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Making Space for The Private Sector: An Interview with Ahmed Tabaqchali

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https://iraqenergy.org/2020/05/31/making-space-for-the-private-sector-an-interview-with-ahmed-tabaqchali/

Making Space for The Private Sector: An Interview with Ahmed Tabaqchali

May 31, 2020
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Within Iraq, the government has very limited space to manoeuvre. If you look at Central Bank data on bank lending to the government and on T-Bill issuance, we survived in 2014-2017 through using reserves, via indirect monetary financing, and government bank lending. But while some of that has been paid off, CBI data as the end of November 2019 show that total domestic debt has increased to the prior crisis’ peak. So, I cannot see that being repeated, not in the same way as then. This time, I struggle to see the state banks’ lending beyond a few billion. The reserves are there but not un-limited and then there are conditionality constraints on any upcoming IMF loans. So, there will be no waiting out this crisis, there has to be decisive reform.

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For the private sector banks, if you look at the end of 2018’s data, there is something like a $9 bn deposit base, 70% of which is in current accounts, so they can’t lend more than one-third of this, maximum. So, you can’t look to the private sector for state loans. That leaves the state banks, and they are so undercapitalized, burdened by un-resolved legacies of the prior regime, they function by a miracle or by pushing the accounting rules’ envelope.

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You can’t have a top-heavy, authoritarian socialist bureaucracy creating jobs or opening up the private sector. During the Kuwait conference, Iraq’s National Investment Commission came up with the One-Stop-Shop initiative – more bureaucracy on top of the bureaucracy. Why not follow the Kurdish Region of Iraq’s approach? Just get a visa on arrival for certain nationalities. That is the direction we need to be going in.

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I have some relatives in government who started receiving their salaries through their banks, and their usage followed the same patterns seen by those in the private sector who were provided with Bank cards as I learned from speaking to bankers. At the beginning where there was an ATM when salaries were dispersed the ATM would just empty as people used it as a cash-out outlet. But in time they started leaving money in the bank and starting using the cards for making purchases. So, the cards have been extremely useful in the transition away from cash.

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