A top U.S. official in Baghdad says Iraq's reconstruction is being hampered because billions of dollars allocated to pay for rebuilding the country have been diverted for security instead. The United States is expected to ask donor nations next week to kick in more money for Iraqi reconstruction.

Iraq's on-going insurgency, coupled with car bombings, kidnappings, acts of sabotage and threats to foreign workers, have driven many civilian contractors out of the country, and have dealt a severe setback to reconstruction efforts.

"It is clearly having an effect," said Ambassador Bill Taylor, the U.S. official in charge of Iraq's reconstruction from Baghdad. He says the on-going insurgency is taking billions of dollars away from rebuilding the country.

"We need additional funds to bolster the number of police on the street and the number of army battalions that are trained and equipped, and the number of national guard battalions that are trained and equipped," he said.

In a briefing from Baghdad, he tells reporters the United States will appeal for additional funds next week during a donors" conference in Japan, saying the security situation is much more difficult than anyone anticipated.

"What we have is a different set of priorities," he said. "So in order to provide additional funds for the police and the national guard and the army, we had to reduce funds for other areas. And the two areas that we took funds from are water and electricity."

Last month, the Bush administration said more than $3 billion of the $18 billion that Congress approved for Iraqi reconstruction would have to be diverted for training and equipping tens of thousands of additional Iraqi security forces.

This latest assessment comes just days after Paul Bremer, who was the top American in charge of the Iraqi occupation until June, suggested much of the damage done to the country might have been prevented if more American troops were in Iraq in the days after the fall of Saddam Hussein to prevent widespread looting and lawlessness. The Pentagon maintains U.S. military commanders in Iraq believed, at the time, that troop levels were sufficient for the task at hand.