By John Lee.

The Iraqi parliament has reportedly authorised borrowing of up to $5 billion (Dh18bn) from abroad after the fall in oil prices caused a financial crunch.

According to The National, the vote came a few days rating agency Fitch forecast the economy to shrink 9 per cent this year and debt to skyrocket.

More here.

(Source: The National)

Prime Minister Masrour Barzani on Wednesday chaired a cabinet meeting via video conference to discuss expenses and the need to adapt to the current budget while protecting public entitlements.

In the meeting attended by Deputy Prime Minister Qubad Talabani, the Council of Ministers stressed continued commitment to reducing salaries of senior officials, including those retired with high pay brackets. These meetings will continue until next Sunday.

During the meeting, the Cabinet extended the deadline to pay public water and electricity bills with 15% discount until September 1, 2020.

The Council of Ministers also debated the ongoing disputes with the federal government and agreed that a delegation will return to Baghdad next week as part of continued efforts to reach an agreement within the framework of the Iraqi constitution.

(Source: KRG)

The Iraqi government says Iraq faces an immediate challenge caused by the decline in oil prices and the impact this has had on the economy and fiscal liquidity.

Officials say that the impact of the fall in oil prices is compounded by other weaknesses caused by decades old policies of a command economy, and by the approach to the economy by successive Iraqi governments over the past seventeen years.

These policies, they add,  have led, amongst other things, to an exponential increase in the size of the public sector, low levels of private investment, mismanagement and administrative corruption.

According to official figures, salaries and staff allowances in the public sector constitute approximately 60% of public spending, and this does not include other expenditure on daily activities of ministries, while spending on investment projects represents 2% of the budget.

The figures show that the number of people employed in the public sector in 2005 was around 850,000, but the number of state employees has risen to more than 3 millions now, and this figure does not include contract employees or those on daily rates, costing Iraq US$36 billions annually, a ten-fold increase from US$3.6 billions annually a few years ago.

The new Iraqi Cabinet announced the establishment of the Emergency Cell for Financial Reform to lead the response to the crisis, under the chairmanship of the Prime Minister, and with the membership of the Ministers of Finance, Foreign Affairs, Planning, the Governor of the Central Bank, the Secretary General of the Council of Ministers, and other officials as nominated by the Prime Minister.

The Cell’s mandate is to ensure financial liquidity, agree measures to rationalise public spending, diversify resources, and propose finance mechanisms for reconstruction and investment projects from outside government funding streams.

As well as rationalising public spending, the new Iraqi government says it will embark on an economic reform programme in Iraq that includes:

  • Supporting the expansion of the private sector and encouraging investment
  • Introducing automation and simplifying procedures in the public sector
  • Adopting a single budget account to monitor spending by ministries to reduce waste and corruption
  • Expanding the electronic payment system for salaries, and pressing ahead with the e-government project
  • Rebalancing Iraq’s economic relations with all neighbouring countries

Earlier this month, the Minister of  Finance, Ali Allawi, said that cutting spending was essential, and that this will include reductions to the the benefits and allowances of state employees, including those of senior officials, but he stressed that the basic salaries of employees will not be reduced, and that any cuts will not include employees or pensioners who earn 500,000 dinars or less a month.

(Source: Govt of Iraq)

By Dana Taib Menmy for Al-Monitor. Any opinions expressed are those of the author(s), and do not necessarily reflect the views of Iraq Business News.

Iraq cuts federal budget from KRG, Kurds defy it as political

Adel Abdul Mahdi’s Iraqi caretaker government in Baghdad April 16 has ordered its Finance Ministry in an official document to cut federal budget contributions to the semi-autonomous Kurdistan Regional Government in Erbil, pushing the KRG toward bankruptcy and cutting off the payment of salaries to its civil servants.

Click here to read the full story.

By Dana Taib Menmy for Al-Monitor. Any opinions expressed are those of the author(s), and do not necessarily reflect the views of Iraq Business News.

Iraq cuts federal budget from KRG, Kurds defy it as political

Adel Abdul Mahdi’s Iraqi caretaker government in Baghdad April 16 has ordered its Finance Ministry in an official document to cut federal budget contributions to the semi-autonomous Kurdistan Regional Government in Erbil, pushing the KRG toward bankruptcy and cutting off the payment of salaries to its civil servants.

Click here to read the full story.

By John Lee.

Baghdad is said to have stopped payments to the Kurdistan Regional Government (KRG).

Writing for Argus Media, Rowena Edwards says central government will also seek to recover payments made since the start of the year, in the absence of KRG transfers of crude oil, which were part of the as-yet-unsigned 2020 budget.

More here.

(Source: Argus Media)

By John Lee.

Erbil and Baghdad have reportedly reached an agreement on Erbil’s contribution to the 2020 federal budget.

According to Reuters, the state news agency INA says the deal includes a transfer of 250,000 barrels per day (bpd) from the oil-producing region to Iraq’s national budget.

Iraq’s 2020 federal budget is currently under discussion in parliament.

(Source: Reuters)

By John Lee.

Simon Hinrichsen, a PhD student at the London School of Economics (LSE), has published an analysis of Iraq’s sovereign debt over the years.

The full 51-page report can be downloaded here.

(Source: LSE)

The Al-Bayan Center for Planning and Studies has just published a new report from our Expert Blogger Ahmed Tabaqchali:

The current debate over the interpretation of the 2019 budget that governs the Kurdistan Regional Government’s (KRG) share of the federal budget in return for contributing 250,000 bbl/d to federal oil exports has echoes of the first conflict in April 2012 on the issue.

The adept quote above by the International Crisis Group (ICC), in its description of the relationship between the two sides leading to that conflict, is as applicable today as it was then, and over the many repeats of similar conflicts in the intervening years.

The current flare up is initiated by members of the federal parliament against the Government of Iraq (GoI) over its continuing payments to the KRG, under the terms of the 2019 budget, while the KRG has not or refused to honour its obligations under the terms of the same budget.

The internal and external dynamics of the players on both sides, the federal politicians and the regional Kurdish politicians, follow the same trajectory that led to countless struggles over this issue and others since 2003. Each side is not only blind and deaf to the other side’s needs and motives but views it with suspicion and mistrust.

Unless something breaks the mould, either an intervention by Iraq’s international stakeholders or a change in the balance of relative power between the two, both will continue to think and act in the same manner that each had acted in the past, while still expecting a different outcome for the conflict or a different response form the other side.

Read Ahmed Tabaqchali’s full report here.

By Salam Zidane for Al Monitor. Any opinions expressed here are those of the author and do not necessarily reflect the views of Iraq Business News.

Iraqi President Barham Salih (pictured) approved the controversial 2019 budget on Feb. 4.

The budget passed the parliament Jan. 23 after long debates over allocations for the Kurdistan Region and southern provinces and amendments that ignored Iraq’s obligations under an agreement with the International Monetary Fund (IMF) mandating austerity measures until 2021.

The Iraqi parliament approved draft legislation for the 2019 budget amid objections from authorities in the southern provinces. At 133.1 trillion Iraqi dinars ($112.6 billion), the budget, if passed, would be the country’s third largest, behind those for 2013 and 2014. With a 27.8% increase in spending, it would appear to blow up the IMF agreement.

Click here to read the full story.