This is what the economy of Iraq lost during a year of political paralysis

This is what the economy of Iraq lost during a year of political paralysis


This is what the economy of Iraq lost during a year of political paralysisOn October 10, Iraq completes a full year since the early parliamentary elections, in the absence of a new government or a budget due to political paralysis that threatens to deprive the country of much-needed infrastructure projects and reform opportunities .

Iraq, an oil-rich country wracked by decades of conflict, generated massive oil revenues in 2022. The money is in the Central Bank, which has $87 billion in foreign currency reserves.

But benefiting from these funds in projects that Iraq needs is contingent on forming a government with full powers and a budget that controls the pace of spending.

Yasar Al-Maliki, an economist at the Middle East Economic Survey, explains that “infrastructure projects need years of steady funding from the government,” adding that “the political situation has caused great turmoil that has further weakened Iraq’s already fragile position in front of its investors .”

He explains that “the political crisis has added to other long-standing concerns, especially security and corruption.”

Political disputes are still continuing between the two prominent Shiite camps, the Sadrist movement on the one hand, and the coordination framework, which includes blocs representing the Popular Mobilization, an alliance of armed factions loyal to Iran that have become affiliated with the state apparatus, on the other hand, a year after elections that were already hesitant among Iraqi voters. . With the two sides of the political crisis unable to resolve their differences, a new government has yet to be formed.

“Great Opportunity Wasted”
On August 29, violence erupted in Baghdad between fighters from the Sadrist movement on the one hand, and the security forces and the Popular Mobilization Forces on the other, killing about 30 al-Sadr supporters.

And considered the United Nations representative in Iraq, Jenin Plaschaert, before a recent Security Council session, that these events were supposed to represent a “warning bell,” adding that “the situation is still very volatile.”

“Many Iraqis have lost confidence in the ability of the political class in Iraq to work for the benefit of the country and its people,” she said.

While the World Bank estimated the growth of the Iraqi economy at an average of 5.4% annually between 2022 and 2024, “the macroeconomic outlook is surrounded by a large degree of risks given the heavy dependence on oil, the persistence of budget stalemates, and the delay in forming the new government.” , as stated in a report in June.

As a result of the absence of a budget, Iraq spends today on the basis of the Federal Financial Management Law, that is, what was spent in the previous budget divided over 12 months, which does not reflect the reality of the revenues that the country achieved in 2022.

But “these are minimal budgets… that resemble the past, not the present or the future, and there are no opportunities for economic growth, and they deprive Iraq of major strategic projects,” according to the Prime Minister’s financial advisor, Mazhar Salih.

“We are missing out on great opportunities, opportunities to invest in important, strategic and planned projects,” he told AFP.

For example, Iraq signed a contract last summer with the French company “Total Energy”, which includes many projects, especially in the field of the exploitation of associated gas and solar energy, worth ten billion dollars, partially funded by the Iraqi government, which is still in its infancy.

And “the Iraqi government is working hard to speed up work in it and remove obstacles before it,” according to a source familiar with the file.

Other projects are progressing “at a slow pace” in the oil sector, and with “the absence of a government with full powers, the Ministry of Oil cannot finance, sign and award contracts for these basic projects,” explains Yasar al-Maliki.

people are tired
To meet emergency expenditures, the Iraqi parliament enacted an emergency subsidy law in June, worth 25 trillion dinars ($17 billion), which allowed meeting emergency needs for the population and buying grain to ensure “food security,” but also ensuring the purchase of energy and electricity from abroad.

As the year 2023 approaches without a budget, the authorities will have to either legislate a new similar food security law or continue spending on a 12-month basis, i.e. “reduce spending again,” as Yasar al-Maliki explains.

Upon resigning from his position as finance minister in August, Ali Allawi, the owner of the reform economic project that had not yet fully turned into a tangible reality, did not hesitate to define the problem quite frankly.

“All plans and programs of the government are always constrained by the need to obtain broad agreement from a fractured political class,” he wrote in his resignation letter. “All calls for reform have been hampered by the political framework of this country,” he added.

Out of every ten young people, four are unemployed, according to the United Nations, while a third of the 42 million population are below the poverty line.

Despite the huge oil revenues, the life of Amin Salman, the sixty-year-old retired from the Iraqi army, who was among the demonstrators on the third anniversary of the unprecedented October 2019 uprising, which came out against the regime and corruption, has not improved much.

“The country is going through a political crisis, and this political crisis affects the people,” says the man from Tahrir Square in central Baghdad. People are all tired.”

The man earns only 400,000 dinars ($274), an amount that barely covers his daily income, and his two sons are unemployed.

He adds, “Iraq has billions, money and gold, but politicians only care about their parties and pockets.”