Inflated public service salaries threaten Iraq with bankruptcy

by **GirlBye** on Mon Oct 05, 2020 10:34 am

Paying the due salaries is now conditional on the House of Representatives’ approval of a domestic loan requested by the government.

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An Iraqi civil service employee works at the general compensation department in Mosul. (AFP)

BAGHDAD – High salaries of millions of Iraqi public sector employees are threatening the country with bankruptcy at a time when oil markets are going through great turmoil, endangering the country’s single-revenue economy.
Since 2003, Iraq has relied on oil revenues to run state affairs. At the same time, with the collapse of the country's private sector, hiring in the public sector has grown to exaggerated proportions as it has practically become the only source of employment for millions of Iraqis. The Iraqi government does not release official figures for the number of employees receiving fixed monthly salaries in the public sector, but unofficial estimates say that about 8 million citizens, including civilians, security and military personnel, retirees and unemployed, receive salaries from the state ranging from $400 to $3,000 per month.

As of October 4, the Iraqi government had yet to pay the September salaries of most of its employees, which is a rare occurrence, indicating the existence of a real financial crisis. Unofficial figures showed a deficit of about $1.5 billion in the salary budget, as oil revenues for last month could not cover more than two-thirds of the required amount.

To remedy the situation, the government turned to internal borrowing, allowing it to withdraw part of the federal reserves in the Central Bank, of course subject to parliamentary approval. On Sunday, Finance Minister Ali Abdul-Amir Allawi said that paying the due salaries is now conditional on the House of Representatives’ approval of a domestic loan.

Allawi explained that “the amounts will be available if the House of Representatives approves the borrowing law,” noting that “this borrowing law is very important because it meets the state's financial needs and addresses the deficit in the budget.”
But the response of parliament's finance committee shocked the government. The committee warned against “Iraq’s bankruptcy.”
In an internal document that The Arab Weekly obtained a copy of, the committee said, “At a time when we have long waited for the government and the Ministry of Finance to implement the provisions of the domestic and foreign borrowing law approved by Parliament on the twenty-fourth of last June, which gave the government sixty days to present its economic and financial reform plan, we were surprised by a project of another loan bill, as if the Ministry of Finance is concerned with borrowing only." The document warned that “if this continues, Iraq will have to declare bankruptcy within six months from now.”

“What if oil prices fell to lower levels?” wondered the committee. The parliamentary finance committee is responsible for reviewing the government’s general budget, and it expressed its surprise at the government's attempt to throw the ball into the court of the House of Representatives, “giving it only the option of approving the loan bill that will bankrupt the country and burden Iraq’s future generations with the consequences, and trying to pressure us by issuing statements that there will be no payment of salaries unless the Parliament approves that bill, and trying to embarrass the Parliament and mix up the cards.”

The finance committee believes that “the issue of salaries is not the responsibility of the legislative authority, and it is one of the purely governmental duties and one of the core of its obligations to its people,” considering that “any attempt by the government to throw the ball into the House of Representatives' court is equivalent to evading its responsibility and obligations.”
Informed political sources say that Parliament Speaker Mohammed al-Halbousi and his two deputies, Hassan Karim al-Kaabi of the Sadrist movement, and Bashir Haddad from the Kurdish list, are pushing for the approval of the government’s internal borrowing bill, while the parliamentary Fatah bloc, which is the political wing of the Iraqi militias affiliated with Iran, is opposed to it.

The Fatah bloc wants to drag Prime Minister Mustafa al-Kadhimi into a confrontation with government employees by delaying their salaries, despite its realisation that the conditions the country is going through, especially the oil price crisis that coincided with the restrictions imposed by the COVID-19 outbreak, require political cooperation to overcome them.
Observers say that the parliamentary bloc that represents Iranian interests in the Iraqi parliament is trying to exploit the salary crisis to highlight the failure of the Kadhimi government in its mission, by enlisting the help of a large number of Iraqi media run by Iran's Islamic Revolutionary Guard Corps (IRGC).

Representatives expect parliament to convene soon to approve the government’s bill to start paying salaries soon enough, given the great risks that may result from delaying employee pensions any further, despite the reluctance of the Iranian bloc.

https://thearabweekly.com/inflated-public-service-salaries-threaten-iraq-bankruptcy