Shafaq News/ Iraq faces the risk of a likely financial collapse in 2021. It may lead to a repeat of the employees’ salaries’ delay series unless a miracle saves a country burdened with debt and crisis.
The parliament has indeed agreed to continue borrowing to pay employees' salaries..However, the slump in oil prices and the lack of lawmakers’ support to the government’s reform plan, the white paper, increased the concerns in a country with millions of employees and is dependent almost entirely on the price of oil barrels.
“Iraq has a deficit of 81 trillion dinars, in addition to the previous debt of 200 billion dollars. It is a major problem, for it may take many years for Iraq to pay off”, said Dr. Nasir Al-Kinani, an expert and economic consultant, in an exclusive statement to Shafaq News agency.
The economist said that the issue of employees’ salaries disruptions had created setbacks throughout the market. He also criticized the idea of unpaid employees due to a rivalry between the government and parliament.
Al-Kinani warned of chaos and called on MPs and government ministers to look at the chaos to come.. He described it as, “If started, it can never be stopped”.
Prime Minister Mustafa Al-Kadhimi said, “Addressing economic challenges is not an easy task; and the current crisis is systematic, not related to this government and its actions..The economic crisis at hand needs real and radical reform and long-term plans to overcome it”.
"The reform paper needs everyone's efforts to develop and to take advantage of existing expertise to translate it into a long-term reality of work. The white paper marks the beginning of economic reform; and although it is lengthy and includes some measures, it will be a base for developing the country's future vision”, the Prime Minister added.
Al-Kadhimi urged the parliament to discuss the White Paper and approve it in principle; as a general framework for real and serious action to advance the Iraqi economy.
The salaries of employees were delayed. A phenomenon, employees in the post-2003 Iraq did not get used to.. except for Kurdistan, as it was hit by financial crises and a frequent financial conflict with Baghdad.
Iraq is one of the countries with a rentier economy, with the country relying on oil sales revenues to finance up to 95% of state spending. Iraq borrowed months ago to secure the employees’ salaries -following the fall in oil prices due to the COVİD-19 pandemic..For the pandemic crippled the world's economies.
The delay in salaries has caused a severe recession in the Iraqi markets -certainly exacerbated by several factors, including the collapse of oil revenues, the price war between Russia and Saudi Arabia, the recent lockdown measures to deal with the COVİD-19 pandemic, as well as the failure of the government and parliament to prepare for the financial crisis that was clearly looming; even to reduce the inflation of public sector employees –as the Carnegie Endowment for International Peace recently reported -the report was published by Shafaq News agency.
The Carnegie institute said that the financial crisis had short-term and long-term repercussions. In the short term, Baghdad is finding it difficult to pay the public sector’s employees, requiring the state to borrow money from the central bank during the summer. With the decline in oil revenues, the state's monthly income now covers only 55% of government expenditures.
In the longer term, Iraq is facing a total financial collapse -likely to occur next year. The country is finding it difficult to cover its monthly expenses.
It is noteworthy mentioning, the size of the public sector has expanded under successive governments; to the extent, the total revenue -generated by the Iraqi state, is no longer sufficient to pay basic expenditures, i.e. public sector’s salaries, pensions, food aid, and the cost of social welfare programs..The state needs to spend more than its revenues to cover these basic expenditures, and to remove the deprivation from the majority of the Iraqi people.
Since oil prices recovered in March, Iraq's oil revenues have averaged just over 3 billion dollars a month and reached 3.52 billion dollars in August.
