Page 8 - MEOG Week 23

MEOG Po LIC y MEOG

a long shadow over June and July, as the coun- Instead, it has been suggested, the govern-
try only receives the cash raised by exports two ment could purchase more dollars, borrow from
months after the sale. banks, the International Monetary Fund (IMF)
or friendly foreign countries, and postpone debt
Crisis long-foreseen payments.
Iraq’s over-reliance on oil has long been foreseen. But these are all non-radical solutions to a
A joint governmental-parliamentary committee chronic financial crisis. Officials think more
was formed months ago to address the fiscal defi- needs to be done in the long-term.
cit and try to find additional resources other than A recent World Bank report recommended
oil to boost the country’s annual financial budget improving governance and promoting private
resources. sector participation in selected productive
The committee submitted a set of remedies sectors such as agriculture, electricity and gas.
and proposals to premier Adel Abdul-Mahdi Efforts in these areas would be a helpful start.
shortly before he stepped down earlier this year,
but he ignored them. A revised version of this new oil minister
draft has now been resubmitted to Kadhimi, Meanwhile in a possible step forward Iraq’s par-
in preparation for voting and approval at the liament has given its vote of confidence to seven
weekly cabinet meeting on tuesday. cabinet ministers, including the key oil and
The draft is said to lay out a set of urgent rem- foreign affairs posts, completing the 22-mem-
edies to tackle this large budget deficit. ber government of Prime Minister Mustafa
the proposals sound drastic and include: al-Kadhimi.
stopping the disbursement of “unnecessary” The new ministers include Ihsan Ismaeel, the
government expenditures; limiting the financ- former head of the Basra Oil Co. (BOC), who
ing of “high-priority” items; renegotiating with will take over from Ali Allawi, the finance minis-
oil companies operating in Iraq under licensing ter, who had been serving as interim oil minister
rounds to review contracts and ease the financial and has been elevated to deputy prime minister
burden on the state; taxing some sectors; stop- for economics and energy, overseeing the oil
ping new appointments; and freezing grants and ministry. BOC operates in Iraq’s south and is the
bonuses until further notice. country’s largest state-run oil company.
Allowances granted to the president, prime Ismaael now has the challenging task of
minister, speaker, ministers, MPs, diplomats, boosting Iraq’s production and export capacity
deans, judges and other governmental officials after years of underinvestment and infrastruc-
would be cut by 50-80 per cent. ture damage due to war, as well as negotiating
As for the rest of state employees, the draft contracts with international oil companies,
suggests reducing the allowances attached to many of whom have been dissatisfied with the
their salaries, as long as their final salary is no fiscal terms offered for upstream partnerships.
less than 500,000 dinars ($400) a month. The federal government in Baghdad is also at
Other remedies include reducing pensions loggerheads with the semi-autonomous Kurd-
and stipends received by victims of the Baath istan Regional Government over oil revenue
regime under saddam Hussein, which would sharing.™
prevent people from receiving more than one
salary.
The proposals are likely to lead to a backlash
from state employees and beneficiaries. Observ-
ers have suggested that Kadhimi aims to absorb
the momentum of those opposing his decisions
and avoid sharp public reactions by postponing
the discussion and approval of the draft.
“Everyone is convinced that the time has
come to change our economic policy … or the
Iraqi economy will collapse sooner or later.”
“Everyone knows that affecting the salaries
of employees … in light of the circumstances
that Iraq is currently going through, would be a
serious threat to government stability,” Ahmed
al-safar, a member of parliament’s finance com-
mittee, was quoted as saying. “Those [employ-
ees] already suffer from high prices and inflation.
Deducting their salaries will mean exposing
them to additional pressure, and this will defi-
nitely lead to an explosion. Cutting salaries
would cause popular frenzy and widespread
demonstrations.”
some specialists in the financial and business
sectors believe the crisis can be overcome with-
out reducing salaries.

P8 www. NEWSBASE .com Week 23 10•May•2020