Introduction - Why is DFID working in Iraq?  

Iraq is a relatively wealthy country, it is estimated that the 2008 budget will exceed $70 billion.  But it is also a fragile state - lacking the capability to spend this money and provide for the basic needs of its people - whose transition to a strong democratic state is critical for wider regional stability.  By 2003, it had suffered over 20 years of conflict and neglect under the rule of Saddam Hussein.  There were significant levels of poverty, lack of employment opportunities, dilapidated infrastructure and a mounting humanitarian situation.  

DFID is therefore playing an important role in helping both the Iraqi Government and the Iraqi people tackle these problems - working closely with the FCO and MOD to deliver the UK Government’s objectives of a stable and secure Iraq.  We are helping to develop Iraqi Government institutions, so that they can use the country’s wealth for the benefit of all its citizens and provide essential services such as water, sanitation, healthcare and education.  DFID is also helping Iraqis promote economic growth and private sector investment - to create jobs and long term prosperity.  Moreover, it is estimated that 4.8 million Iraqis are displaced and vulnerable, both internally and in the Middle Eastern region.  DFID is therefore supporting international agencies to provide aid and assistance to the most vulnerable people.

The security situation in Iraq is improving, leading to visible improvements through reconstruction and development efforts - and DFID is supporting the Iraqi Government and people to capitalise on these improvements.  In the longer term, the UK is committed to helping Iraq become a stable and independent actor in the international arena.

About the DFID Iraq Programme

The Iraqi Government is cash-rich – it earned $41 billion from oil revenues in 2007 and it is estimated the 2008 budget will exceed $70 billion. However, years of dictatorial government have prevented the country from developing the institutions and experience to manage the business of government. This lack of experience is preventing it from spending this money and delivering services and stability to the Iraqi people.

DFID’s priority is therefore providing technical assistance to develop capacity in the Iraqi government, at national and provincial level, to unlock its resources and manage public finances effectively, as well as to help support the Government in securing private sector investment – which is vital in providing long term employment and prosperity.

At the Madrid Donors’ Conference in October 2003, the international community pledged an initial $32 billion in support of Iraq’s reconstruction.  The UK initially pledged £544 million, which has subsequently increased to £744 million, and has so far disbursed £720 million of this pledge.

DFID’s initial priority was to help rebuild Iraq’s dilapidated infrastructure, to provide essential services to the Iraqi people such as water and power.  By the end of 2008, DFID will have spent nearly £100 million to improve southern Iraq’s key infrastructure, and will have improved power and helped deliver clean water to 1 million people in Basra.  Once these programmes are complete, we will continue to support infrastructure reconstruction and service provision by encouraging the Iraqis to use their own resources to fund such projects and secure further improvements.

DFID is supporting the UK-led Provincial Reconstruction Team (PRT) in Basra, which is helping the provincial government drive forward local development and reconstruction, and building the capacity of the Basra Provincial Council (BPC) to manage public finances and the economy. Our support and mentoring has contributed to developing the expertise of the BPC so that Iraqi institutions are now in a position to take advantage of the improving security situation and are leading on reconstruction, using Iraqi money:

We are also working at the centre of government to improve the effectiveness of institutions such as the Office of the Prime Minister and the Council of Representatives Secretariat, to put in place the basic decision-making mechanisms.  We are advising the Iraqi government on macro-economic fiscal and public financial management issues.

DFID is working to help Basra realise its economic potential through a package of economic initiatives which are aimed at stimulating economic growth, a vibrant private sector and international investment.  We are supporting three Iraqi owned and led institutions:

Humanitarian Assistance
We are very concerned about the humanitarian situation in Iraq and the large numbers of people who have been displaced due to ongoing violence. It is estimated 2.8 million Iraqis are displaced internally and another 2 million have fled to neigbouring countries - mainly Syria and Jordan.  This is placing significant pressure on host communities and countries’ resources and public services.

We are supporting key international agencies to provide assistance to vulnerable groups, including those displaced internally and in neighbouring countries. We are working to promote a coordinated international effort in response to the humanitarian situation, with the Government of Iraq in the lead. This year, we have provided £17 million for Iraqis inside the country and displaced in the region. Our total humanitarian contribution since 2003 is over £166 million.

In the longer term, only the Government of Iraq can solve the humanitarian situation. We are therefore encouraging the Government of Iraq to take a lead in providing for the welfare of its own people – both in providing immediate humanitarian relief and in creating the longer term security conditions which will encourage people to return to their homes.

International Engagement

Under Saddam, Iraq built up an enormous and unsustainable level of external debt, which had not been serviced for many years. By November 2004, 18 months after Saddam’s overthrow, total debt was around $119 billion - an estimated 445% of GDP. Iraq has successfully completed two IMF programmes, releasing Paris Club debt relief of $24 billion and inflation has come down from 65% in 2006 to 25% in 2007. A third IMF programme has been agreed, and successful implementation will release the third and final instalment of Paris Club debt relief in December 2008.  The UK is helping Iraq to implement these objectives through our technical assistance programme supporting economic reform.

In July 2006, UN Secretary General Kofi Annan and Prime Minister Nouri Al-Maliki announced a joint effort to formulate a new International Compact with Iraq (ICI). This was launched in May 2007 with the endorsement of over 70 countries and organisations. Donor countries agreed to help Iraq achieve its commitments while the Government of Iraq set out an extensive programme of economic reforms to encourage sustainable economic growth and progress on political and security measures. Partners pledged $687 million in new assistance and around $15 billion in debt relief. DFID is working with the Government of Iraq, UN, World Bank, US and others to achieve a more coordinated and Iraqi-led reconstruction and development effort.  

DFID is working through the international system to support these efforts, and is a major contributor to the UN and World Bank trust funds for Iraq.  We are also helping other donors to establish programmes and increase their support for Iraq.