THE United States is nearing the end of its $18.4 billion (£11 billion) fund for rebuilding Iraq, with little prospect of further multibillion-dollar injections.

In language mirroring the planned reduction of troops, US officials in Baghdad have begun talking of “drawdown”, “transition” and the “wind-down” of American reconstruction projects. Instead they plan to focus on building up the Iraqi Government’s capacity to manage its own affairs.

Outlining what he called the “drawdown”, one American official said: “US reconstruction is basically aiming for completion (this) year. No one ever intended for outside assistance to continue indefinitely, but rather to create conditions where the Iraqi economy can use reconstruction of essential services to get going on its own.”

Realisation that the last of the US money will be allocated by the summer, with work continuing well into 2007, will dismay ordinary Iraqis. Millions remain frustrated at what they see as a paucity of large-scale projects such as power stations, and still expect the US-led coalition to rebuild the shattered country’s electricity network and essential services.

Standing in the Baladiyat district of Baghdad amid heaps of sewage and rubbish Hamza Abbas, a casual labourer, said: “There isn’t any construction. The only construction is piles of trash. Even if anything is rebuilt it will be sabotaged and the money will be in vain.”

In the nearby slum of Sadr City, Jassem Zawaed, a traffic policeman, conceded that international and Iraqi efforts had begun paving roads and treating sewage, but cautioned: “There has been a good start, but it’s only the beginning.”

Brigadier-General William McCoy, commander of the US Army Corps of Engineers in the Gulf, confirmed that contracts for 80 per cent of the $18.4 billion had already been issued. Those for the remaining $1.7 billion will be issued by the summer. Asked if more sizeable tranches of congressional money were expected he replied: “No. Our intent always was that as they began to generate their own revenue and stabilise their own economy and stabilise the security situation that they would take this over.”

General McCoy, who also heads the Project and Contracting Office in Baghdad, insisted that the Iraqis’ own ability to reconstruct had “developed quite well”. Whereas 60 per cent of reconstruction contracts were once carried out from design to completion stage by international companies, nearly 77 per cent were now awarded to Iraqi contractors, he said.

US officials say that experts will remain to train Iraqi ministries to manage their budgets. The aim is to decentralise and free up the sclerotic Iraqi economy through privatisation and subsidy reductions, and to improve the business climate.

They also aim to replace the current poorly targeted ration system with a welfare network designed for the “poorest of the poor”, the 25 per cent of Iraqis living on less than $1 (about 60p) a day. But Iraqis complain that nearly three years after the war Iraq still produces only 4,800 megawatts of power, little more than the 4,000 before the war, and far short of its needs. Baghdad remains a special problem, receiving only three hours of electricity a day because of sabotage to oil and electricity lines.

Insurgents have exploited the public anger, timing a series of attacks on the vulnerable electricity and oil lines to coincide with the Shia-led Government’s recent decision to increase petrol prices fivefold. The price rises caused riots and tyre-burning protests among Iraqis accustomed to having the cheapest petrol in the world.

Although General McCoy insisted that the trend of attacks was down, he confirmed that last week was the worst so far for the US-led reconstruction team, with six killed in attacks or accidents, four wounded and two kidnapped. But he said his team, especially its Iraqi members, remained “resilient”.

POWERED UP

Most cities have 10-13 hours of power daily, but Baghdad has 3 hours

Times Recommends

• Would you live on the wrong side of the Berlin Wall?
• Wish you were here, says Iraq tourist board
• Russian policeman’s corruption plea to Putin