Notes on the Public Debt Law in force

by **Rocky** Sat 29 Jun 2019, 2:45 pm

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Notes on the Public Debt Law in force

by Rocky Sat 29 Jun 2019, 2:45 pm

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The Iraqi parliament voted at the end of last May on the new Financial Management Act 2019, and despite the time spent by the Finance Committee in revising and amending this law, the legislator law has many weaknesses and conflicts with the government program of the government of Adel Abdul Mahdi.

Here we do not want to delve into the weaknesses of the new law in the hope of discussing this in another article, but we focus on the negligence of the Financial Management Act 2019 legislator of a new law on public debt. It was hoped that the law would include provisions and provisions governing public debt levels and mechanisms to extinguish the accumulated debt in order to achieve financial sustainability in the country.

Due to the repeated borrowing from the accumulation of public debt rates steadily, leaving the premiums and benefits became exhausting the federal budget, as the payments of public debt (internal and external) the duty to repay more than (10) trillion dinars, as stated in Article (2) Of the federal budget law for this year, a difficult figure will inevitably be at the expense of the efforts of construction and reconstruction and economic development in Iraq. Currently, total public debt exceeds $ 130 billion ($ 41 billion in outstanding debt) and nearly $ 65 billion in external debt, and the remaining $ 36 billion in domestic debt estimated to reach 2018.

Article 52 of the new law provided for the repeal of the Financial Management and Public Debt Law issued under CPA Order No. 95 of 2004, with the exception of Appendix B of the Public Debt Law. Which means the continuation of the previous and effective public debt law.

Here are several observations:

1. The Finance Management Act (94) of 2004 gives the Minister of Finance considerable powers in public borrowing.

2. The law does not refer to the maximum ratios of public debt. The new financial management law also mentioned the maximum deficit ratio of 3% of GDP.

3 - Most of the details contained in the law are technical and have no economic or financial dimensions.

4 - There is no reference to external debt and mechanisms to deal with.

5. There is no reference to government debt from international institutions and mechanisms to deal with them (IMF and World Bank).

6 - There is no reference to the debts of the provinces and regions and the mechanism of payment, which is a problem between the Center and the region.

7. The law does not refer to the accumulated debt and the mechanisms for dealing with it, nor does it include a fund to pay the public debt.

In light of these observations, and many other technical details, a number of factors oblige the House of Representatives to accelerate the enactment of a new law to manage the public debt, perhaps the most important:

1. The fragile financial situation and the accumulated debts necessitate a review of the structure and content of the effective debt management law to ensure financial sustainability.

2 - There is no justification for the adoption of a new law of financial management devoid of the law of public debt, although the latter part of the first.

3 - The text of the fourth axis / first / paragraph (9) in the government program of Mr. Adel Abdul Mahdi (2018-2022) on the control of internal and external debt. This paragraph is one of the most important paragraphs of the axis of strengthening the economy because of its repercussions on the economic and financial situation in Iraq in the medium and long term, and stipulated: ((control of internal and external debt and prevent exceeding certain levels, and linking the internal debt and external investment projects and generated values and wealth and non-use For the consumer or operational purposes of the budget), while the new Financial Management Law did not include any reference to the achievement of the said objective from near or far.

4. Article 20, paragraph 2, of the new Financial Management Act refers to the deposit of the financial surplus realized in a sovereign fund, which necessitates the establishment of a sovereign fund whose branch may be allocated to pay the accumulated public debt.

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