The Finance Minister praises the “white paper” and talks about alternatives
The Finance Minister praises the “white paper” and talks about alternatives
10/16/2020 8:49
Ayna News_Baghdad
The Iraqi Finance Minister said that there is a growing political will to make the radical reforms required for the country to address the massive liquidity crisis that has pushed Iraq to the brink of collapse.
Finance Minister Ali Allawi told the Associated Press in an interview, “There is more will now than there was five months ago. Now, I think there is recognition that unless oil prices rise miraculously, this is something we have to deal with and manage.”
Lower oil prices have cut revenues in the oil-exporting country by nearly half, and over-reliance on oil has limited the government’s ability to obtain other income.
The widening of the deficit from month to month has created uncertainty about how future payments of public wages, external debt and essential imports of food and medicine will be paid.
It is worth noting that the unsustainable Iraqi economy, exposed by the financial pressures stimulated by plummeting oil prices and the Corona virus epidemic, is a long-term problem that has bothered reformers for more than a decade.
Prime Minister Mustafa Al-Kazemi’s government this week released the 95-page “white paper” of economic reform, which, if implemented, would prompt a radical reform of the entire system within three to five years.
“It is a paper designed to create a strategic and political framework for a new Iraqi economy,” Allawi said. “At the end of this period of change and reform … we are supposed to have a restructured and more dynamic economy, this is the goal of it.”
A lack of support from key political elites has undermined similar efforts in the past. Al-Kazemi’s government continues to rely on parliament approval for the vision to gain momentum.
“There is less denial. First of all, denial,” Allawi said.
Senior officials in the Al-Kazemi government, including Allawi, have repeatedly stated that while oil prices are not expected to recover in the short term, only reforms will help Iraq avoid an economic disaster. The future of the project faces a big test: Parliament’s approval in the form of a binding decision or legislation.
“Once this is done, we have to roll up our sleeves and start work,” the minister added.
Allawi said that at a later time, aspects of the plan outlined in the paper will be incorporated into the 2021 budget, which will require a vote in Parliament. Government support in the electricity and oil sectors will face special scrutiny.
“Part of the public sector finance problem is the huge amount of subsidies, and we intend to address this issue directly in the 2021 budget,” the minister explained.
But the public debate focused on the white paper that aims to reduce public wages from 25 percent of GDP to 12 percent.
Lowering public sector wages, especially in an election year, is widely seen as an unpopular move.
Nevertheless, Allawi was firm when he said, “I have said many times before, that the share of oil revenues allocated to salaries in 2004 was 20 percent, and now it is 120 percent.”
“This is clearly not sustainable,” he stressed.
In September, Iraq achieved $ 3.16 billion in oil exports, accounting for 90 percent of state revenues, less than half of the $ 7 billion needed to pay salaries, pensions, imports, and debt.
September salaries were delayed and the payment of October wages depends to a large extent on internal government borrowing.
A previous bill authorizing $ 12 billion in internal borrowing has been exhausted. A new bill requesting $ 35 billion faces a vote in Parliament.
“I hope Parliament will approve it. If this does not happen, we have the possibility of other alternatives, but it will be more difficult,” Allawi said of the bill.
Iraq’s hard currency reserves amount to $ 53 billion
alliraqnews.com
