Parlous finances top Iraq’s list of troubles

Parlous finances top Iraq’s list of troubles

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Saudi Governor of the Northern Borders Region Prince Faisal bin Khalid bin Sultan at the opening of the Arar border crossing, Nov. 18, 2020. (Reuters)

Early last month, Iraqi Prime Minister Mustafa Al-Kadhimi completed six months in office. Ushered in as head of government with considerable hope by Iraq’s warring politicians, the half-year milestone evoked little enthusiasm among ordinary Iraqis. Most of them see him as well-meaning but ineffectual in the face of the country’s diverse challenges: Violence, deep national divisions and, above all, the state of the economy.
The combination of the pandemic and low oil prices has hit Iraq very hard. Oil sales provide 95 percent of the nation’s revenues. In 2019, income from oil sales was $6.5 billion per month, but it collapsed to just $1.4 billion in April this year, before recovering to about $3 billion from May onward. But this is still not enough to pay the salaries and other benefits due to the country’s 4 million state employees, compelling the government to borrow $3 billion per month from the central bank.
This pattern of living hand-to-mouth has continued: On Nov. 12, the Iraqi parliament approved governmental borrowing of another $10 billion, which will be just enough to meet the salary bill until the end of December.
Iraq’s parlous condition is being addressed by sections of the international community. An “international financial alliance,” made up of the G7 countries, the World Bank and European and Iraqi financial institutions, set up the Iraqi Economic Contact Group in October to back reforms and promote stability and growth. However, Finance Minister Ali Allawi has focused on another priority — getting back the $150 billion he claims was “stolen” from Iraq and is located in foreign banks.
As he handled his country’s tattered finances, Allawi last month vented his strong feelings in public, condemning the rampant corruption in the country. He noted that lowly clerical jobs at border posts were being sold for amounts between $50,000 and $100,000, so that the government coffers received just 10 percent of what was collected. Given that oil prices are unlikely to go up in the near future, the minister warned that the country could either adopt austerity or go bankrupt. So far, he noted, there were no takers for austerity.
The government’s indulgence of its salaried employees — who make up just 11 percent of the workforce — brings little comfort to those who eke out a miserable existence in the country’s informal sector: Casual workers on daily wages. They were reduced to destitution by the pandemic-enforced lockdowns, contributing to the 10 percent increase in Iraq’s poverty levels. The government’s efforts to ease their situation and reopen the economy have created an exponential increase in coronavirus disease infections. Iraq now has more than half-a-million cases, the highest in the region after Turkey and Iran, and has suffered 12,000 deaths.
While Iraq is no longer seeing the lethal sectarian violence of the last decade, the threat from Daesh remains. In August, the UN’s head of counterterrorism, Vladimir Voronkov, estimated there were 10,000 Daesh fighters active in Syria and Iraq. They have carried out at least three major attacks in Iraq in the last month: Killing a tribal chief in the Diyala region near the Iran border; killing another 11 people, many of them from the Popular Mobilization Units, at a lookout post at Al-Radwaniyah, southwest of Baghdad; and launching a rocket attack at the Siniya refinery in Salahuddin province.
These attacks, coupled with the killing of eight Sunni youths in Salahuddin province in October, could aggravate the barely-healed sectarian divisions and revive the conflicts that previously devastated Iraq. Thus, Sunni politicians have used the murder of the youths to promote a Sunni alliance and even create an autonomous Sunni-majority province in Anbar, Iraq’s largest province, which shares borders with Syria, Jordan and Saudi Arabia. Fortunately for Iraq, these politicians have little credibility: Most are believed to be driven by personal ambitions and many have an unsavory record of corruption.

Given that oil prices are unlikely to go up in the near future, the finance minister warned that the country could either adopt austerity or go bankrupt.

Talmiz Ahmad

The good news is that Anbar province is at the center of a major Saudi-Iraqi cooperation project. Since April 2018, the Saudi-Iraqi Coordination Council has been pursuing Saudi investment in an agricultural project in Anbar. Covering a million hectares, the project envisages the creation of agricultural production and food processing facilities in the region, possibly providing 30,000 jobs. The region provides rich farmland due to the presence of the Habbaniyah, Razaza and Sawa lakes and the Haditha Dam, which is a major reservoir. The province also has numerous desert springs that have supported small farms for centuries.
Saudi-Iraqi ties received a fillip with last month’s opening of the Arar border crossing for the first time in 30 years. This was the traditional route for Iraqi pilgrims going to Saudi Arabia for pilgrimage and it is now expected to facilitate cross-border trade.
In fact, the Arar crossing and the Anbar agricultural project are the best antidotes to Iraq’s economic malaise.

  • Talmiz Ahmad is an author and former Indian ambassador to Saudi Arabia, Oman and the UAE. He holds the Ram Sathe Chair for International Studies, Symbiosis International University, Pune, India.
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