October 26th, 2022
Iraq’s Wealth and the Forty Thieves: Structural Enablers of Corruption with Impunity
by Ahmed Tabaqchali
The disclosure on 15 October 2022 of the embezzlement of 3.7 trillion Iraqi dinars (IQD), about US$2.5 billion, from the General Commission of Taxes (GCT) brought the stinging resignation letter of the outgoing finance minister into sharp focus –
in particular, the charge that ‘vast underground networks of senior officials, corrupt businessmen and politicians operate in the shadows to dominate entire sectors of the economy,
and siphon off literally billions of dollars from the public purse.’
Righteous indignation notwithstanding, severe punishments and new measures to root out corruption are doomed to fail, as were all prior anti-corruption measures,
because the root causes are inherent in the post-2003 political order’s politically sanctioned corruption;
and the inevitable politicisation of the senior civil service, which have hollowed out the state and its institutional capacity to function.
In particular, the Ministry of Finance (MoF), is structurally weak and ill-equipped to deal with the complexities of managing the state’s budget.
Specifically, the absence of coherent revenue and expenditure management policies and systems, i.e., a Public Financial Management (PFM) system,
combined with the prevalence of decades old paper-based systems,
makes it impossible for the government to monitor its finances,
in particular its cash management operations.
Now You See Me, Now You Don’t
The audacity of the embezzlement is matched only by the ease and impunity with which it was carried out.
The Sad State of the Ministry of Finance
Lacking a sound PFM, the MoF operates without an Integrated Financial Management Information System (IFMIS)
which electronically links
reporting of all government entities;
exacerbated by the absence of a Treasury Single Account (TSA),
which consolidates all the government’s accounts in a single account controlled by the MoF.
As such the MoF has a tenuous control over government entities’ expenditures, and only a partial knowledge of its cash balances.
The White Paper and Resistance from Within
Two key aspects of the ‘White Paper for Economic Reform’, were to
address the MoF’s structural weaknesses through the introduction of a PFM system,
by reviving the long-stalled implementation of an IFMIS and a TSA;
and to restructure state-owned banks Rafidain and Rasheed.
While this has moved both projects from their multi-year aspirational phases to the realms of the possible, the system valiantly resisted – more passively than aggressively in the face of a strong push from the leadership of the MoF from May 2020 until October 2022.
A Feature and Not a Bug
Consequently, each government entity continues to have nearly full autonomy over its expenditures and bank accounts, making central accountability and effective governance a pipe dream.
As such – whether by design or a happy coincidence – this state of affairs maintains the substantiveness of ministerial appointments within the Muhasasa Ta’ifia structure, and within its Wikala sub-structure for the appointments of senior civil servants.
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