The current economic crisis is required in Iraq and Reform

The current economic crisis is required in Iraq and Reform

- Published in the April 26, 2016

Dr. Haidar Hussein Al Tohme

Haider Hussain

It expected that the Iraqi economy is entering a deep recession at the beginning of next year , especially with the continuing deterioration of the prices of crude oil, and the government's failure to diversify its sources of budget revenues on the one hand and the pressure of government expenditure on the other.

Difficult challenges facing the Iraqi economy imposes him cope with the scarcity of oil resources and activating economic sectors alternative such as industry, agriculture and tourism, not only to finance budget expenditures, but also to absorb unemployment and operation of production capacity idle and reduce total reliance on imports to meet the local need of commodities.

and this paper attempts to discuss the current economic landscape in Iraq and determine the most needed to get out of the financial predicament policies current and advancing development and economic stability in the country. the

first axis of the current economic scene the

economic landscape is not as complex as the political landscape in Iraq and in this context , reference can be made ​​to the most prominent features of the deterioration of the country 's economy and the nature of the challenges facing the economic reform:

1. sharp and sustained fall in oil prices in global markets:

According to the latest OPEC forecast a continued decline in oil prices for several years due to the slowing growth of the world economy from the point of continuing in crude oil production and an increase from inside and outside OPEC on the other hand, will not recover price before the end of the decade to reach the best estimate to 80 dollars a barrel in 2020 , according to the FAO report.

2. fierce war with Daash military and civilian costs:

fighting Iraq war fierce with terror Daash gangs in a war that has entered its second year, according to sources in the parliamentary Finance Committee, the cost of the ongoing war in excess of $ 10 million a day, not to mention costs of armament contracts and the cost of subsidy displaced and housed and the reconstruction of liberated areas, all need to open financing does not balance the austerity.

3. weak infrastructure and deteriorating business environment capable of stimulating the private sector: the

government did not succeed in more than a decade to achieve a minimum of improving infrastructure infrastructure necessary for the start of the private sector, as it is still electricity file a challenge against the chances of the country to progress and stability, as it failed budgets explosive previous years in the provision of self - sufficiency in electricity, and improve the road level and maintain the water and sewer networks in the country.

4. sectarian quotas and competition Altankoaqrat in economic and service's management:

He notes the evolution of the phenomenon of political and sectarian quotas seriously to reach the lower positions in the peace administrative, reflected poor economic management's clearly in the performance of the previous governments and the current government. As increased focus oil sector to GDP ratio of most economic sectors and slipped into recession chronic evaporated billions of oil resources in the fake projects.

5. alarming levels of unemployment , particularly among graduates and high poverty rates:

According to the latest Ministry of Planning statistics, the unemployment rate in the country exceeded 30 % recently in a country that is one of the richest oil countries in the world and accompanied by a rise in the poverty rate to 25% , which threatens a humanitarian catastrophe , especially with the entry of Iraq donation demographic.

6. financial and administrative corruption and the dominance of mafias policy on the resources of the country: it

has melted hundreds of billions of petrodollars in fake projects and dedicated to coverage of the ruling political class and the requirements of government expenses, nor any unfinished development achieved at the level of education, public health or services.

7. government sag and the magnitude of the administrative system and low productivity: were

known several studies on the low productivity of government employee and the spread of disguised unemployment in all episodes management of the ministries and government institutions in Iraq, coincided with a decline in level of service provided from the presence of government institutions.

8. chronic dispute between the center and the region around the oil revenues:

it is noted that the recent political agreement did not succeed in defusing the crisis between the center and the region around the oil revenues, there is no the province is still insisting on its right to export oil abroad at the same time demanding full of its share of the federal budget.

9. erosion of central bank dollar reserves:

fell Central Bank reserves to below 60 billion dollars recently after it exceeded the threshold of $ 80 billion in 2014, due so to excess demand for the dollar due to increased imports, smuggling and money laundering size compared to the falling dollar flow into the country because of the decline in world oil prices.

10. crisis of displaced persons and the costs of dependents and the reconstruction of liberated areas:

that the number of displaced people continues to increase due to the continued liberalization usurped areas of operations of Thermo organize Daash terrorist, the government has allocated large sums of money to provide housing, camps and living necessities for these families as well as the reconstruction of liberated areas, estimated at billions of dollars due to the magnitude of the devastation stunning inflicted on these areas costs.

11. flooding Iraqi markets various imported products:

notes Iraq 's transition to market absorbs most food and industrial goods produced in neighboring countries and coming from Asia, due to the demise of domestic production and breakdown of imports and weak oversight.

12. government borrowing huge benefits:

in the absence of the government 's ability retrenchment to an acceptable level and the air conditioning with the oil prices , the Ministry of Finance began promoting international government bonds and interest rates high in order to cover expenses and fill government deficits, is expected to eventually lead to Iraq 's inability to pay its debts and entry conditional application of recipes IMF debt rescheduling programs , especially with the weak absorptive capacity of investment projects planned lending for her. The experience of previous years have been were known about the government 's inability to carry out investment projects despite the availability of the necessary liquidity, once because of the corruption that is going on most of the administrative episodes ranging from granting tender until receipt of the project and again due to the weakness of the port side of the delivery of the project in accordance with the schedules and the inability of most companies implementing efficiency for such projects. This means that the problem is not the scarcity of financial resources, but poor management and implementation of investment projects in the country, and that the borrowing will not change this reality, but only Sakpl Iraq 's new commitments. The

second axis: the policies of reform required

Unfortunately the economics of underdeveloped countries resort always to reform in times of crisis and do not think much to the prevention of these times of crisis prosperity financial and convenience .. because s economic decision is often , however , the ruling political class does not , however , economists, and this case is exactly the Iraqi economy.

before reference to the required reform policies must be stressed that the success of any reforms economic depends on the will and the seriousness of the political parties in the country, it represents the government in various institutions, and this requires sacrificing the interests of the party in favor of helping Iraq out of the current ordeal, and highlights the solutions put forward in this context:

1. reducing its expenses:

of the leading causes of the current crisis , excessive overhead during the previous years due to high oil prices and the absence of control, and it was economically more worthy establishment of a sovereign wealth fund , similar to the Gulf countries are ready oil shocks faced by all oil countries. But because the government is not serious in its reform program on Petrhik government expenditure, most of the measures that have been announced recently she was shy and formality will not change the reality of inflated costs in the country.

2. diversify government revenue:

discloses experience that the government is able to diversify its budget does not tax revenue nor of the public sector companies and across government departments and to the weakness of the rule of law and not to the central government 's ability to apply the law in force on the territory, prompting central and southern governorates not to obey the laws on taxes and tariffs and government legislation that did not abide by the province first, it has been repeated this case 2015 for several times.

3. encourage the private sector:

efforts are being made ​​in order to stimulate the private sector starting point because of its pivotal role in the absorption of manpower and moving all the stagnant economic sectors, and the Council of Ministers announced more than once his quest to overcome all the obstacles that hinder the starting sector private and took the leading role in the development and absorption of manpower and diversify the Iraqi economy, but without proper and put a stable security and legislation of tax appropriate and protect the customs effective, these measures only letters of construction is far from the reality in Iraq will not be an infrastructure.

4- be 2016 budget programs do not balance budget items:

one of the main causes of faltering Iraqi economy during the previous years , the absence of the economic program for the expenditure sections and government revenues included in the budgets of previous years, so it is necessary to include the budget 2016 economic program simulates the economic crisis in the country and establishes a new pattern of economic file management tends to diversify resources and stimulate the agricultural, industrial and tourism sectors of the economy and reduces gradually from the unilateralism of the Iraqi economy and chronic Talh on the oil resource.

5. stimulate the industrial sector ,

Iraq has a large number of factories and public facilities that have stopped completely after the occupation of Iraq in 2003 and still constitute a burden on the state because of the pay the wages of employees without a little in return, and if they were selling and leasing the property to the private sector or foreign companies can provide good financial resources and ease the burden on the government, as the government can enter into partnerships with the private sector in order to exploit the experience of the last and resources in the management of this sector successfully.

6. revive the agricultural sector: the

agricultural sector played an important role in absorbing labor on the one hand and the achievement of food security for the country on the other hand , and the government can stimulate this sector by addressing the energy file and water scarcity and import runaway agricultural products and the provision of soft loans to encourage this sector to the starting of new due necessary domestic demand to provide to accommodate various agricultural products in terms of quantity and quality.

7. not to engage in international loan programs

most of the experiences of developing countries were not borrowing encouraging and ended in the end to debt restructuring and sale of the public sector and national wealth to foreign companies, it is believed that there is a conspiracy to seize Iraqi oil by giant companies , especially after they have suffered from difficulty with the Iraqi negotiator. So be wary of international borrowing and the benefits high for fear of falling into the trap of debt.

8. Develop a fair tax system that aims to tax heavy blood only with the application of a customs tax system affects all luxury goods and luxury cars. With a substance in the new budget law obliges the provincial tax laws in force implementation in exchange for the receipt of the region 's share of the budget.

9. use of the institutions of scrutiny and international control away from the political parties in order to detect corrupt files and organize exchange expenditure operations and contracts are awarded in a transparent manner.

10. reassess dinar Iraq: the

Central Bank spends $ 5 billion a month to defend the exchange rate (123,000 vs. $ 100) this means with a reserve of 50 billion by the steadfastness of the dinar against the dollar will continue at best to the middle of next year. Especially with the scarcity of oil revenues , and she went to oil companies operating in Iraq and finance the purchase of heavy and light weapons and aircraft operations. What makes it imperative for the government re - Iraqi dinar evaluate reasonably and combating financial and political corruption that is going on the auction of foreign currency for years.

11. reform of the banking system and enact punitive laws to reform the banking system in the country and the conversion of private banks to bridges for development and funding is not the offices of money laundering and the smuggling of the dollar.

12. pry the upper economic positions in the country from quotas, favoritism , notably the Iraqi Central Bank and Ministry of Finance and Ministry of planning and the High Authority for investment, and that it was not possible at the ministerial level there is nothing wrong to be on the level of general directors and advisers.

13. full coordination with the Ministry of Higher Education and Scientific Research Institutions for support and outsourcing the work of all ministries through joint cooperation in order to lend the scientific aspect in state institutions management and providing them with the latest reached by science and technology.