Attention has turned towards Iraq recently, after fears that the country will face bankruptcy with market turmoil, food security, high prices and the decline of the local currency against the US dollar.

Economically, bankruptcy means that the state has become unable to pay its debts or fulfill its other financial obligations, such as paying for the goods it imports, in addition to its inability to pay wages and salaries, and it cannot conduct its economic affairs without the help of others.

The Caliph believes that the causes of bankruptcy are available, and Iraq is approaching them day after day (Al-Jazeera)

bankruptcy signs

Regarding the possibility that Iraq will face bankruptcy, the financial and oil expert, Dr. Bilal Al-Khalifa, says that the reasons for bankruptcy are available, and Iraq is approaching them day after day.

It highlights a number of factors that began to appear in Iraq and pave the way for bankruptcy in it, most notably the inability of the state to pay its debts in whole or in part. We also note that the debts after 2003 were $120 billion, and that the Paris Club dropped most debts and reduced them to $20 billion. .

However, as a result of wrong policies - according to the Caliph - and despite the increase in oil production, the internal and external debts rose again, as Baghdad temporarily stopped paying in 2014 as a result of the deteriorating security situation and the control of the Islamic State over several Iraqi provinces, with the increase in the size of the Iraqi public debt In 2021 to $ 26 billion, which is external debt.

Among other factors, the volume of spending on military institutions has expanded a lot. For example, the financial allocation to the Ministry of Defense in 2019 was 9 trillion dinars (more than 6 billion dollars), accounting for 6.8% of the federal general budget. In 2021, the financial allocations are 7.4 trillion. dinars (5 billion dollars), which constitutes 5.73% of the budget.

As for the financial allocations to the Ministry of the Interior for the year 2019, it was 11.2 trillion dinars (7.5 billion dollars), or 8.4%, and in 2021 the financial allocations were estimated at 10.5 trillion dinars (more than 7 billion dollars), making up 8.1% of the size of the general budget.

Iraq is rich in its oil wealth, which makes the specter of bankruptcy far away (Reuters)

When the two percentages are combined, they become 15.2% of the allocations of the Ministries of Defense and Interior for the year 2019, and for the year 2021 they are 13.83%, according to the Khalifa, who assures Al Jazeera Net that these figures do not include many other security services such as the intelligence and counterterrorism services and the Popular Mobilization, and the retirees from those ministries and agencies, In the end, the percentage reaches 20% of the general budget, and this is a very large percentage.

Among the reasons that lead to bankruptcy is also the internal political turmoil resulting from changing governments and coups, and this is present in Iraq, and the evidence is that the elections took place last October, and after 6 months, the government was not formed.

And the Caliph is not satisfied with these reasons, but rather pointed to the excessive government spending and the decline of the most important industries in the country. In all of Iraq’s budgets, public expenditures are more than investment expenditures, and the percentage reaches more than 80%.

One of the reasons for bankruptcy is also the issuance of new laws that frighten the financial markets and withdraw capital from the country, and this factor is also present in Iraq, as the Caliph indicates, after the government’s decision in December 2020 to raise the price of the dollar against the Iraqi dinar, which created chaos in the market.

In addition to the decrease in the collection of taxes and fees as a result of exemptions and corruption, and this decrease is increasing daily with government decisions exempting countries, companies and goods from taxes and customs.

Chalabi warned more than 7 years ago of the bankruptcy of Iraq after revealing the existence of corruption mafias that seized banks (Getty Images)

Previous Warnings

The late former head of the Parliamentary Finance Committee, Ahmed Chalabi, warned in 2015 that Iraq was heading towards bankruptcy after revealing the existence of large corruption mafias that seized banks and had partners in the Central Bank.

The opinion of the current Minister of Finance, Dr. Ali Allawi, was in agreement with Chalabi’s opinion, when he indicated in a previous meeting that “the government may abandon some employees after 10 years if the situation continues as it is now,” meaning that it cannot pay the salaries of its employees, and this explains - the Caliph - It's "a certain bankruptcy".

Haidar ruled out the bankruptcy of Iraq because its economy is diversified with sources of income and public and private revenues (Al-Jazeera Net)

exclude bankruptcy

Economist and university professor Dr. Khaled Haidar disagreed with what the Caliph said, and ruled out the bankruptcy of Iraq, as its economy is diversified with sources of income and public and private revenues, pointing to the country’s possession of many natural resources, foremost of which is oil, in addition to border areas and other factors that increase public revenues. and annually.

And about the possibility that Iraq will face bankruptcy if the oil prices on which it depends by more than 90% to finance the country’s annual budget drop to low levels, as happened during previous years, Haider stresses that “the Iraqi economy cannot go bankrupt even if oil prices drop,” attributing the reason to that It is never possible for prices to fall below cost, or for the country not to get a profit from extracting, refining and exporting oil and its derivatives.

He considered that what enhances Iraq's financial position is its possession of a good cash reserve, in addition to its ability to borrow from other countries, which keeps the specter of bankruptcy away.

Cougar called on the government to conduct a serious review of monetary and economic policy (Al-Jazeera Net)

serious review

Despite the proliferation of weapons and the political division in Iraq, this does not necessarily mean that Iraq will face the fate of bankruptcy, as it has permanent resources such as oil, border crossings, and others.

Here's what former House Finance Committee member Jamal Cougar says.

Cougar wonders, "How can Iraq go bankrupt while it has a decent cash reserve, after it was boosted during the recent period with a percentage that helped it overcome the shortage that occurred in it with the rise in oil prices."

Although Cougar rules out the bankruptcy of Iraq, he acknowledges at the same time the need to conduct a serious review of monetary and economic policy, specifically the banking and financial system in the country, justifying this by noting that the mechanisms used in it are outdated, including the system or model used in the budget called “balancing items.” which has been exceeded in most countries of the world.