Iraq's debt represents 34% of the country's gross domestic product (Reuters)

 Baghdad

- Iraq is searching for internal and external loans to finance infrastructure projects that need more than 100 billion dollars, due to the inability of the general budget to finance them against the backdrop of increased public spending, especially salaries, which amount to 53 billion dollars annually.

The International Monetary Fund recently urged Iraq to increase capital spending and increase non-oil revenues, through reforming the electricity sector, levies, imposing new taxes, and others.

Iraq's need for financing

Mazhar Muhammad Salih, financial advisor to the Prime Minister, revealed Iraq’s need for funding to rehabilitate infrastructure. Muhammad Salih confirmed in his interview with Al Jazeera Net that the international community, at the Madrid donors conference in October 2003, identified Iraq’s need to finance infrastructure at a limit of 60 billion dollars. .

Muhammad Saleh indicated that a number of international financial institutions provided loans worth about $9 billion to develop infrastructure projects in the water and energy sector.

Infrastructure projects in Iraq need more than 100 billion dollars (Reuters)

In 2018, the Kuwait International Conference for the Reconstruction of Iraq was held, which identified Iraq’s need for $100 billion to develop the economy, after internal conflicts and the war against ISIS

.

The conference was able to collect loans and grants worth $30 billion.

According to the Central Bank, the internal debt rose from 38.3 trillion dinars ($29.4 billion) in 2019 to 73.2 trillion dinars ($56.3 billion) currently, while the external debt exceeded $60 billion, including the Gulf states’ debt to Saddam Hussein’s regime amounting to $40 billion. .

The 2023-2025 budget allowed the government to borrow $7.7 billion from a number of international institutions, including the World Bank, the Japan International Cooperation Agency (JICA), and others. To finance infrastructure projects for electricity, oil, municipalities, agriculture, and others.

Financial obligations

With the aim of reducing external public debt and regulating the borrowing process, the Iraqi Council of Ministers, in its session held yesterday, Tuesday, approved the Ministerial Council’s recommendation related to external debt. The recommendation included:

  • The Ministry of Planning’s study of projects canceled loans; To discuss the possibility of including it with funding sources from the federal general budget.

  •  Should the Ministry of Finance check the existence of any financial obligations that may result from canceling these projects with the loan donors when implementing the decision?

  • Cancellation of non-performing loans, worth $1.05 billion, and completion of important projects from government funding sources.

  • Canceling borrowing requests worth $5.8 billion for the Basra water desalination and sky train projects, financing the first project from the regional development budget, and financing the second project by offering it for investment.

  • Reducing the current external public debt, amounting to $10.5 billion, to $8.9 billion.

  • Redirecting World Bank loans to stalled projects and other surpluses towards implementing the vital railway link project (Faw-Rabia-Fishkhabour).

  • Contracting with an international financial consultant to audit and manage foreign debts in the future.

Saleh said that the loans granted to Iraq by international institutions, estimated at $17 billion, are for development purposes, not consumption.

He explained that external debts are classified as long-term loans, noting that these debts represent more than 34% of the gross domestic product, while they reach the danger stage when the percentage reaches 60%.

Saleh pointed out the importance of these loans as they provide an opportunity to introduce technology into the Iraqi economy and allow large companies to work inside Iraq, indicating that debt does not constitute a burden on the Iraqi economy at the present time.

Iraq still needs to borrow to repair electricity and invest in the gas associated with producing oil that is burned in large quantities. Baghdad borrowed $257 million from JP Morgan257 for the purpose of maintaining power plants.

Correctional conditions

For his part, Mustafa Hantoush told Al Jazeera Net that loans are a normal issue in all countries, and Iraq needs them during the current period, to support development projects, explaining that external loans to Iraq are of little interest, but include achieving reform conditions.

Hantoush pointed out that most of Iraq's debts are scheduled, and therefore "we need investment projects that can repay this debt during the coming period, because any decline in oil prices in the future may lead to problems with Iraq's foreign obligations."

Iraq does not need loans

Economic journalist Salam Zidan told Al Jazeera Net that Iraq's financial revenues have increased significantly since the start of the Russian-Ukrainian war, and he saw that Iraq does not need external loans, but rather needs correct financial management through which it can control "random" spending, as he put it.

Iraq's revenues have increased significantly since the outbreak of the Russian-Ukrainian war (Getty)

Zidane added that a lot of money is being spent randomly, while infrastructure projects in education, health, transportation, and energy are still lagging behind.

 In this context, he talked about:

  • Increasing the number of state employees to 4 million people.

  • Including a large number of undeserving people in social care.

  • Providing direct support on fuel, electricity, and ration cards.

He stressed that Iraq needs more than 200 billion dollars in order to spend it on investment projects during the next five years, and this number is very difficult to achieve, due to operational spending, most of which goes to please politicians and buy voters’ votes, as he put it.

Zidane pointed out that Iraq does not need to borrow, as much as it needs very bold decisions, namely reducing the number of employees, making room for the private sector, and reforming vital sectors.

Source: Al Jazeera