A war chest of £3.8bn for military operations in Iraq is set to run out within three months, official figures released last week indicate.
Defence economists estimate that keeping British troops in the country is costing taxpayers up to £125m a month.
However, figures released at the same time as the Budget show the special contingency reserve for Iraq has just £300m left to pay for operations in the coming financial year.
The Chancellor, Gordon Brown, insisted last week that Britain could afford its "ongoing and additional commitments in Iraq, Afghanistan and in the fight against terrorism". He set aside another £1bn to pay for Britain's part in the "war on terror" in the coming financial year, rising to £2bn in coming years.
Experts predict that the Ministry of Defence is likely to need the extra cash as soon as this July if the current rate of spending in Iraq continues. The MoD says it is too soon to say how much the operation in Iraq is costing.
Mark Stoker, an economist at the International Institute of Strategic Studies, says that reliable estimates suggest that the cost could top £1.5bn for this year alone.
"National Audit Office figures on peacekeeping in Kosovo suggest that maintaining a 15,000-strong force in Iraq could be costing between £100m and £125m a month." The bill for Iraq is likely to leave little, if any, money left for any other operations in the "war on terror" if Britain keeps its current military commitments in the country, he said.
Tensions between the Treasury and the MoD have been rising in recent months as Whitehall departments gear up for the coming three-year spending review.
Geoff Hoon, the Defence Secretary, angered Mr Brown by appealing over his head to Tony Blair against proposed cuts. A row over accounting procedures could see the Chancellor claw back as much as £9bn from the budget, some analysts predict.Reuse content