Iraq has huge cash reserves from oil revenues exceeding 113 billion dollars, at a time when it suffe

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[size=52]Despite the abundance of cash reserves, why does the Iraqi government not pay its internal debts?[/size]

[size=45]Iraq has huge cash reserves from oil revenues exceeding 113 billion dollars, at a time when it suffers from internal debts estimated at 70 trillion, which raises many questions about the reasons for the government not paying these debts, getting rid of the interest burdens owed on them, and investing the money to provide new resources.[/size]
[size=45]Last July, Deputy Governor of the Central Bank of Iraq, Ammar Khalaf, announced that foreign exchange reserves had risen to 113 billion dollars, benefiting from the improvement in the price of oil, which constitutes 96% of the total national product, while he confirmed that the volume of internal debt had increased to 70 trillion Iraqi dinars (about 47 trillion Iraqi dinars). Billion dollar).[/size]
[size=45]For his part, the Governor of the Central Bank of Iraq, Ali Al-Alaq, revealed last August that the government owes an amount of 46 trillion Iraqi dinars ($34.6 billion), as debts owed to the Central Bank.[/size]
[size=45]As oil revenues rise and fall according to market prices, current government spending includes $47.6 billion annually in salaries for about 12 million employees, while defense, security, and service spending consumes about $60 billion, out of a total revenue of about $120 billion annually.[/size]
[size=45]In this context, economic academic Ali Daadoush explains, “The public debt is divided into two external parts amounting to approximately 13 billion dollars until the beginning of 2023, and these are paid on an ongoing basis and deducted from the oil revenues achieved as a result of the rise in oil prices above the price of a barrel of oil specified in the general budget.” .[/size]
[size=45]Daadoush added in a press statement followed by Al Mada: “In addition to the presence of an external debt amounting to $5.8 billion, pre-2003 debt, and unaddressed debts outside the Paris Club amounting to about $40 billion, which have not been claimed by the Gulf states.”[/size]
[size=45]He continued, saying, “As for the internal debt, it has reached about 70 trillion dinars, of which 50 trillion are for the benefit of the Central Bank of Iraq, and these are rescheduled from time to time, with an interest determined by the government.”[/size]
[size=45]He believes that “the government’s hesitation not to pay the internal debt is a result of its many obligations towards investment and service projects within the government curriculum, especially since the size of the planned deficit in the general budget for the year 2023 amounted to about 64 trillion dinars, and this also prevents the government from paying the internal debt, which portends the existence of “Financial and economic problems facing the current government in the near future.”[/size]
[size=45]He pointed out that “an opportunity was available to pay off the internal debt before the Corona crisis, specifically during the period (2017-2019), during the achievement of financial abundance, but it was not paid as a result of the lack of a clear-cut plan, in addition to the failure of private banks and some parties that financed the internal debt to demand their debts.” Because it has high liquidity through which it can confront banking risks, if any.”[/size]
[size=45]Daadoush concluded by saying, “In general, the external debt is paid with continuous debt service, while the internal debt is paid only from time to time in very small amounts.”[/size]
[size=45]The economic and financial expert, Mahmoud Dagher, agrees with what Ali Daadoush said regarding the continuation of external debt payments and the size of internal and outstanding debts, stressing that “there is nothing preventing the payment of internal debt, most of which is to the Central Bank.”[/size]
[size=45]In turn, the financial advisor to the Prime Minister, Mazhar Muhammad Salih, says, “The issue of Iraq’s debts for its loans granted to other countries that were previously provided by the Iraqi Fund for External Development between the mid-seventies of the last century and the beginning of the eighties is raised from time to time, which stopped following the outbreak of the Iran-Iraq war.” “.[/size]
[size=45]Saleh explains, “Most of these loans were granted to developing countries in Africa, Asia, and Latin America, and claims are still outstanding on the remains of those loans that have not been repaid and are pending repayment and are estimated at less than two billion dollars.” He adds, “It is believed that part of it has been subject to those countries’ agreements with the Paris Club, as they are sovereign debts and belong to groups of poor countries. Despite this, efforts are being made to restore the country’s rights through diplomatic means and methods.”[/size]
[size=45]Nabil Al-Marsoumi, professor of economics at Basra University, said in a blog post that “the public debt in Iraq at the end of 2022 amounted to 94.94 trillion dinars ($63.3 billion), of which 70.5 trillion dinars ($47 billion) were internal debts.”[/size]
[size=45]The internal and external (debt service) (installment + interest) in the current year’s budget amounts to 18.96 trillion dinars ($12.6 billion) annually.” Al-Marsoumi adds, “Perhaps the most dangerous thing about the budget is that it is tripartite and not annual, which means continuing disbursement in the next year and not On the basis of 1/12 of actual spending, but rather on the basis of what was allocated in the budget in the previous year, and this may lead to the government having a free hand in internal and external borrowing, especially with the disappearance of the cash surplus that will be used in this year’s budget, in addition to the fact that it is possible that it will continue. The budget is in its current form without amendment in the next two years and without Parliament having the legal powers to reject or amend it, which will drown the country in a sea of ​​debt.”[/size]
[size=45]Al-Marsoumi continues, “The legislation of the tripartite budget will give the government full legal powers to borrow 41.5 trillion dinars not in 2023, but also in 2024 and 2025, which means that the government can borrow internally and externally without referring to Parliament, an amount of 121.5 trillion dinars during the tripartite budget and for the years.” “The three 2023, 2024 and 2025.”[/size]
[size=45]It is noteworthy that the World Bank described the Iraqi economy as “fragile,” and stated that the country’s debts had increased to about 152 billion dollars.[/size]
[size=45]He said in a report issued last August, “The annual budget approved by the government authorities witnesses a significant increase in the volume of public expenditures by 59% over the previous year, which represents 74.3% of total spending, which will lead to a large financial deficit of 51.6 trillion dinars.” “Iraqi - equivalent to 39.7 billion dollars - which represents 14.3% of the volume of general imports, that is, more than half of the recent record reserves that were accumulated in the wake of the boom in oil prices.”[/size]
[size=45]According to the World Bank, “Iraq’s lack of diversification of sources of income due to the chaotic policies of successive governments led to a contraction of the gross domestic product by 1.1% in 2023 and an increase in the country’s public debt to reach 58.3% after it was 53.8% in the previous year, meaning it will reach 152 billion dollars.” , an increase of 10 billion dollars, while the total external debt reached 50 billion dollars, and the internal debts amounted to 102 billion dollars, which means that the government authorities borrowed in the previous three years internally about 60 billion dollars, at a rate of 15 billion annually, with annual interest on internal debts amounting to 16 to 17 % of the amount of debt.[/size]
[size=45]According to the bank, “Iraq’s economic future prospects are still exposed to great risks. “Because of excessive dependence on oil, which makes it vulnerable to shocks in oil markets and global demand, as evidenced by the recent decline in oil prices, in addition to the factors driving fragility that pose fundamental challenges to the economy, such as widespread corruption, poor service provision, infrastructure development, and security risks.”[/size]
[size=45]The World Bank added, “The governmental authorities’ continuation of following these policies will make the country’s budget in favor of the political parties that have delayed the wheel of development and caused it to suffer from major imbalances despite the passage of two decades since the war was claimed to have ended.”[/size]
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