Studies Center: The future of the White Paper project and the priorities of the new government phase

[size=52]Studies Center: The future of the White Paper project and the priorities of the new government phase[/size]

[size=45]Translation / Hamed Ahmed[/size]
[size=45]In the summer of 2020, the Iraqi government, with the support and blessing of the World Bank, the International Monetary Fund, and the G7, introduced a draft road map and economic constitution known as the White Paper.[/size]
[size=45]The document sought to review and re-evaluate the future of the Iraqi economy, rethink economic and financial sustainability in the short and long term, and most importantly start a dialogue towards changing the culture and the general concept about the country's economic structure, the role of the state, and the independence of natural resources. The report prepared by the EPC Center for Studies deals with some of the main projects included in the paper and the obstacles to their implementation, and also discusses what has been achieved after more than a year and what the new government should take to address and manage its economy amid the consequences and effects of climate change.[/size]
[size=45]While the white paper was a project that was discussed for several years, the economic and political problems and the health crisis that the country faced in 2019 revealed the fragility of the Iraqi economy and the urgent need for short and long-term reforms and structural changes. The crisis was further exacerbated by the consequences of the outbreak of the Corona epidemic and the decreasing demand for oil, which led to the collapse of its global prices to below 25 dollars at a time when 90% of the country’s budget depends on oil imports.[/size]
[size=45]The consequences of the Corona epidemic also revealed the weakness of the country’s infrastructure and the depth of corruption, especially in the health and educational sector systems, which led to great losses in human lives and years of development. A group of these crises, and adding to them the weak ability of the state to respond effectively in this regard, caused a contraction in the country’s economic growth, known as the GDP, for the year 2020 by 11%, leaving nearly 5.5 million Iraqis facing the risk of poverty, while the youth unemployment rate reached 25.2. %.[/size]
[size=45]In the midst of these crises, the Iraqi government went to adopt a roadmap for economic reforms known as the White Paper prepared by the Crisis Cell for financial and banking reform. The white paper presents 64 projects and proposals. Instead of setting a detailed plan with clear steps, it suggested short and medium-term goals to be completed within 3-5 years to create financial sustainability for the purpose of long-term economic change. The white paper suggested several steps to reduce the deficit from 20% to 3% of GDP and salaries from 25% to 12.5%. These proposals include collecting electricity fees, recovering Iraq's stolen money, reforming the pension fund, increasing imports from taxes and customs, and reconsidering the dollar's exchange rate against the Iraqi dinar.[/size]
[size=45]Together, these policies aim to address the crisis of the burden of public sector salaries and allocations, which drains the country's budget, as well as diversifying the country's economic sources away from dependence only on oil. If these policies are adopted, these proposals would protect the country from external economic shocks caused by changes and fluctuations in the energy market. These proposals are necessary to achieve economic stability and a vital factor for achieving political stability as well.[/size]
[size=45]The report raises a question: Has change been achieved a year after the White Paper was presented? Iraqi officials indicate that there are things that have been achieved at the level of short-term goals, such as overcoming the state of financial collapse and achieving a cash surplus by reducing the value of the dinar exchange, but economic experts confirm that reducing the value of the dinar exchange against the dollar only worked to reduce the deficit, but that did not achieve any reform To protect the poor and the middle class. They pointed out that the devaluation of the dinar has affected people with limited income instead, with the increase in the prices of imported goods and other services and the increase in inflation rates, especially with regard to food supplies, construction materials and real estate prices.[/size]
[size=45]The report indicates that an examination of the non-oil sector reveals that what this sector contributes to the GDP does not go beyond the financial and service fields, all of which are not exportable. This means that there has been no significant progress towards diversifying the economy's sources and keeping it away from dependence only on oil.[/size]
[size=45]The new government's economic priorities[/size]
[size=45]The economic system of Iraq requires a radical re-examination of the fragility of its economy and its dependence on oil prices, and the development of better institutional mechanisms that can effectively achieve possible changes in the energy sector and climate change security. This can be achieved in several ways, and the new government should prioritize three goals. Many economies of countries that depend on their natural resources from oil have established a Sovereign Finance Fund, which benefits from the returns of natural resources, especially during high oil prices. However, the institutional authority must be effective in this area and this includes, among other things, addressing the issue of corruption and bureaucratic mismanagement at the state level within the legislative system that requires cooperation and transparency.[/size]
[size=45]A second priority for the new government to tackle is the water security crisis and climate change, and this matter is considered a primary obstacle to the implementation of the White Paper roadmap. With rising temperatures in the region, it is expected that Iraq will face an unprecedented water crisis. This water crisis affected the wheat and barley farmers in the country by reducing their production by 37% and 30%, respectively, and their harvest decreased by 90%, with agricultural families losing 37% of their livestock. Among the goals of economic diversification within the white paper is the development of the agricultural sector. Therefore, with the exacerbation of the water crisis and the absence of clear solutions from the government, the areas of agricultural land will shrink day by day.[/size]
[size=45]The report indicates that one of the important steps that the new government should take is negotiating with neighboring countries to invest in modern agricultural technologies that will help introduce new methods that address the problem of high temperatures and the water crisis and the rehabilitation of soil.[/size]
[size=45]As for the third priority, the new government should solve the problem of gas flaring, which contributes to the deterioration of the country's environmental situation, and Iraq remains dependent on importing gas from neighboring countries.[/size]
[size=45]It can be said that the previous government prepared the cornerstone for economic reform through the White Paper, which requires subsequent governments to complete their steps. The steps that the new government will take to address the economic, political, social and environmental challenges will be vital in following up on the inevitable economic and political crises. The report indicates that there must be a political will to deal with the challenges of implementing the White Paper.[/size]
[size=45]About the EPC Studies Center[/size]
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