Iraq: a fragile economy and more than $100 billion in debt

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[size=52]Iraq: a fragile economy and more than $100 billion in debt[/size]

[size=45]The World Bank described the Iraqi economy as “fragile” in its latest report, and stated that the country’s debts had increased to about $152 billion, and the currency auction of the Central Bank of Iraq caused the redirection of hard currency to the parallel market, which led to a decrease in the value of the dinar against the dollar.[/size]
[size=45]The issued report indicated that the Iraqi economy continues to recover, driven by the oil boom, after the severe recession caused by the Corona pandemic in 2020, while the non-oil sectors are still suffering from recession, in addition to the emergence of growth obstacles again.[/size]
[size=45]Despite Iraq reaping unexpected record oil revenues and approving the long-awaited new fiscal budget, Iraq is still at risk of missing an opportunity to move forward with urgent and long-awaited reforms that are critical to boosting private sector growth and providing millions of jobs needed over the years. the next ten, according to the report.[/size]
[size=45]Great risks
between the World Bank, through data for the spring and summer seasons of the current year 2023, for the report of the Economic Monitor for Iraq, which came under the title “Pressures Reappear: Recovery in Iraq is at stake,” that the real GDP rose at an accelerated rate to 7% in 2022, driven by The boom in the oil sector, however, decreased to 2.6% on an annual basis in the first quarter of this year.[/size]
[size=45]As for the rate of consumer price inflation, which was at medium levels in 2022, it also rose at the beginning of this year due to the depreciation of the Iraqi dinar in the parallel (black) market, as the favorable oil market dynamics in the first nine months of 2022 led to an increase in total reserves. , excluding gold, to a record $89 billion, however, this trend slowed in early 2023.[/size]
[size=45]Also, according to the World Bank, Iraq’s budget for the years 2023-2025, which was approved last June, indicated an increase in public spending, which could lead to a rapid drain on unexpected oil revenues, and thus pressure on public finances, in addition to that the expansion of spending has It causes the long-needed delay of the structural reforms needed to develop a vibrant and sustainable economy in Iraq.[/size]
[size=45]He stated that “the annual budget approved by the Iraqi authorities witnessed an excessive increase in the volume of public expenditures by 59% compared to the previous budget, which represented 74.3% of total spending, which would lead to a large fiscal deficit of 51.6 trillion Iraqi dinars ($39.7 billion), representing about 14.3 % of the volume of public imports, more than half of the recent record reserves accumulated in the aftermath of the boom in oil prices.[/size]
[size=45]For his part, a professor of economics at Al-Maqel University in Basra says that there are many negatives that afflicted the country's general budget for the years (2023-2025), noting that it is represented by the large size of the budget, which recorded the largest deficit ever, in addition to that its financing will be through internal and external borrowing. By 66%, which will cause an increase in the indebtedness of the current government and future governments, according to the decree.[/size]
[size=45]This may not be the only problem in the tripartite budget, as Al-Marsoumi adds that what he described as the recorded “fixed burdens” include salaries, gas imports, social welfare, and the costs of oil licensing rounds, which amount to about $99 billion, indicating that the dilemma is that these burdens cannot be reduced within the two years. For the arrivals, the budget relied on exporting oil by 90% in light of the restrictions imposed on the country in order not to increase production in accordance with the agreements concluded with the “OPEC Plus” group, and to stop the export of oil through the Kurdistan region to the Turkish port of Ceyhan, which is estimated at 400 thousand barrels per day.[/size]
[size=45]Excessive spending
The economist, Muhammad al-Hamdani, indicated that Iraq's restriction to the size of huge spending is due to poor planning resulting from the large economic benefits that Iraqi politicians reap, explaining that the tripartite budget allocated to Parliament is $350 million annually, with more than $1 billion during the next three years 2023. -2025, in addition to increasing the number of public sector employees by about 600 thousand job degrees through new appointments and contracts, which increased the financial burden on the public budget.[/size]
[size=45]In an exclusive interview with Al-Jazeera Net, Al-Hamdani indicated that this increase in the number of public employees comes at a time when international indicators indicate that the Iraqi employee's work rate does not exceed 10 minutes a day, indicating that the other dilemma is represented by the huge number of private grades. And general managers, which exceeds 4,500 general managers, which causes huge losses to the Iraqi economy as a result of huge salaries and allocations for armored cars and protections, according to him.[/size]
[size=45]The currency auction may not be far from these debilitating indicators of the Iraqi economy, according to Al-Hamdani, who explained that 20 years after the US invasion of the country, the government still relies on the currency auction, although this mechanism is not followed in all countries of the world, especially in oil producing countries.[/size]
[size=45]Al-Hamdani also stated that despite the Central Bank's measures and promises of economic reforms, the Iraqi government is still unable to provide reassurance to the Iraqis in order to use banks and not to hoard money in homes and companies, which forces the government to proceed with the currency auction in order to provide cash liquidity in Iraqi dinars, at the same time Which economic reports indicate that about 80% of the volume of the Iraqi monetary mass amounting to 83 trillion Iraqi dinars is still outside the banking system, he said.[/size]
[size=45]In the context, economist Rashid al-Saadi explained that the World Bank's announcement that Iraq's debts have risen to $152 billion is due to the failure of successive governments to adhere to plans, advice and warnings regarding managing the economic file, which led to the accumulation of those debts and their great benefits.[/size]
[size=45]Al-Saadi also confirmed in his interview with a media outlet that the World Bank, prior to approving the tripartite general budget, issued a report confirming that an estimated $20 billion was spent for only about 100,000 Iraqis, and that among them are those who receive multiple salaries of up to 9 salaries per month.[/size]
[size=45]Exaggeration in numbers
Returning to Nabil Al-Marsoumi, a professor of economics at Al-Maqel University, and despite his acknowledgment of the negatives included in the tripartite budget, he believes that there is an exaggeration in the size of the public debt on Iraq, which was revealed by the World Bank report.[/size]
[size=45]Al-Marsoumi says - in a post on his Facebook page - that the World Bank figures are incorrect, as the World Bank report assumed that Iraq's external debt is estimated at $50 billion, while the value of internal debt is about $102 billion, and the ratio of public debt to GDP estimated at 58.3%.[/size]
[size=45]Al-Marsoumi’s rejection of the World Bank’s data stems from the fact that these figures assume that the 2023 budget will be fully implemented, which will result in adding about $31 billion to the total public debt, indicating that logic shows that this budget will not be fully implemented, especially after its implementation has been delayed. to the current month of August, which raises doubts about the credibility of the World Bank figures, as he put it.[/size]
[size=45]For more details on Iraq's debts, he explained that Iraq's external debt, along with the frozen Gulf debt, amounts to $61 billion, not $50 billion - as reported by the World Bank - and if the 2023 budget is fully implemented, the debt will rise to about $70 billion.[/size]
[size=45]As for the internal debt, he revealed that it amounts to 53 billion dollars, and if the budget is implemented, it will rise to about 77 billion dollars and not 102 billion dollars as in the data of the World Bank, indicating that the total public debt in the event of the full implementation of the budget will reach 138 billion dollars and not 152 One billion dollars, according to the World Bank, according to the decree.[/size]
[size=45]Whether the World Bank data is accurate or not, the facts indicate that Iraq is saddled with heavy debts of no less than $138 billion, noting that internal debts are the biggest obstacle for the country because of the high interest rates, according to what Iraqi economists revealed.[/size]
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