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Economic dilemmas facing Iraq and employee salaries “at risk”
APRIL 20TH, 2020
Planning: solutions "under study to produce mature decisions"
New Morning - Agencies:
After OPEC’s decision to reduce oil production, talk is escalating in Iraq about how to overcome the financial crisis the country is going through, in light of the global drop in oil prices and the large deficit in the public budget, which may lead to the government's inability to pay the salaries of its employees, as well as other economic problems In light of the Iraqi budget’s dependence almost entirely on oil.
Possible actions
It seems that the available economic solutions are very difficult and have significant economic effects, as observers see that there are several main scenarios before the government to overcome the crisis, the first of which is that Iraq sells treasury bonds. As for the second scenario, it is what is talked about in several circles, that the government will reduce the salaries of employees, and the third is what the Parliamentary Finance Committee talked about, about the possibility of financing employee salaries by printing the currency, selling oil to citizens, or changing the exchange rate of the dollar against the local currency.
In spite of all of this, the Mahdi government’s measures have so far been absent to avoid this problem, as economists expect Iraq to be able to pay staff wages for this month, but its complications may emerge at the beginning of next May.
Perhaps what is delaying the caretaker government from taking strict measures, is its attempt to transfer that crisis to the next government and not tolerate potential criticism from the segments that will be affected.
Four solutions
In the same context, member of the Parliament’s Finance Committee, Ahmed Hama Rashid, confirmed to “The Independent Arabia” that “the country is in a financially critical stage and suffers from enormous inflation in the state’s career apparatus, as the number of government sector employees is about 3 million employees, whose wages monthly reach about $ 3 billion.
He talked about four solutions for Iraq to overcome the financial crisis, saying, "It is possible to address the crisis by selling treasury bonds, or by financing inflation by changing the price of the dollar, or printing currency or selling oil to citizens by means of sukuk," explaining, "All solutions will lead to inflation." wild".
He revealed that "Iraq’s imports decreased in March to $ 2.9 billion, a decrease of about 2 billion from February 2020, and is expected to decrease further this month." He pointed out that "the country needs a month to additional one billion dollars to pay salaries, except for obligations." The other is payable. ”
And on the possibility of borrowing to cover the budget deficit, Rashid indicated that "Iraq is not on the IMF schedule," explaining that "internal borrowing has become difficult because the domestic debt is about 35 billion dollars."
He ruled out the possibility of resorting to cutting part of the employees salaries, explaining that he "will cause a crisis and they may go out to protest in the streets."
Expectations of higher oil prices
The Minister of Oil, Thamer Al-Ghadban, had announced earlier that the total crude oil production in the country, including the Kurdistan region, is about 5 million barrels per day, pointing out that Iraq will reduce its production of crude oil by a rate of one million and 61 thousand barrels per day starting in May. Next and in stages.
In the same context, a statement of the Ministry of Oil stated that "what the global oil market is witnessing today from some decrease in prices is a temporary matter due to the continued significant impact of the Corona pandemic and the oil supply at its highest levels, as the implementation of the agreement starts from next month."
"The decline in prices is expected to stop and even towards slow improvement until significant amounts of global oil reserves are withdrawn and the impact of the pandemic will decline to achieve good levels, starting from the end of this year and continuing to the next year with good compliance ratios achieved," the statement added.
He pointed out that "the Ministry of Oil has prepared several alternatives to deal with recent developments with the aim of maximizing financial resources as a result of low oil prices, including reducing the cost of production and optimal treatment with international oil companies contracting with Iraq, maintaining liquidation operations at the required rates and providing fuel for power stations to produce electrical energy in the country." .
Half a billion dollars for the poor
It seems that solutions for the private sector and low-income people are almost nonexistent, with the continuation of the curfew and its entry into the second month, and an almost complete cessation of the economic movement.
Although the Iraqi government announced its intention to give money to people with limited income, it is estimated at about $ 50 per capita, dedicated to the segment of the poor who are estimated according to official statistics of about 10 million people, but that these measures have not seen the light until now, in light of the growing state of popular curse, specifically Among the poor.
On the other hand, the spokesman for the Ministry of Planning, Abd Al-Zahra Al-Hindawi, told "Independent Arabia" that "the government continues to work to put in place the necessary remedies in the face of the financial crisis, due to the lack of resources", noting that "all efforts are focused on finding remedies to confront the crisis."
He added, “All issues related to spending and providing financial balances are being discussed, but they are still under study to produce mature decisions.” He revealed “the period of application for the government grant has expired and the process of checking citizens’ data that will be completed at the end of this week ”has been started, noting that“ 13 million citizens have submitted Applications for a grant.
He pointed out that "the grant will be spent in two installments, the first next week and the second early next month," explaining that the total grant amounts to about half a billion dollars.
Huge budget deficit
As for economics professor Ahmed Sobeih, he said that "Iraq must reduce the volume of Central Bank sales of the dollar, which now amount to about 125 thousand dollars per day, while oil imports do not exceed 65 million dollars per day."
He explained that "the country is on the verge of a huge financial deficit, and in front of the central bank is either relying on cash reserves and this is a disaster, or reducing sales or trying to raise the exchange rate of the dollar against the Iraqi dinar."
He continued, "According to the prices announced in the global oil market, the Iraqi barrel of oil is sold these days at a price of $ 25, and this means that the total oil revenues will not exceed $ 2 billion per month and about $ 23.4 billion annually, after it was calculated in the 2020 budget by about $ 92 billion. Annually before the Corona pandemic, "indicating that" the fiscal deficit will amount to about $ 108 billion, or 75 percent. "
Raise the dollar price
Sobeih pointed out that "raising the dollar price by a calculated amount, although it will cause slight inflation, will contribute to the payment of employee wages."
He explained that "the government should try to reduce the budget deficit rates by reducing the salaries of the highest levels in the state, canceling maintenance allocations and secondary wages, and stopping the investment, in addition to restricting the available funds to basic salaries and wages."
On the available means to overcome the financial crisis, Sobeih counted that "among all possible measures is to reduce the value of the Iraqi dinar, reduce surplus costs, and find other ways for public revenues through taxes and customs and control them."
He ruled out that Iraq would be able to fulfill its obligations with regard to staff salaries, if it did not take urgent action.
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APRIL 20TH, 2020
Planning: solutions "under study to produce mature decisions"
New Morning - Agencies:
After OPEC’s decision to reduce oil production, talk is escalating in Iraq about how to overcome the financial crisis the country is going through, in light of the global drop in oil prices and the large deficit in the public budget, which may lead to the government's inability to pay the salaries of its employees, as well as other economic problems In light of the Iraqi budget’s dependence almost entirely on oil.
Possible actions
It seems that the available economic solutions are very difficult and have significant economic effects, as observers see that there are several main scenarios before the government to overcome the crisis, the first of which is that Iraq sells treasury bonds. As for the second scenario, it is what is talked about in several circles, that the government will reduce the salaries of employees, and the third is what the Parliamentary Finance Committee talked about, about the possibility of financing employee salaries by printing the currency, selling oil to citizens, or changing the exchange rate of the dollar against the local currency.
In spite of all of this, the Mahdi government’s measures have so far been absent to avoid this problem, as economists expect Iraq to be able to pay staff wages for this month, but its complications may emerge at the beginning of next May.
Perhaps what is delaying the caretaker government from taking strict measures, is its attempt to transfer that crisis to the next government and not tolerate potential criticism from the segments that will be affected.
Four solutions
In the same context, member of the Parliament’s Finance Committee, Ahmed Hama Rashid, confirmed to “The Independent Arabia” that “the country is in a financially critical stage and suffers from enormous inflation in the state’s career apparatus, as the number of government sector employees is about 3 million employees, whose wages monthly reach about $ 3 billion.
He talked about four solutions for Iraq to overcome the financial crisis, saying, "It is possible to address the crisis by selling treasury bonds, or by financing inflation by changing the price of the dollar, or printing currency or selling oil to citizens by means of sukuk," explaining, "All solutions will lead to inflation." wild".
He revealed that "Iraq’s imports decreased in March to $ 2.9 billion, a decrease of about 2 billion from February 2020, and is expected to decrease further this month." He pointed out that "the country needs a month to additional one billion dollars to pay salaries, except for obligations." The other is payable. ”
And on the possibility of borrowing to cover the budget deficit, Rashid indicated that "Iraq is not on the IMF schedule," explaining that "internal borrowing has become difficult because the domestic debt is about 35 billion dollars."
He ruled out the possibility of resorting to cutting part of the employees salaries, explaining that he "will cause a crisis and they may go out to protest in the streets."
Expectations of higher oil prices
The Minister of Oil, Thamer Al-Ghadban, had announced earlier that the total crude oil production in the country, including the Kurdistan region, is about 5 million barrels per day, pointing out that Iraq will reduce its production of crude oil by a rate of one million and 61 thousand barrels per day starting in May. Next and in stages.
In the same context, a statement of the Ministry of Oil stated that "what the global oil market is witnessing today from some decrease in prices is a temporary matter due to the continued significant impact of the Corona pandemic and the oil supply at its highest levels, as the implementation of the agreement starts from next month."
"The decline in prices is expected to stop and even towards slow improvement until significant amounts of global oil reserves are withdrawn and the impact of the pandemic will decline to achieve good levels, starting from the end of this year and continuing to the next year with good compliance ratios achieved," the statement added.
He pointed out that "the Ministry of Oil has prepared several alternatives to deal with recent developments with the aim of maximizing financial resources as a result of low oil prices, including reducing the cost of production and optimal treatment with international oil companies contracting with Iraq, maintaining liquidation operations at the required rates and providing fuel for power stations to produce electrical energy in the country." .
Half a billion dollars for the poor
It seems that solutions for the private sector and low-income people are almost nonexistent, with the continuation of the curfew and its entry into the second month, and an almost complete cessation of the economic movement.
Although the Iraqi government announced its intention to give money to people with limited income, it is estimated at about $ 50 per capita, dedicated to the segment of the poor who are estimated according to official statistics of about 10 million people, but that these measures have not seen the light until now, in light of the growing state of popular curse, specifically Among the poor.
On the other hand, the spokesman for the Ministry of Planning, Abd Al-Zahra Al-Hindawi, told "Independent Arabia" that "the government continues to work to put in place the necessary remedies in the face of the financial crisis, due to the lack of resources", noting that "all efforts are focused on finding remedies to confront the crisis."
He added, “All issues related to spending and providing financial balances are being discussed, but they are still under study to produce mature decisions.” He revealed “the period of application for the government grant has expired and the process of checking citizens’ data that will be completed at the end of this week ”has been started, noting that“ 13 million citizens have submitted Applications for a grant.
He pointed out that "the grant will be spent in two installments, the first next week and the second early next month," explaining that the total grant amounts to about half a billion dollars.
Huge budget deficit
As for economics professor Ahmed Sobeih, he said that "Iraq must reduce the volume of Central Bank sales of the dollar, which now amount to about 125 thousand dollars per day, while oil imports do not exceed 65 million dollars per day."
He explained that "the country is on the verge of a huge financial deficit, and in front of the central bank is either relying on cash reserves and this is a disaster, or reducing sales or trying to raise the exchange rate of the dollar against the Iraqi dinar."
He continued, "According to the prices announced in the global oil market, the Iraqi barrel of oil is sold these days at a price of $ 25, and this means that the total oil revenues will not exceed $ 2 billion per month and about $ 23.4 billion annually, after it was calculated in the 2020 budget by about $ 92 billion. Annually before the Corona pandemic, "indicating that" the fiscal deficit will amount to about $ 108 billion, or 75 percent. "
Raise the dollar price
Sobeih pointed out that "raising the dollar price by a calculated amount, although it will cause slight inflation, will contribute to the payment of employee wages."
He explained that "the government should try to reduce the budget deficit rates by reducing the salaries of the highest levels in the state, canceling maintenance allocations and secondary wages, and stopping the investment, in addition to restricting the available funds to basic salaries and wages."
On the available means to overcome the financial crisis, Sobeih counted that "among all possible measures is to reduce the value of the Iraqi dinar, reduce surplus costs, and find other ways for public revenues through taxes and customs and control them."
He ruled out that Iraq would be able to fulfill its obligations with regard to staff salaries, if it did not take urgent action.
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