Iraq's financial crisis and ways to address them for the year 2016

January 6th, 2016

Hammam Ali Abdullah proper *
And let the Iraqis in 2015, including the tragedies and joys and greeted the new year in 2016 Bomnaat and dreams of various ranged mostly in the safety and editing application and the return of displaced people and others of dreams for some, it was the new year began with a chance of showers Ghaith please be watering mercy and the good of Iraq, but the new year, this holds in with it many concerns, including military, political and perhaps economic most serious of the financial crisis through which Iraq is expected to increase in strength this year and raised doubts about the government's inability to which to pay the salaries of its employees or perhaps the bankruptcy of Iraq because of the failed economic policies of the previous governments and even the present, it has many controversy through the media about the financial crisis that beset the Iraqi economy and the possibility of out of it, what are the indicators of the Iraqi economy beginning of the year 2016? What are the challenges facing Iraq's budget? And how to get out of this by the economic problems in the interest of the country? This is what we will shed light upon this in our study are as follows:
Iraqi economy indicators
Is known as the Iraqi economy is characterized feature that yield a distorted and one-sided economy, it depends in its development on oil revenues; that depends on oil to finance its budget and more than 97% of the budget revenues are oil revenues and Neutral little for the non-oil revenues. These returns affected by the global economic recession that resulted from the current financial crisis, has resulted in, among many other things to reduce the demand for oil and lower prices on an ongoing basis in international markets since the fair in 2014 until the beginning of 2016 is expected to decline will continue until the end of 2017 according to estimates OPEC, which has a great role in this decline because of its agreement to reduce the supply in order to raise prices.
This decline in prices cast a shadow over Iraq's budget as oil imports according to current prices and with high production costs, which take companies because of licensing rounds notorious oil no longer enough to cover the fictional government spending and began moving toward the alleged austerity and these imports are not enough to pay the salaries of state employees and thus Iraq will have to external borrowing to cover the large deficit in the general budget.
Economic Challenges
Iraq's budget for early 2016
Of the total of the above, we can say that there are a number of challenges facing the Iraqi economy and the finance ministry or specifically facing the federal budget beginning in 2016 perhaps the most notable:
1 - lower oil prices in the global markets because of the oversupply.
2 - Rising Iraqi oil extraction costs due to licensing rounds notorious.
3 - little or no non-oil imports especially from industrial and agricultural sectors; because of the freezing of most of the Ministry of Industry and Minerals and converted from the operating companies to losing companies.
4 - high defense costs and expenses of the war, which reflect negatively on the general budget, especially as these costs are not limited to military actions only in terms of equipment, training, mobilization and salaries, but to compensate families of the martyrs expenses and treatment of the wounded and helping widows and orphans, rehabilitation and maintenance also includes war damage, and this It represents a whole extra expenses weigh heavily on the budget.
5 - Lack of cash and foreign reserves decline to about $ 54 billion only, so that the budget deficit could rise to more than 40%.
6 - salaries and allowances exaggerated the three presidencies, ministers, deputies, agents, consultants, general managers and special grades and the most in Iraq today, as well as the large number of ministries and the number of members of the House of Representatives and agents. Although their salaries excessive, they cost the Treasury and Ministry of Finance additional burdens allowances instead of rent and the allocation of cars and propellants and maintenance and allowances of protection and the allocation of fuel to power their homes and allowances of stationery and other allowances that never existed globally and that weigh the federal budget, and this understanding are better for the ordinary citizen who earns a little salary or moderate and that it manages things living in this salary amid rising cost of living there rent his allowance and fuel allowance and Stationery nor the other.
7 - sheltering the displaced and support expenses in displacement camps and pay their dues from the Ministry of Displacement and Migration.
8 - additional financial burdens imposed by the decision to transfer the employees of the self-financing companies to the salaries of central funding.
9 - an increase in total expenditure allocated to the slice (political prisoners) who are assigned treasury billions of dinars and in particular who are originally staff in other departments and are paid salaries from the original constituencies.
10 - the higher the reconstruction of liberated areas damaged by military business expenses.
11 - high unemployment indicators among Iraqis in general.
12 - suspended due to lack of investment allocations and investor fears of lawlessness and economic turmoil.
13 - administrative sag in government departments in general, which cost the state expenses over a few benefit or non-existent, in Iraq's budget allocated 40 trillion dinars salaries for employees, as well as 11 trillion dinars salaries of retirees, a total of 51 trillion dinars, which accounts for 48.5% of the budget It is the world's largest.
14 - import Iranian gas to generate electricity expenses by more than $ 5 billion.
All these and other challenges with the continuing decline in the low global oil prices and rising costs of the war and military actions on the ground and the lack of non-oil imports and the budget deficit to cover the overhead of the state and resort to external borrowing, all of this represents an alarm bell or a real ultimatum to the Iraqi government is exacerbated the financial crisis through fiscal year 2016 and perhaps bankruptcy Iraq in the same year or the year 2017. The government has not accelerated to save what can be saved and the pressure of public expenditure and seek to increase non-oil imports in order to cover the financing of the fiscal deficit. So what are the most important steps that will enable the country to emerge from this financial crisis and save the Iraqi economy and increase non-oil imports and cut costs ??
And means of dealing with the crisis
Iraqi Finance
About all the challenges above has to be for the government to take action and follow the fast-reform economic policies to get out of the current financial crisis or to mitigate their effects and to enter into a recession or declaring bankruptcy Iraq, we can we include below a set of recommendations or proposals that it is necessary to follow to deal with the crisis and to mitigate the government expenditures and increase non-oil imports, namely: -
1 - re immediate consideration, including licensing rounds called a notorious or canceled contracts immediately.
2 - gas investment associated with the extraction of oil and non-burning and cooperation with the World Bank, the only Iraqi Oil Ministry, the quantities of gas associated with the investment of oil, which burns a day is estimated at 42 million cubic meters almost $ 10 the millions are burned per day, and this figure according to the price of a barrel of oil for $ 40, while when the price per barrel was $ 100 Iraq was losing $ 25 million a day.
3 - Local gas investment in the production of electricity instead of imported gas, which aims to support the Iranian economy.
4 - support and expansion of Iraqi oil refineries to meet domestic consumption of oil products instead of imported from Iran and Turkey, including work on the rehabilitation of the Baiji refinery oil which has been severely damaged as a result of military operations as well as the theft of some of his services by calculated on the government armed groups, and cooperation with the World Bank in order to achieve this future goal.
5 - Reduction of operations for the smuggling of Iraqi oil outside through both Turkey and Iran.
6 - stop spending all allowances and social benefits for ministers and deputies, agents and advisers and their grade allocations instead of rent, fuel and cars, guards and maintenance of cars, stationery, equal to that official and the citizen Atdbero them salaries and living in them.
7 - divided the members of the House of Representatives to 3 groups of two groups 109 deputies and comprises the third 110 deputies give each group a vacation mandatory without salary for a period of four months and rotates among the three groups in order to support the budget, as well as the case of the provincial councils, or to donate all members of the House of Representatives and Minister total their salaries and allowances for the months just to balance and support.
8 - take a future decision shrinking number of members of the House of Representatives next parliamentary session to no more than 170 deputies instead of 328 and by representing the Attorney 200,000 people for, as well as the reduction of ministries in the Iraqi government and to integrate some of which the decision must be implemented in the next government of configurable, and these resolutions It will ease the heavy burden of the federal budget and reduce government expenditures.
9 - restructuring of public companies in the Ministry of Industry and Minerals granted or for investment, and support for production and competition in the markets and restore the self-financing its members' salaries rather than central.
10 - Turn off the statements out of the country by state institutions, and to stop the allocation of departments send managers or employees alternative exchange visits or trips within the country does not send any of the Director of the Department in the province to visit the head of her ministry in Baghdad.
11 - religious tourism investment and raise incomes for Iraq to $ 90 in the least visa.
12 - Turn off or reduce the conferences and seminars held in most of the state institutions of millions being spent in vain.
13 - improve the efficiency of quasi-social protection are not covered by the exclusion from the network.
14 - information base of retirees who are not eligible to receive the liquidation of pensions.
15 - stop paying salaries covered by the institution of political prisoners or at least stop them salaries of employees in other departments and are paid salaries from their constituencies or retirement body.
16 - rehabilitation of military manufacturing facility and support to produce what can be supported by the national product of military supplies.
17 - legislation of laws to support and protect the foreign investor and the granting of most of the late state projects to investors.
18 - National Product support and encouragement of competition and protections emerging national industries from ethnic foreign industries, by imposing tariff duties on importation of goods that are produced like locally, as it can be to run a plant or several plants profitable contribute to moving the wheel and growth of the national economy.
19 - immediate re-displaced people to their areas liberated to alleviate their suffering and to get rid of their financial burdens.
20 - meet the wages of electricity, water and other services to support the citizens of the budget revenues.
21 - Amendments Unified Retirement Law and lowering the retirement age as from 63 years to 60 years which could be of hauling a large proportion of older employees who are paid high salaries peer-long service, thus providing a degree of functional vacant, according to the movement of the angel, which could set the large numbers young graduates and thus reducing unemployment. And so the state can approve the Central Bank of the requirement to stop the appointment for three years; these appointments will be on the angel movement is not new and personalized.
22 - the establishment of a state company Telecom competition eligibility for companies to take advantage of its revenues in budget support, and the imposition of fees on real telecom companies and not downloaded to the citizens.
23 - adaptation of diplomatic efforts to return stolen money from abroad, and coordination with Interpol to re-Iraqi officials wanted to eradicate corruption charges and booking their property.
24 - Overture donor countries to support Iraq economically and financially and the allocation of fund to support Iraq out of the financial crisis.
25 - the actual work to the principle Where did you get this and accountability of all those responsible for their property and their assets and asking them to submit financial statements to their property before their term of office and to compare them and to confiscate all the money and property that were collected as a result of abuse of office or manipulation of contracts and other investment support and reference people for this procedure.
26 - issuing guidance collection of amounts ordered all ministries, departments and border crossings into the treasury of the State General instead of some of them went into the treasury of certain ministries.
27 - Ask a part of government bonds to subscribe banking and sell them to the private sector in order to cover the budget deficit.
28 - improving the competitive environment between state banks and private banks in the banking system.
Finally, the items above listed under the rescue plan address or means of addressing the financial crisis has included a range of ego ones and medium-sized economic policy-term and long-term, as well as coverage of political decisions or perhaps legislation may need to modify some of the Constitution or some of the applicable laws items, and it was Our goal in all of this is the reform of the Iraqi economy and the pursuit of growth and development and the face of the current financial crisis do not claim perfection taint our study has some shortcomings and deficiencies, we sought our hard-working and for each share.
Will the Iraqi government will be able to cope with the current financial crisis it will be applied and whether any of the above suggestions and recommendations in order to save Iraq and its economy from the effects of this financial crisis, which could lead to bankruptcy? This is what we hope for
* Iraqi economic expert