The next US president now has his exit ticket from Iraq. A new report shows that high oil prices are enabling the Iraqi Government to store up a huge budget surplus, but that it is spending US money on reconstruction far faster than its own.

Although written soberly, and acknowledging the obstacles for anyone trying to spend money well in Iraq, the report by the non-partisan Government Accountability Office will add to the pressure on the next president to cut reconstruction spending.

It does acknowledge that Iraq faces huge foreign debts, and war reparations to Kuwait, and that its protection from these claims by the UN Security Council runs out in December. But it shows the difficulty of the case the Iraqi Government will have to make abroad: to the Security Council, to stave off claims from creditors, and to the US, for more funds.

According to the GAO’s latest report to Congress, the oil boom will give Iraq a surplus of $79 billion (£40.5 billion) in unspent funds by the end of this year. Nearly $10 billion has been sitting in a US bank in New York. The report, commissioned from the oversight agency by two senators, the Democrat Carl Levin and the Republican John Warner, will reignite questioning about the $48 billion the US has spent since the 2003 invasion on rebuilding a country with the third-greatest oil reserves in the world.

The senators point out that in 2007, Iraq spent only 28 per cent of the $12 billion it earmarked for reconstruction — and $2 billion of that was in the northern Kurdish region, which has been spared the worst of the violence. The GAO found that from 2005 to the end of 2007, Iraq brought in $96 billion in revenues, of which oil exports made up 94 per cent. It reckons that oil revenues are now more than double the average in that early period, and that for 2008 Iraq could make up to $86.2 billion.

It also notes that 90 per cent of Iraqi government spending went on salaries, goods and services, but only 1 per cent on maintaining Iraqi and US-funded investments such as buildings, water and electricity, and weapons. It also notes that between 2003 and 2008, US agencies spent about $23.2 billion on security, oil, electricity and water services, crucial to Iraq’s future stability, where Iraq had spent only about $3.9 billion. (There is a sobering coda which describes the unreliability of the figures from the Iraqi Ministry of Finance, with columns and rows not adding up.)

But the GAO does give warning of one potential drain on Iraqi funds: its foreign debts. It suggests that in July it owed between $50 billion to $80 billion in foreign debt, and $29 billion to Kuwait. Iraq’s oil revenues are at the moment immune from legal claim, but this protection will expire in December without an extension by the Security Council.

This report will inevitably be read as a case for cutting US aid to Iraq, although that would be damaging. The aid does, after all, give the US a bit of leverage over the worst-managed Iraqi ministries, although it also means that the US is blamed for their failures. But the report does show that Iraq will have to argue harder than in the past for help, and that it won’t be able to do so unless it can spend the money better, and show that it has done so.

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