Thanks to the current economic crisis in Iraq, the federal government is having to deal with a troubling budget deficit. Falling oil prices – which is how the country makes most of its money – combined with an expensive security crisis mean that the government has had to come up with a variety of ways to try and deal with the shortfall in funds.
One suggested plan involves cutting the salaries of government employees, and in some cases, even making employees redundant. In a rentier economy where the government is the biggest employer, this is causing serious concerns: The Iraqi government employs almost a quarter of the population, an estimated 7 million locals, out of a population of over 35 million.
There has been an outcry on social media in Iraq with many expressing concerns about what will happen next. Some Iraqis are already talking about working out new ways to make a living, including starting small businesses on the side, others say they want to sell their homes or use their savings to try and immigrate. Current conditions in Iraq indicate that there's no point in trying to invest inside the country, many have argued on social media forums.
The Iraqi state is a hollow one, a giant consumer that produces only one thing.
In return, the government has sent out reassuring messages. “According to the budget for 2016, the salaries of government employees will not be reduced,” local economist Mathhar Mohammed Saleh, who also advises the Iraqi Prime Minister, Haider al-Abadi, told NIQASH.
“Those who are spreading baseless rumours about employees' salaries being cut are lying,” Saleh noted.
In fact, Saleh added, the 2016 budget doesn't reflect bankruptcy or deficits, it simply reflects the need for more austerity. “We need austerity to confront our problems, it's a necessity, but reducing the deficit in the long term involves more effective measures, like encouraging the private sector,” Saleh says. “We intend to transform Iraq's economy into a real market economy by 2030. We consider 2017 the real beginning of this plan.”
Not all messages were that reassuring though. In a newspaper interview, Iraq's Minister of Finance, Hoshyar Zebari, said that 2016 was going to be a tough year, following on a tough 2015.
“During the past year we've been able to keep paying employee salaries but this year we are very concerned about a major shortfall coming up in April,” Zebari said. “We may not be able to pay all salaries and that is something that people need to understand and be realistic about. We are hoping that oil prices will increase again, at least by September. Because 90 percent of the Iraqi economy depends on oil.”
Meanwhile MP Haitham al-Jibouri, a member of the Iraqi Parliament's Finance Committee in Baghdad, had more bad news.
“The sum of employees' salaries is around US$45 billion. We expect the country’s revenue from oil sales to reach about US$15 billion – and that includes oil being exported out of Iraqi Kurdistan,” he told NIQASH. “More money – but not more than US$10 billion – will come from external and internal borrowing. But even with that, it seems certain this financial crisis is going to continue.”
The government is proposing a bundle of solutions, al-Jibouri continued. These include selling state-owned property, including real estate and vehicles, trying to activate the private sector more and convincing Iraqis to put the money they are keeping under their beds (because they don't trust Iraqi banks) into the bank or into circulation.
“It's a reality we all need to accept,” he says. “And the fact that the government needs to be involved in all these measures is also clear.”
A very difficult road lies ahead, says Layth Shiber, who heads the Energy and Water Development Centre. And it won't be easily traversed because Iraq's current economic problems are the result of years of financial mismanagement, corruption and over dependency on oil revenues.
“Since the 1980s Iraq's economy has been almost solely dependent on sales of oil,” Shiber told NIQASH. “Day by day, Iraq has lost any semblance of being an agricultural producer, as it once was, and for various obvious factors, it hasn’t been able to develop other industries like tourism either. With such high oil prices after 2003, the situation didn't change.”
“Since then successive governments have added more burdens to the budget because they have continued to employ unneeded staff or give out service contracts for unneeded work,” Shiber continues. “Each government has done this to ensure people vote for them. So we depend only on oil for revenue, which is used to pay an overinflated public sector. And no government has been able to provide Iraqis with genuine job opportunities. The Iraqi state is a hollow one financially, with no real value; it is a giant consumer but produces only one thing.”
Some local experts believe the issue of government employees is also a human rights one. “As an employer the government can reduce the number of staff,” says Salam Sumaisem, an economist who advises Iraq's banking sector and activist. “But there are also labour laws and human rights issues to consider,” she told NIQASH.
In fact, as Sumaisem points out, by law employees can actually file legal suit against employers who do not pay them on time or withhold salaries – as the government is currently doing. “But nobody is talking about this issue,” she says. “Not the employees themselves or any human rights organisations.”
“Unfortunately there are no quick and easy solutions,” adds Majid Hamid Abu-Kalal, a civil society activist and head of an NGO, the Ther Development Centre, which helps unemployed people gain new skills in Muthanna.
Abu-Kalal believes that the activists who have organised protests against the government and against corruption also have a role to play in revitalising the Iraqi economy. But he stresses that these forces too need some sort of united front and coherent plan to help Iraq's economy – despite the fact that the problems come as a result of years of corruption – that “puts the interests of Iraq as a whole, first”. And, as he puts it, “the painful truth” is that they do not have one as yet and even if they did, the current political and sectarian problems in Iraq would prevent them from succeeding.