Amid great popular discontent, Iraqis have entered a phase of extreme caution due to delayed payment of salaries for government employees for more than 50 days for the first time ever, and this comes in light of the financial crisis that the country has been experiencing for months due to the collapse of oil prices and the consequences of the Corona pandemic.
And the Parliamentary Finance Committee warned that the government would resort to options that may be the most difficult in the country's history, and that may put Iraqis in front of horrors that remind them of the consequences of the international siege imposed on the country between 1991 and 2003.
In the event that oil prices remain low and reform measures are not taken, the World Bank forecasts that the budget deficit will exceed 29% of GDP this year, and thus total financing needs will reach $ 67 billion, or more than 39% of GDP, While the Jefferies Institute for Financial Services estimated that Iraq’s need for external financing this year will be about $ 40 billion, with great difficulties in obtaining it.
Rashid sees difficulty in the government's approach to compulsory saving of salaries (Al-Jazeera Net)
The World Bank expected Iraq's GDP to contract by 9.7% this year, down from the positive growth rate of 4.4% recorded last year, which means recording the worst annual performance since 2003.
Parliamentary circles warn against resorting to 3 options, which are: compulsory saving of salaries, lowering the exchange rate of the dinar, or withdrawing from the cash reserves of the Central Bank.
However, a member of the Parliamentary Finance Committee, Ahmed Hama Rashid, sees difficulty in the government's approach to compulsory saving of salaries (the government deducts part of the salaries of its employees and saves them for a certain period, due to lack of liquidity, and then disbursed later without interest), explaining that he needed a law, but he indicated at the time The same indicates that the Iraqi government is working on this from another temporary standpoint, which is delaying salaries, sometimes for more than 50 days.
As for the government's resort to withdrawing from foreign monetary reserves, Rasheed revealed to Al-Jazeera Net that this is actually happening through the government’s issuance of bonds that the central bank purchases, and the guarantor in which the cash reserve is currently estimated at $ 60 billion, down by 7 billion from the previous one.
Al-Mashhadani considered that all options are difficult and will have negative effects on the economy and the citizen (Al-Jazeera Net)
As for the professor of economics at the Iraqi University, Abd al-Rahman al-Mashhadani, he indicated for his part that all options facing Iraq are difficult and illogical, and that they will have negative effects on the Iraqi economy and the citizen.
Al-Mashhadani believes that the government's tendency to manipulate the exchange rate to two thousand dinars per dollar will provide it with about 15 trillion dinars (12.5 billion dollars) per month, but the repercussions of this will be evident on the Iraqis, whose wages will diminish by about 60%, indicating - in an interview with Al-Jazeera Net- That the Iraqis would face higher prices for imported goods, which account for 90% of their purchases.
Al-Mashhadani comments that the Central Bank data confirmed that the government had borrowed until October 30 trillion dinars (25 billion dollars), as well as another indirect borrowing of 24 trillion dinars (20 billion dollars) in treasury and bond transfers, with relentless attempts to borrow 27 trillion. Dinars (22.5 billion dollars), and this will take the Iraqi cash reserves in the wind, especially since the government will not be able to repay these loans, and this is what strengthens the speculation that the World Bank went to.
Dagher considered that the government has not made up its mind to develop a plan for reform (communication sites)
Causes and solutions
There are many reasons that led the country's economic situation to this impasse, as the financial expert Mahmoud Dagher believes that the government has not made up its mind about a clear plan for reform, in addition to the failure of the Ministry of Finance to provide any codified and technical approach to the deterioration and wide gap between revenues and expenditures.
Dagher, in his speech to Al-Jazeera Net, believes that the problems between the government and parliament and the political rivalries led to the delay in drawing up a plan to save the country, especially since the economic reform promised by the government has not started. The distance that will make him face a social mobility and compliance with international parties to obtain support.
For his part, a member of the Parliamentary Finance Committee, Muhammad al-Darraji, revealed that the financial deterioration in the country is primarily caused by corruption, indicating that, according to the volume of imports, the budget was supposed to be supplied since the beginning of this year with $ 1.5 billion in customs revenues (at the minimum), However, it did not exceed $ 490 million, considering the border crossings the spoiled institution in the history of Iraq.
Many economic experts had warned in advance of the economic mistakes accumulated since 2003, as economist Salam Sumaisem says that Iraq now has two options to get out of the current crisis, either reducing the value of the dinar against the dollar in order to provide greater amounts of the Iraqi currency, or offering bonds And permissions from the Central Bank to sell to individuals and local and foreign institutions, pointing to a similar experience in 1972 when the government borrowed from employees under the name of "steadfastness bonds", which were in return for interest to lenders.
Sumaisem, in her interview with Al-Jazeera Net, believes that the government must fight rampant corruption and find out where the surplus funds have gone from previous budgets, whose fate has not been revealed until now, due to the absence of final accounts for the budgets.
Sumaisem: Iraq faces two options to get out of the crisis, either reducing the value of the dinar or offering bonds for sale (Al-Jazeera Net)
The problem of employee salaries
Hama Rashid, a member of the Finance Committee, reveals that the number of state salaries is 3.75 million employees, 3.7 million retirees, and 1.5 million people with social care, which makes the government bound by fixed expenses payable monthly, as the value of employees ’salaries is estimated. Government officials, $ 4 billion a month
For his part, the financial expert, Mahmoud Dagher, indicated that the number of employees in Iraq is enormous, but that there are more than a quarter of a million "space" employees (fake), as well as thousands of others who receive salaries without being in their functional institutions.
Governmentally, Mazhar Muhammad Salih, the economic advisor to the prime minister, confirms that the number of employees in Iraq is very large, and that half of the Iraqis (20 million Iraqis) depend on government salaries indirectly, given that the average number of family members is 4 people.
Saleh asserts that the coming days will witness an agreement between the executive and legislative authorities to approve a law that allows the government to borrow more, especially since the salaries of employees are designed according to oil revenues estimated at $ 80 per barrel, considering that borrowing will indirectly affect the cash reserve while the state must reduce its expenditures, according to him. .
Saleh concludes his speech to Al-Jazeera Net by noting that the volume of external debts since 2003 is estimated at 27 billion dollars payable between 2020 and 2028, while the Central Bank of Iraq confirmed earlier that the external debts of the pre-2003 era amounted to $ 40.9 billion, in addition to the internal debt. Which is represented in borrowing and treasury bonds.