Iraq Cabinet approves $67 billion budget for 2010

Iraq's Cabinet has signed off on a $67 billion draft budget for 2010 that is well below what officials have said is needed, raising concerns that the shortfall will derail the progress of Iraqi security forces just they are taking over from withdrawing American troops.

Low oil prices have forced Iraq to curtail spending for the second year, complicating efforts to rebuild the country after years of war and construct a military capable of self-defense.

The proposed budget has a $15 billion shortfall that Iraq plans to cover by issuing bonds and asking for loans from international banking organizations, government spokesman Ali al-Dabbagh said in a statement released late Tuesday.

Parliament must still approve the budget. It was unclear when lawmakers would schedule a vote.

Last year's budget suffered deep cuts as oil prices fell from record levels of nearly $150 per barrel, forcing officials to twice slash this year's spending plans from $79 billion to $58.6 billion. The budget was based on an average oil price of $50 a barrel.

Next year's budget is based on an average oil price of $60 per barrel. On Wednesday, the November benchmark crude oil contract was up to $74.88 per barrel in Asia on electronic trading on the New York Mercantile Exchange.

Al-Dabbagh said that about $17.83 billion of the budget would be used for reconstruction and infrastructure improvements. The remainder would be used for government operating costs, such as paying salaries, he said.

This year's budget crunch has already forced Iraqi planners to make tough choices as American troops prepare to withdraw by the end of 2011. With the U.S. no longer in a position to finance an Iraqi budget shortfall, the government has imposed a hiring freeze and limited its military spending.

Al-Dabbagh said government cutbacks also were expected to be made next year. He did not say where the cuts would be made.

The U.S. military has said Iraq's budget crunch has derailed its effort to buy enough ships, planes and weapons. It also has slowed the construction of a national supply chain to feed and fuel the forces.

Reconstruction has moved to the forefront as the leading campaign issue facing lawmakers ahead of January's national elections. After more than six years of war, Iraq is still struggling to provide clean water and electricity to its population.

Prime Minister Nouri al-Maliki recently said so much money was being spent on Iraqi security forces that it was hindering reconstruction, sending a signal that more attention would be paid to rebuilding infrastructure.