World Bank official: Kurdistan can pull itself out of economic crisis

by **Ponee** Fri Jun 03, 2016 8:48 am

Iraq, June 2, 2016

ERBIL, Kurdistan Region – The Kurdistan Region has the resources and opportunities to pull itself out of a severe economic slump, a World Bank official said in a press release.

“The Kurdistan Region of Iraq has strengths and opportunities to get the economy out of crisis,” said Ferid Belhaj, World Bank Director for the Middle East department.

“These include large natural resources, fertile agricultural land, a young and entrepreneurial population and a central and, so far, relatively stable location on major trade routes. It also has a government determined to implement reforms and a donor community eager to help,” he added.

A new World Bank Group report proposes a number of reforms for the Kurdistan Regional Government (KRG) to chart a path out of the economic crisis.

“This includes introducing economic reforms to strengthen the KRG’s capacity to isolate its core expenditures from external fluctuations in revenue,” the press release said.

“Accompanying fiscal adjustment and structural reform measures, the KRG’s recent social protection framework should be strengthened and retooled to handle the ongoing social and humanitarian crisis,” according to Sibel Kulaksiz, World Bank Senior Economist, and Lead Author of the report.

Meanwhile, a new report by the Kurdistan Investment Union says that the ongoing economic crisis has cost the autonomous enclave in northern Iraq an estimated $10 billion since 2014, when a financial downturn hit the region, following a drop in oil prices and the war with the so-called Islamic State (ISIS).

The report also warns that the cost could climb over $15 billion by the end of this year, if the crisis continues.

“We have had investors who went completely bankrupt over the past two years because of the sudden halt of the economic growth in Kurdistan,” said Yaseen Mahmoud, a spokesperson at the union.

According to Mahmoud some 500 small and middle size businesses have declared bankruptcy while hundreds more have been “severely” affected by the economic stagnation.

“These are colossal losses for the relatively fragile economy of Kurdistan,” he told Rudaw.

According to the data made available by the union, the private sector has laid off around 330,000 full and part time employees over the past two years due to the cash crisis, which has pushed over 80 percent of the projects to an almost complete standstill.

The report comes amid severe austerity measures and government reforms that are planned to revive the economic growth by investing large sums in the private sector.

The government now hopes that by investing some $5 billion in the private sector it could move large parts of the government employees to the private sector where they can enjoy similar state benefits such as pensions and paid holidays.

The private market in the Kurdistan region has been notoriously unregulated with almost no taxation or protecting labor rights.

The insecurity at the private sector has prompted the bulk of the labor force to seek government employment with considerably lower wages.

Around 1.5 million salaries are paid by the KRG to, among others, civil servants and the retired which has so far amounted to 75 percent of the government’s annual budget.

Authorities now hope that the government reforms will reignite the two-digit economic growth that the region experienced before the double shock of a plunge in the price of oil and the war with ISIS, which has flooded Kurdistan with some 1.8 million war refugees from Syria and internally displaced persons (IDPs) from other parts of Iraq.

http://iraqdailyjournal.com/story-z13255580