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Established in 2006 as a Community of Reality

Welcome to the Neno's Place!

Neno's Place Established in 2006 as a Community of Reality


Neno

I can be reached by phone or text 8am-7pm cst 972-768-9772 or, once joining the board I can be reached by a (PM) Private Message.

Established in 2006 as a Community of Reality

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Established in 2006 as a Community of Reality

Many Topics Including The Oldest Dinar Community. Copyright © 2006-2020


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    Iraq's new government faces tough and limited options to cope with economic crisis

    Rocky
    Rocky
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    Iraq's new government faces tough and limited options to cope with economic crisis Empty Iraq's new government faces tough and limited options to cope with economic crisis

    Post by Rocky Thu 07 May 2020, 9:38 am

    Iraq's new government faces tough and limited options to cope with economic crisis

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    May 7, 202064

    BAGHDAD ( AFP) - As financial prospects worsen day by day, Iraq is considering cutting huge public salaries, a move that will be popularly rejected and could renew the wave of protests as a new government takes over.

    Iraq's GDP is expected to fall by 9.7 percent this year, and poverty rates may also double, according to the World Bank, making the country's worst annual performance since the U.S. invasion of Saddam Hussein in 2003.

    OPEC's second largest producer was hit by a double blow, first by the collapse in oil prices and secondly by the Coved-19 pandemic, which dramatically affected its oil revenues.

    Iraq's oil revenues last month amounted to $1.4 billion, less than a third of the four and a half billion that the country needs monthly to pay public sector employees' salaries, compensation and government costs.

    In the face of this crisis, officials may put huge payrolls on the deduction list, according to two senior officials involved in discussions to propose solutions.

    The foundations of salaries are likely to remain the same, and the austerity measures will affect the large "allocations", which accounted for two-thirds of the $36 billion salary budget in 2019.

    These allocations include rewards or privileges such as cars and homes, based on factors including seniority, educational level and children, or informally political and family relations.

    "The reductions we are considering include more than half the allocation of high-level public servants, the average level of 50 percent, and the low level of about 30 percent," an Iraqi official said.

    The government will also consider freezing recruitment and promotion, reducing military spending and halting the maintenance of government buildings to save more money.

    The authorities may even print the currency to pay salaries, which will force the central bank to use its $60 billion foreign reserves to support the dinar's exchange rate against the dollar.

    The measures are part of the $54 billion Emergency Finance Document, just over a third of the amount allocated in the draft 2020 budget that parliament has not yet passed.

    "This is the first time we have to do something similar," the official said.

    - "Too little and too late" -

    As the deficit increases every month, "what kind of action the government will take now to try to avoid an economic disaster is actually too little and too late," Iraqi economic analyst Ali Molloy told AFP.

    The government pays salaries to four million employees, pensions to three million, and aid to another million, which means that one in five Iraqis receives what can be considered state payments.

    The government of Prime Minister Adel Abdel Mahdi, like its predecessors, has appointed officials to please political allies, Molloy said.

    "Oil prices rose when Abdul Mahdi took office, which led to a false sense of security from his government, and the public sector expanded to a loss of control, which led to this serious financial crisis," he said.

    For 2019, the government monitored a 13 percent increase in payroll expenditure, and pensions jumped by 127 percent, according to a World Bank analysis.

    Late last year, the government employed at least 500,000 people in an effort to appease angry anti-government protesters protesting unemployment and corruption, resulting in a 25 percent increase in payroll spending.

    Public functions are inherited from the previous era in Iraq, where university graduates are theoretically recruited from a relevant ministry upon graduation. However, this strategy has burdened the corrupt public sector.

    Benefits associated with government positions mean that they are sold in amounts of hundreds of thousands of dollars by rank, while the private sector is unfortunately reluctant.

    "This is an economy that does not create jobs," said Wael Mansour, world bank chief economist in Iraq.

    This is problematic in a country with rapid population growth, which is set to increase by 10 million in the next decade to 50 million people.

    "If they really want to make an impact, the only place to do that is through salaries," Mansour said.

    - Difficult decision -

    However, similar austerity measures "could provoke further social unrest, with already poor public services and high unemployment," according to the World Bank.

    New Prime Minister Mustafa Al-Kadhimi had hoped that he would not have to start his mandate with cuts, but fear of public reaction prevented the caretaker government headed by Abdul Mahdi from implementing the cuts.

    "No one wanted to take responsibility," says a second official involved in the development of emergency procedures.

    The same official describes meetings where business ministers were more focused on signing last-minute contracts that would earn them quick bribes, knowing that their days in government were numbered.

    Given the expectation of a further decline in oil revenues in May as prices and demand fall, things could get worse.

    "If we don't agree on something quick, there will be no money in June," the official said. We will have to declare a complete government shutdown, and this is a precedent."

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    weslin3
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    Iraq's new government faces tough and limited options to cope with economic crisis Empty Re: Iraq's new government faces tough and limited options to cope with economic crisis

    Post by weslin3 Thu 07 May 2020, 12:18 pm

    We know what they need to do... Right?
    The author of this message was banned from the forum - See the message

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    Iraq's new government faces tough and limited options to cope with economic crisis Empty Re: Iraq's new government faces tough and limited options to cope with economic crisis

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