Iraq..political obstacles to economic reforms after the recovery of oil prices

[size=52]Iraq..political obstacles to economic reforms after the recovery of oil prices[/size]

[size=45]Translation / Hamed Ahmed[/size]
[size=45]The Iraqi economist, Ahmed Al-Tabjali, indicated in a new report that global economic growth will continue to rise now and will move in a more moderate direction for the next stage 2022-2023, after the world realized how to deal with the new mutated, the Omicron virus, and this global economic growth will have a clear impact on Iraq's economic recovery for the next stage, taking into account the increasing demand for crude oil in the global market.[/size]
[size=45]Al-Tabaqjali mentions that the revenues from oil sales in Iraq decreased during the year 2020 due to the restrictions of measures to limit the spread of the Corona virus from 6.1 billion dollars in January to 1.5 billion dollars only by April of that year before returning to recover gradually to reach 4.1 billion dollars In the month of December, the end of the year 2020. At that time, employee salaries and retirees’ salaries constituted 95% of the oil revenues, while only 18% of the budget was allocated to spending on other goods and services.[/size]
[size=45]From mid-2020 through 2021, the government began introducing an economic recovery plan by injecting cash through internal borrowing, which increased by 22% by the end of 2020 and gradually decreased to 9% by October 2021. Also this year, oil sales increased from $4.8 billion in January 2021 to nearly $7.3 billion in December at the end of the year. At the time, the Iraqi government was able to cover all its important expenses after passing the 2021 budget in mid-April.[/size]
[size=45]Regarding the developments in the non-oil economic sector, the available information indicates an increase in the recovery rate in this sector by 21% during the first half of 2021 compared to the same stage of the year 2020, at a time when current indicators estimate the continuation of this recovery, but at lower rates.[/size]
[size=45]The economic growth forecast for Iraq in the short term indicates that the financial liquidity achieved in the Iraqi economy over the past two years will increase more during 2022-2023 due to the increasing demand for oil as a result of the global economic recovery and the recovery of global oil market prices. Forward selling contracts indicate that the ceiling of the price of a barrel of oil will continue to exceed the $70 barrier until 2024, and then gradually decline to reach $65 a barrel at the beginning of 2029.[/size]
[size=45]Such high oil prices will provide the next government with ways to continue the current expansionary economic policy through the next year 2023, while also allowing it to increase the budget balance from the fiscal surplus. These economic stimulants will, as a result, improve the Iraqi budget in paying the expenses well for several years to come, which will result in an increase in the surplus of hard currency reserves, and this will enhance the trend of continuous economic growth for the country as long as oil prices remain high.[/size]
[size=45]political obstacles[/size]
[size=45]Despite all this, such an orientation towards annual budgets will deepen the structural imbalances of the country and make it more vulnerable to future economic shocks. The economic crisis that Iraq experienced in the year 2020 not only revealed the fragility of the Iraqi economy, but also revealed the advanced stages of the imbalance in the economic structure of the country. It was necessary to take drastic measures to avoid the collapse situation. It is the white paper for economic reform that every government must implement to reveal the causes of the imbalance in the economic structure that the country is experiencing due to the political system that the country adopted after 2003. Here lies the weakness in implementing the terms of the reform white paper or any other effort to implement an economic reform policy.[/size]
[size=45]The influence of groups of political elites in the country on the parliament and government ministries is more than the influence of the government authority on them, and these elites strongly rejected and hindered the implementation of the reforms of the White Paper during the year 2021.[/size]
[size=45]Oil price recovery[/size]
[size=45]The economic expert, Tabaqjali, points out that the recovery of oil prices will discourage them from taking the necessary steps for economic reform. Noting that the next government will rely on the same compromise solutions adopted by previous governments from 2018 to 2021, which illustrate the failure to implement the reforms called for by the International Monetary Fund at the time, and the country was exposed to the economic shock of 2020.[/size]
[size=45]The months that will follow the formation of the next government will be a test for it as to whether it will be able to implement the reforms listed in the white paper, or it will be a reform paper that will be forgotten if the economic crisis is overcome. The problem in Iraq is that interest in economic reform is gaining momentum in the event of a drop in oil prices and an economic crisis, while implementing sustainable and meaningful reforms in such circumstances is difficult because the government will have to spend all its resources to avoid a short-term financial collapse. The rush towards economic reform will fade immediately if oil prices recover, but the government must raise the rate of stability and flexibility of the budget towards passing reforms that will enable the country to withstand in times of crisis and withstand the inevitable expectations of fluctuations and decline in oil prices in the foreseeable future.[/size]
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