The Iraqi economy between inevitable bankruptcy and the required rescue
Sunday 22nd November 2020 94
Muhammad Sahib Al-Darraji
Nations and peoples are accustomed to studying their conditions as a matter of consulting in the matter and working to come up with the best solutions that do not fall within partisan calculations or international regional pressures,
and also not within the framework of adhering to throwing the ball of accusations in the range of others, as everyone is responsible and everyone is responsible for his flock.
From this standpoint, a more realistic understanding of what our dear Iraq has gone through after 2003 until today and what threatens the existence of the current political process as a whole in the next few months,
Also, it is not about tampering with numbers or economic facts,
as everyone witnessed the state of non-payment of salaries to employees except through the repetition of the borrowing model that has become today on the edge of the precipice,
and the central question that we must all ask in this frank dialogue is what are the best expected solutions and what are their societal prices Before the expected political price?
I believe that the responsibility is firmly on the people of the solution and the contract in the country's higher political leaderships to reach these solutions.
And this paper is nothing but a proposed roadmap to reach those supposed and desired solutions,
and I may begin by analyzing the opportunities and challenges that are frequently talked about by many specialists and non-specialists who challenge the power of political decision and among the elites and academic and intellectual competencies
The white paper for economic reform presented by the government appears to be Noah’s compound for the survival of the Iraqi economy, while any reading by a non-specialist discovers that this paper in its high academic language did not rise to the ranks of urgent and prospective administrative, financial and monetary solutions, and then solutions in the long term as if it deals with a wanted patient Provide first aid to him with a long treatment plan!
The other matter, the government program of the Prime Minister is defined by a transitional plan towards holding early, fair and fair elections that respond to the will of popular protest and the positions of the rational authority in the desired change of the political process and its removal from the administration context by quoting components to the administration by virtue of citizenship.
This requires the government and its Economic Council to work on analyzing the crisis and come up with solutions to aid the budget with productive and investment development items that can be harvested in months, if not in weeks or days.
The third thing, the White Paper did not carry, even in its future solutions, any projects for fundamental changes in the Iraqi laws in force, but rather complements to implement such laws or activate inactive governmental instructions and regulations.
Perhaps the most prominent example of it is "automating government outlets", which everyone heard about years ago.!!.
Analyzing opportunities and challenges
As a parliamentary legislature, it is not possible to replace the positions with the executive authority constitutionally, but because advice is very much needed in managing the crisis of the risks of the likely collapse of the national economy and its dangerous repercussions on the entire political process, I find it useful to confirm the following points:
First: Among the priorities of administrative work is a foresight to identify opportunities and challenges for what may happen today, tomorrow and beyond, and any economic crisis cell must know that the global economy is going through a serious downturn due to the effects of the Corona pandemic,
and this is expected and published in the literature of the International Monetary Fund and the publications of the program The United Nations Development Program, and saturated a search on social media sites of Iraqi elites and competencies and made recommendations on how to get out of this crisis,
which was the subject of attention in dealing with the 2020 budget that was not presented and also with the borrowing law, which stipulated submitting a reform paper for such solutions.
The forward-looking ideas are the subject of extensive discussions between the relevant committees in the House of Representatives, including the Finance Committee and government agencies before and after the formation of Mr. Al-Kazemi's government.
What was the result of this forward-looking effort?
The quota remained in issuing the White Paper without urgent and foreseeable solutions and only future solutions were satisfied, and this is the most dangerous aspect of the methodological challenges of the thinking of those in charge of government work in not working on developing such solutions.
Second: The second challenge is to throw the ball of accusation about not distributing salaries between the government and the House of Representatives in official statements, then other statements appear different, then other contradictions and so forth until the citizen who is waiting for his monthly salary is found in the cycle of borrowing and the approval of the House of Representatives or not,
as if the government does not want to bear The constitutional and corporate responsibility being the executive authority and there are financial legal procedures that are required to act according to what they stipulated, not to use the media and conflicting statements to search for these solutions in front of the citizen who is awaiting his monthly salary.
The most dangerous thing is that there is still the possibility of borrowing in the year 2021,
and here we must be very frank, as
internal borrowing is an unreal metaphor for the reality of using money from the Central Bank of Iraq, as
Iraqi banks are unable to lend to the government because it suffers from a lack of liquidity Basically.
On this basis, the Central Bank issues treasury transfers to government banks to give them to the government to fill the deficit.
The important question here is where the central bank comes from this money?
The answer is that the bank has two solutions, the best of them being bitter,
the first is to use reserve storage from hard currency and convert it into dinars by increasing the sales window selling currency,
and the second is to print Iraqi currency without a cover in exchange for gold or hard currency.
These two solutions will sooner or later lead to very negative results that may reach complete collapse through either the bankruptcy of the central bank’s reserves or the loss of control over the exchange rate without being prepared for this and the protection of the fragile strata of society.
Thus, in light of the weakness of the authority and prestige of the state, the political system can easily collapse In light of these two dilemmas.
Third: Without going into other details, let us stand on the best opportunities that the government can implement according to the forward-looking view of what things could be in 2021, and in this field it is possible to establish a fact that appears clear to many economists and finance experts, internationally and regionally.
That the international economic downturn will show its results in the first half of this next year, which requires countries that depend on the rentier economy, such as Iraq, with one economic type, which is oil, to work to reduce import resources and to maximize income productivity to fill the shortfall from the importer and to cancel luxury goods to maintain the best exchange rate Required.
In this context, the following can be proposed to implement this forward-looking methodology in the following points:
1- Asking OPEC to exempt Iraq from reducing the quantities of exported oil and abiding by the original quota.
2 - Converting the state’s assets and assets into cash, selling overlooked lands and selling agricultural lands to contracting parties.
3 - Government control of retirement, insurance and insurance investment funds and their operation in order to bring appropriate returns.
4 - Stopping consumer expenditures in state departments and closing embassies and missions in countries that do not have diplomatic representation in Iraq.
5 - Freezing allocations for presidencies and some ministries and achieving the principle of equal salary and allowances for all state employees.
6 - Compulsory collection of services such as electricity, water and sewage, and collection of all state debts by updating collection mechanisms and encouraging the taxpayer to pay the tax to pay it on time.
7 - Imposing compulsory insurance on all commercial activities.
8 - Stop all cuts in oil prices, internally and externally.
9 - Changing the exchange rate on imported goods, provided that it is accompanied by a series of measures to control prices and protect the poor and middle income classes.
10 - Imposing a sales tax and increasing customs on some luxury items and increasing the tax base, not taxes.
11 - Declaring all government factories as investment opportunities, protecting the local product and preventing some imports.
12 - Work on granting bank guarantees to withdraw cash present in the community and re-employ it in productive projects.
This is done in various ways, although previously explained in previous articles.
13- Imposing electronic payment, minimizing the use of cash payment, and encouraging e-commerce.
14 - Adopting the biometric card or the unified job number when distributing the salary.
15 - Giving concessions and facilities to investors who pay flat sums to the state.
16 - Opening the door to competition in the telecommunications and Internet sector and ending the commercial monopoly of some companies.
17 - Opening the door for investment in mineral resources such as phosphates, sulfur and others.
18 - The Ministry of Finance sells hard currency directly to those wishing to buy.
19 - Pumping loans to operate the private sector and giving sovereign guarantees to international companies equipped for the production lines of factories in the event that the private sector imports these production lines.
20 - Restructuring the ration card or converting it into cash sums delivered to the unemployed, retired, and junior employees, and those who prove that their monthly income is less than one million dinars.
Fourth: Whenever it is submitted it does not need to legislate a new law or amend any law in force, only that the methodology of preparing the 2021 budget needs to be explicit austerity in a way that preserves the content of the disciplined societal economy that preserves the rights of the vulnerable and poor classes without taking the recommendations of moving to an open market economy that It breaks down the fragile bones of a wide range of citizens,
and the opportunities available for the implementation of progress from points that can be in front of the House of Representatives' responsibility actually and not in words only when the government applies to activate economic, financial and monetary measures that enhance the state's general budget resources,
and the House of Representatives must ratify them in the 2021 Budget Law
And it is not the opposite to ask the House of Representatives to approve a white economic reform paper that looks into the long future with a plan that may actually be correct, but without taking urgent and effective steps to reduce damage to the Iraqi economy.
Yes, we are going through a stifling crisis and we are not the only country facing such an economic disaster,
but realizing what can reduce the risks of this crisis requires real awareness of it and not touching its cilia.
It begins to generate job opportunities in the private sector by attracting Iraqi funds for real investment opportunities, as well as the most prominent conditions for good attraction to regional and international companies in generating these opportunities that provide a renewed lung for the Iraqi economy to breathe in the air of non-rentier production..
Then it is possible to think about the resources of the plans that have been developed. In the white paper for a future based on a methodology other than the rentier approach, and perhaps the white ideas contained in it may be correct or not and need new development.