This article was originally published by Niqash. Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.
By Hayman Hassan.
The Iraqi Kurdish authorities owe many state employees months in back pay. The citizens of Iraqi Kurdistan owe the government a variety of fees. But right now, it seems nobody is getting anything.
In the semi-autonomous, northern region of Iraqi Kurdistan, there are a lot of debts to be paid – and everybody owes somebody money.
One of the most pressing issues is that of the partial payment of salaries to those employed by the government. Iraqi Kurdish teachers have recently been protesting about this again, causing the closure of some local schools, and other state employees have done so in the past.
As a result of its financial problems – caused, partially by the security crisis, a fall in oil prices and ongoing wrangling about their share of the national budget – the government of Iraqi Kurdistan decided to “save” employees’ salaries in 2016. This means that a part of any employee’s salary was paid to them as usual and the other part was withheld, with a view to returning it later. It was a debt that the Iraqi Kurdish government owed to its people.
Earlier this month, the authorities decided again to set up a whole new department – the department of government debt – to deal with this issue. They had announced they would do this last year but nothing really happened.
The department should log all of the money that the Iraqi Kurdish government owed and also what was owed to them. The staff salary “savings” are meant to be part of this but it’s hard to know how the department could enforce any exchange of cash. As yet, there is no dedicated bank account to deal with this issue and nobody knows when repayments might happen.
“The Kurdish government should pay their people back around US$10 billion, and then another US$10 billion to other investors,” Ali Hama Salih, the deputy head of the Iraqi Kurdish parliament’s finance committee and a member of the anti-corruption Change movement, told NIQASH. “But it has no mechanism in place to pay anything back.”
“When the government’s revenues increase again, it is going to pay those debts,” says Safeen Dizayee, the spokesperson for the Iraqi Kurdish government and a member of the region’s biggest political party, the Kurdish Democratic Party.
Over the past four years, nobody has managed to figure out how to pay government employees back what they are owed. One of the ideas suggested by provincial councils late last year was that the government deduct the money they owe citizens from citizens’ bills for power and water and for other payments such as traffic fines.
“We’ve suggested this project two times now,” says Khanzad Younis, a member of the Erbil provincial council. “But the government refused, saying such a thing cannot be implemented right now. That is despite the fact that we outlined all of the specific things the government and citizens should do to have these debts repaid.”
The Kurdish government told the council members that it would all take too long and that too much information was required, that nobody had. It also requires all employees to have bank accounts, which they do not. Additionally, the government still only has enough money to pay the proportion of salaries it is liable for.
Another proposal says that a bank account should be opened, and all of the savings should be deposited in there eventually. This would be impossible currently and anyway, the ministry of finance has all of the details of what is owed. Still, the idea was thought to be a symbolic step in the right direction. However, this has not happened either.
And there is an added complication. In November 2017, the government waived some payments that local tax payers were supposed to make to it. This includes some payments for water and power, marriage license fees and loans for housing, saying that those who had been impacted badly by the fight against the extremist group known as the Islamic State should not have to pay these.
The debt that locals owe the Kurdish government apparently totals around IQD3 billion (around US$2 million) and is slowly being paid back via small monthly instalments, Dizayee explains. But this is nothing when compared to the larger amount of back pay owed to employees.
“Given that the government is the executive authority in Iraqi Kurdistan it could issue new laws that allow it to collect those debts from citizens faster,” speculates Khalid Hayder, an assistant professor of economics at the University of Sulaymaniyah in Iraqi Kurdistan. “As for what the government owes its citizens, it is under pressure to pay that money back at some stage. If it doesn’t this creates a serious lack of trust and endangers the whole region’s economic future.”
Right now, it seems the Kurdish government is waiting for the federal authorities in Baghdad to pay them their share of the federal budget. But, he adds, when it comes, that is most likely to be used to pay the outgoing salaries of citizens and not the debts.
The Iraqi government passed its 2018 budget earlier this month, and although wrangling continues as to whether it is actually workable, one thing does appear to have been made clear: The percentage of the income that the Kurds get has dropped. Politicians have already warned that they won’t be getting enough to pay back the debts they owe their own employees and voters. The debtors’ standoff looks likely to continue.