Iraq Cannot Say Where $76 Billion Went, and No Law Compels It To – JURIST – Commentary

Fourteen governorates share 2.8 percent of Iraq’s national budget. Ministries in Baghdad direct 87 percent. Nothing in practice requires anyone to explain the gap.

When the head of Iraq’s Federal Board of Supreme Audit brought the board’s annual report before the Council of Representatives last week, Parliament did something it had not done since 2003: it convened a dedicated session to examine how the state had handled the public’s money. The report ran to tens of thousands of pages, and among its findings was a figure that ought to concentrate the mind of every Iraqi—roughly $76 billion in unsettled advances, money paid out of the treasury but never reconciled against a result. That number is easier to weigh once it is placed beside the budget it belongs to. Iraq’s own 2024 budget schedules record planned expenditure of about 211.9 trillion dinars—some $163 billion at the budget’s official rate of roughly 1,300 dinars to the dollar—against forecast revenue of 147.8 trillion dinars, or about $114 billion. The gap between the two—nearly 64 trillion dinars, about $49 billion, or 43 percent of revenue—is smaller than the $76 billion the auditor could not trace.

For more than 20 years, Iraq’s argument about its wealth has been told as a quarrel between Baghdad and Erbil, a dispute over oil, pipelines, and the constitutional status of the Kurdistan Region. That framing is not wrong, but it is narrow, and it hides the larger and more uncomfortable truth the audit report exposed. The problem is not only that the capital and the region cannot agree on how to divide the oil. It is that the central government controls the nation’s revenue while the legal machinery meant to show where that revenue goes has largely stopped working. The control is not rhetorical; it is arithmetic. In the 2024 revenue schedule published by Iraq’s Ministry of Finance, oil and mineral exports supply 120.5 trillion of 147.8 trillion dinars—81.5 percent of everything the state expects to earn. A single, centrally collected stream funds four-fifths of the Iraqi state, and the result is a disparity that reaches every governorate—Basra and Nineveh no less than Erbil. At its core, it is a question of law.

A constitution that promised accountability

Iraq’s 2005 Constitution did not leave fair distribution to goodwill; it built an architecture for it. Article 111 declares that oil and gas belong to all Iraqis in every region and governorate, and Article 112 requires that revenue be distributed fairly in proportion to population. Less noticed, but more important here, is Article 106, which requires a public commission—staffed by experts from the federal government, the regions, and the governorates—to audit federal revenues and to guarantee “transparency and justice” in allocating funds to the provinces. The Constitution also promised a Federation Council under Article 65, a second chamber in which the governorates and regions could defend their shares.

Around this constitutional core sits a body of ordinary law: the Financial Management Law No. 6 of 2019, which governs the budget cycle; the mandate of the Federal Board of Supreme Audit to examine the state’s accounts; and the decentralization framework of Law No. 21 of 2008, which was meant to move both competences and money down to the governorates. On paper, Iraq has a complete accountability cycle—the budget is approved, funds are spent, the auditor examines the results, and Parliament reviews the final accounts before the next budget is written.

The trouble is that several links in this chain have quietly fallen away. The Article 106 commission has never been made to function. The Federation Council was never established, so the governorates have no legislative venue of their own. And the final accounts—the closing statements that reconcile what was appropriated with what was actually spent—have gone unprepared and unapproved for years. This is the decisive distinction the schedules themselves illustrate: Schedules A and B are appropriation documents, precise records of what the state authorized itself to raise and spend, but there exists no audited counterpart reconciling them with what actually moved. One member of the Parliamentary Finance Committee put the absurdity plainly, noting that debating a new budget is unrealistic when the accounts for the current year do not yet exist. When the auditor’s report finally reached Parliament this year, it was news precisely because the cycle it belongs to had been broken for so long.

What the global standard expects

None of this is a peculiarly Iraqi puzzle. The world has a settled legal template for exactly these questions, and measuring Iraq against it clarifies what has gone wrong. The independence of state auditors and their duty to report to the legislature are set out in the Lima Declaration, adopted by the International Organization of Supreme Audit Institutions in 1977 and often called the “Magna Carta” of public auditing. Its principles, reinforced by the later Mexico Declaration, were endorsed by the United Nations General Assembly in Resolution 66/209 in 2011 and again in Resolution 69/228, which call on member states to strengthen their audit institutions as instruments of accountability and transparency.

The budget side of the cycle has an equally clear benchmark. The International Monetary Fund’s Code of Good Practices on Fiscal Transparency provides that audited final accounts, reconciled with the approved budget, should be presented to the legislature and published within a year of the fiscal year’s end. Iraq has also, through its membership in the Extractive Industries Transparency Initiative, accepted international commitments to disclose what it earns from oil and how those earnings are managed. Read against these standards, Iraq’s failing is specific and identifiable. The country has the institutions the framework asks for; what it lacks is the last and decisive step—the timely, reconciled, publicly available final account, reviewed by Parliament, that turns audit into accountability. Without it, the auditor’s findings are a document, not a remedy, and the money it describes remains, in the fullest sense, unaccounted for.

A disparity felt in every province

The budget schedules make the disparity legible to anyone willing to add the columns. Of the 211.9 trillion dinars in planned spending, the 15 governorates outside the Kurdistan Region receive direct allocations totaling just 6.0 trillion dinars, a mere 2.8 percent of the national budget. The Kurdistan Region receives 20.9 trillion dinars (9.9 percent), roughly three and a half times the 15 governorates combined. The remaining 87 percent is spent centrally, through ministries in Baghdad. The Ministry of Finance alone commands about 43 trillion dinars — 20 percent of the entire budget, and more than every governorate and the Kurdistan Region put together. Decentralization, the promise of Law No. 21 of 2008, has not moved the money it was written to move.

Within the governorates the spread is stark and unexplained. Basra, which produces the majority of Iraq’s oil, is allocated 1.3 trillion dinars directly, while Muthanna, among the poorest provinces, receives 165 billion, a nearly eightfold difference, with no published reconciliation to justify it. And these are only the sums the budget assigns; whether they arrive is a separate question. Basra’s governor has reported receiving almost none of the province’s 2024 petrodollar share, the five percent of oil and gas revenue owed to producing provinces for their own development, even though the province sits atop the fields that generate the 120 trillion dinars sitting in the revenue column. Broader analysis of ministry spending shows the same pattern of significant and unexplained differences from one governorate to the next. The composition compounds it: operational costs absorb 64.5 percent of the budget, while capital investment—the part that builds a clinic or lays a water main—is only 26 percent, leaving a thin margin that is distributed without a public accounting of why one province receives what it does and another does not.

This is why the Baghdad–Erbil frame is too small. The Kurdistan Region’s grievance about its share is real, but it is a particular case of a general condition. When the entity that collects the revenue is not required to prove where it went, every province becomes a supplicant, and the difference between them is measured not by law but by what each can extract in a given year’s negotiation. A citizen of Muthanna or Dhi Qar has the same legal complaint as a citizen of Erbil: the Constitution promised a fair and verified share, and the mechanism that would verify it has been allowed to lapse.

The remedy is already written

The encouraging part of this diagnosis is that the cure requires no new grand bargain; Iraqi law already prescribes it. Activating the Article 106 commission would give the governorates and regions a standing body to ask, on the record, why the 15 provinces share 2.8 percent of the budget while ministries in Baghdad direct the rest. Restoring the final-accounts cycle, as the Financial Management Law and international practice both demand, would make the 211.9 trillion dinars legally visible and reconcilable rather than merely appropriated. Establishing the Federation Council would give the provinces the voice the Constitution intended. Each is a legal obligation the state has undertaken and not yet met, and none takes a side in the political contest between the capital and the region. They serve every governorate equally.

There is a reason to act beyond good administration. Money that cannot be traced is, to the people who never see its benefit, indistinguishable from money that was taken from them. The fund for reconstructing the poorest provinces is allotted just 413 billion dinars, about $318 million for the whole of Iraq’s most deprived districts, a rounding error beside the Finance Ministry’s 43 trillion. A clinic that is not built, a school that is not repaired, a water network that is not laid: these are how an unreconciled account is experienced in a province far from the capital. A state that cannot show its citizens where their common wealth has gone forfeits, slowly, the trust that holds it together. Injustice that no one is obliged to explain does not stay quiet forever; left unanswered, it teaches every province the same dangerous lesson—that the compact has failed and that redress must be sought outside the law. Iraq has already paid, more than once, the price of that lesson. The missing law of fair distribution is not a technicality. It is the difference between a shared state and a fractured one.

Notes:

Primary data: Republic of Iraq, Ministry of Finance, Federal General Budget 2024 — Schedule A (Revenues) and Schedule B (Expenditures by ministry and spending unit), published on the Ministry’s official website, mof.gov.iq. Figures are in thousands of dinars in the source; dollar equivalents are approximate, at roughly 1,300 IQD/USD. The schedules are appropriation figures, not audited final accounts.

Oday Talal Mahmood is an assistant professor of constitutional law and a researcher at the Peacebuilding and Peaceful Coexistence Center at the University of Mosul, Iraq. He holds an S.J.D. from the University of Pittsburgh School of Law and an LL.M. from Penn State Law, and writes on constitutional justice, judicial review, and the role of legal institutions in post-conflict states.