wednesday, November 29, 2023

By: Sarhang Hamasaeed;  Mac Skelton;  Zmkan Ali Saleem

Iraq is projected to be among the five countries hardest hit by the impact of climate change. The country is already witnessing depreciating water supply and accelerating desertification, leading to the loss of as much as 60,000 acres of arable land each year, according to Iraqi government and United Nations sources. These climate phenomena threaten the livelihoods and food security of Iraq’s population of an estimated 43 million, creating conditions for displacement, instability and a deterioration of social cohesion. The water crisis has grown steadily amid severe drought, upstream damming practices in Turkey and Iran, and increased domestic consumption within Iraq’s borders.

Type: Analysis

EnvironmentGlobal Policy

Iraq’s al-Sudani Government, One Year Later

Iraq’s al-Sudani Government, One Year Later

Thursday, November 2, 2023

By: Sarhang Hamasaeed

Last week marked one year since Iraq’s Prime Minister Mohammed Shia al-Sudani assumed office. His ascension to the role came after a year of deep political tensions, several alarming but contained episodes of violence, and no annual government budget. A political agreement among the Shia coalition known as the Coordination Framework and major Kurdish and Sunni Arab parties set the stage for the al-Sudani government to form — meanwhile, the biggest winner in the 2021 parliamentary elections, cleric and political leader Moqtada al-Sadr, decided to withdraw from the political process altogether.

Type: Analysis

Democracy & Governance

View All Publications