IRAQ: Extra Funds Needed for Iraq Reconstruction

WASHINGTON, Sept 7 - Extra funding will be needed to finish key Iraqi reconstruction projects, given high unexpected outlays for security, the top official auditing $18.4 billion in U.S.-funded Iraq projects said on Wednesday.

Stuart Bowen, U.S. Special Inspector General for Iraq Reconstruction, said it was not yet clear whether the new funds would come from international donors, the World Bank or U.S. government supplemental budget requests.

He said it was not the right time to discuss more money to finance Iraqi reconstruction, given the devastation caused by Hurricane Katrina in the U.S. Gulf region, but it was clear that eventually more funding would be needed.

"It is an issue that we need to address at the right time," Bowen told Reuters after a hearing of the Foreign Operations Subcommittee of the House Appropriations Committee.

"In order to complete the plan we initially developed, we'll need more money. Whether that money can come from donor sources, World Bank loans or a supplemental is yet to be decided," said the former White House lawyer, who has traveled to Iraq nine times during the past 18 months.

Subcommittee Chairman Jim Kolbe, an Arizona Republican, told the hearing he was concerned by continuing problems with Iraq reconstruction, citing high costs and persistent problems with generating electricity and keeping oil flowing.

Kolbe said the Bush administration's plan to quickly restore Iraq's infrastructure, thereby enabling a speedy U.S. withdrawal, had proved to be "a castle built of sand."

Bowen said that $5 billion had been shifted from the $18.4 billion Iraq Reconstruction and Relief Fund created by Congress in November 2003 to pay for increased security, but said it was not clear exactly how much would be needed to wrap up the most important oil and electricity projects.

The issue of a possible supplemental budget request surfaced at the very end of a two-and-a-half hour hearing, when New York Democrat Rep. Nita Lowey asked Bowen if the Iraq fund would need additional restructuring or extra funding.

Bowen told her a 2004 reconstruction plan had been scaled back due to higher security costs, with some projects having to be canceled.

"Another supplemental could help us complete the vision expressed in that plan," he said, adding, "I think it's a worthy goal to get that part of the Iraqi infrastructure completed."

Ambassador James Jeffrey, senior adviser to Secretary of State Condoleezza Rice, said decisions on future funding would be "political," although he added, "the need is still there."

"What we want to do is fix those highest priority elements that impact particularly on the insurgency," he testified.

Jeffrey said even if the United States pumped up funding to restart work on programs cut due to higher security costs, it would still fall far short of the $50 billion that the World Bank estimates is needed to rebuild Iraq's infrastructure.

Bowen gave a cautiously optimistic assessment of work on Iraqi reconstruction projects generally, noting that he was encouraged by the commitment of senior Iraqi leaders to get more engaged in and sustain big infrastructure projects.

A series of audits completed by his office had also improved oversight and was ensuring better control of costs needed to complete projects already underway, he said.

The Government Accountability Office said separately on Wednesday that poor security and management challenges had adversely affected U.S.-funded water and sewer work in Iraq.

The GAO report said initial cost estimates that were 25 to 50 percent below actual costs and delays in funding had reduced the scope and delayed the start of projects.

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