Regime Finance and Procurement - Annex C
Key Budgetary Actors
Ministry of Finance
The MOF oversaw the formulation of the general government budget, which was based on the calendar year.
- The budget process began in June when the MOF, headed by Hikmat Mizban Ibrahim al-Azzawi, Minister of Finance from 1995-2003, requested that other ministries and organizations submit their budget proposals.
- In October or November, each ministry submitted its proposed budget for the next fiscal year to the MoF Budget Office. The Budget Office and the various organizations began discussions at the technical level. The office negotiated with each ministry to arrive at an acceptable budget figure. If they could not reach an agreement, the finance minister met personally with the other minister to reach an accord.
- Budget proposals from each ministry formed the Regime’s current spending (operating expenditure) input to the general government budget.
Ministry of Planning
The Ministry of Planning (MoP) also negotiated with each ministry to arrive at an acceptable budget figure for their respective projects.
- Projects submitted from each ministry formed the Regime’s capital spending (infrastructure expenditure) budget input to the general government budget.
- This ministry was responsible for large projects designed to improve production and foster development in various sectors of the economy, particularly within the ministries of industry and agriculture,as well as the MoO and MoD, according to the governor of the CBI.
In the early 1980s, as a result of fluctuations in economic resources and the effects of the war with Iran, Iraq suspended its use of long-term economic planning. In 2001 and 2002, the former Regime restored the use of five-year and ten-year plans, respectively, as long-term planning tools. According to Iraqi press reports, the five-year plan was designed to foster economic development, distribute resources among government projects, and improve the country’s production capabilities. The ten-year plan was concerned with long-term economic policy to achieve high economic growth rates. The Planning Commission worked with the EAC to create the ten-year plan and probably worked with the EAC on the five-year plan as well.
- In November 1994, Law No. 24 established the Planning Commission, abolished the MoP and took over all its rights and duties.
- In August 2002, an RCC decree reestablished the MoP (Some details of Law No. 24 continued to apply) and abolished the Planning Commission. The MoP “assumed its tasks, jurisdiction, rights, and obligations.” This decree appointed ‘Abd al-Mun’im al-Khattab, former head of the Planning Commission since the mid 1990s, as Minister of Planning.
Economic Affairs Committee
In late 1995, Saddam re-established the EAC to handle economic issues that would have normally gone to the Presidential Diwan. The EAC had influence over fiscal and monetary policy issues such as government spending, taxation, importation and interest ratesand met weekly at the MoP. Some issues, presumably sensitive, were handled only by the head of the committee, rather than presenting them to the other committee members.
- Upon approval by the finance and planning ministries, the combined operating and capital/project budgets would go to the EAC—subcommittee of the CoM—for approval.
Members of the EAC were also heads of ministries and organizations within the régime. The chairman of the EAC was Deputy Prime Minister and Minister of Finance al-Azzawi. The MIC Head, Abd al-Tawab Mullah Huwaysh was the vice chairman of the EAC. Other members of the EAC included the:
- Minister of Oil.
- Minister of Trade.
- Minister of Agriculture.
- Minister of Industry and Minerals.
- Minister of Planning.
- Head of the Cooperative Economic Societies.
- Current CBI governor.
- One previous CBI governor.
- Several former finance ministers.
A sub-committee of the EAC, known as the Foreign Currency Disbursement Committee (FCDC), met weekly,primarily to address the allocation of hard currency earned from Iraq’s legal and illegal trade activity.
- This sub-committee evolved from an ad hoc to a regularly scheduled affair. This probably occurred in 1997 or later when the Regime began to see an increase in its legal and illegal revenues from the implementation of the UN OFF program.
- Minister of Finance al-Azzawi maintained a close relationship with the governor of the CBI, Isam Rashid al-Huwaysh. The Governor provided the Minister with monthly reports on Iraq’s hard currency balances.
- The FCDC reviewed contracts and the ministries’ demands for hard currency, and also kept track of the country’s foreign currency reserves in the CBI. Individual ministries knew how much foreign currency was available to spend only after the revenues earned through Iraq’s illegal activities had been allocated by the FCDC. These revenues did not appear in the national budget.
The FCDC included six members:
- Minister of Finance (sub-committee head).
- Minister of Oil.
- Minister of Trade.
- Minister of Industry and Minerals.
- Current CBI Governor.
- One previous CBI Governor.
According to part of a captured budget document, some ministries and organizations were not funded through the MoF-led EAC discussions, and others were only partially funded by this process. They received fundsdirectly from the Presidency. Specifically, they received all or additional funds either through the chief of the Presidential Diwan, or the Presidential Secretariat. Some of these organizations included the:
While the MIC and the MoD were partially funded by minister of finance-led EAC budget discussions, the IIS, SSO and the IAEC were not listed in the budget. Saddam probably ordered funds transfers in support of these organizations.The Presidential Diwan and the Presidential Secretariat also were not listed in the budget.
Budget Review and Approval
After review by the EAC, budget recommendations were sent to the CoM for approval, where the budget became law. The RCC rubberstamped the CoM’s decision and issued a presidential decree signed by the president.
Presidential Diwan Financial Accounts Department
Any decision in any area that needed Saddam’s signature, approval, comment or review had to be routed through one of the Diwan’s departments. Fiscal decisions were routed to the Presidential Diwan’s Financial Accounts Department.
- This department was responsible for reviewing government budget decisions, ministry requests for budget increases, new financial allocations, and any other financial matters except those for the IIS, SSO, and DGMI.
- Any ministry or organization’s financial request outside of the annually allocated budget was to be sent to the president for review and or approval through this directorate.
- The department also managed domestic banking accounts reserved for the payment of employee salaries and Diwan expenditures.
According to the minister of finance, funds were disbursed monthly to the various ministries’ accounts in the CBI or Rafidian Bank. These monthly disbursements were approved by the MoF, and in the case of recurring expenses, such as salaries, the disbursement was made yearly. Monthly allocations were a portion of the annual budget for each ministry. Government funds were held by the MoF in accounts at the CBI and Rafidian Bank. Disbursements to other ministries were usually made from funds at the Rafidian and other state-owned banks (See Figures 4 and 5).
- The MoF, however, did not have authority to approve disbursals involving the Presidential Secretariat, the Presidential Diwan, the IIS, the Directorate of General Security (DGS), and certain secret MoD and MIC expenses.
Role of the National Security Council
Those organizations whose budgets were not reviewed by the Presidential Diwan’s Financial Accounts Department were presented to the NSC. Vice President and RCC Vice-Chairman Izzat Ibrahim al-Duri chaired the NSC with the head of the Presidential Secretariat, Abid Hamid Mahmud al-Tikriti—the Secretary of the NSC. Because both al-Duri and al-Tikriti headed NSC meetings, it is unclear who precisely exercised the most power. However, the Presidential secretary was influential. The NSC met a few times each year, as necessary, to discuss budget, security, and intelligence issues (for additional information on the NSC, see the Security Services Annex). Other members of the NSC included the following:
- Interior Minister.
- Foreign Minister.
- Qusay Saddam Husayn al-Tikriti, head of the RG.
- General Director of the IIS.
- General Director of the SSO.
- General Director of the DGMI.
According to late 1994 documents from the Secretariat of the NSC and addressed to the MoI, directors of the IIS, SSO, DGS, the Military Security Directorate, and the DGMI, met with the NSC to discuss their budgets plans. Meetings were held at the office of the vice-chairmanof the RCC.
Documents from late 1994 indicate that the budget process for intelligence and security organizations, such as the IIS, the DGMI, and probably other organizations, involved roughly seven steps:
- The requesting organization sent a note to the NSC Secretariat requesting funds.
- The NSC Secretariat sent a note to the NSC Auditing Division requesting its opinion on the funds requested.
- The NSC Auditing Division sent a note to the Secretariat, approving the funds transfer. Depending upon the sensitivity of the request, the Auditing Division would suggest adding the requested funds to the organization’s budget after receiving approval from Saddam. The NSC Secretariat would send a note to Saddam with the Auditing Division’s suggestion. Upon the President’s approval, the NSC Secretariat would send a note to the MoF informing it of Saddam’s decision.
- The NSC sometimes sent a note within the Secretariat and to the requesting organization about the NSC’s decision and to inform the MoF that it should add the funds to the concerned organization’s budget.
- Finally, the NSC Secretariat sent a note to the Minister’s office in the MoF informing it of the NSC’s decision.
- According to the minister of finance, the Presidential Diwan probably also viewed NSC budget proposals before they were sent to the MoF.