Uncertain future of the economy of the Ard al-Sawad (the land of greenness)… .. the Iraqi debts exceeded $ 100 billion ..

Uncertain future of the economy of the Ard al-Sawad (the land of greenness)… .. the Iraqi debts exceeded $ 100 billion ..

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Economic and political  analysts  confirm  that  the size of Iraq ‘s accumulated  debts  have exceeded  $ 100 billion, with many of the problems suffered by the Iraqi economy, and the amount of public debt that has  accumulated  on the country , this was the result of the collapse in oil prices, and the costs of the war being waged against al Daesh.
They also affirm that the termination of the file of  Iraq ‘s foreign debt and settling it   is very important process  because it  will be positively reflected  on the country ‘s economy and encourage foreign companies to invest in the country and the development of the banking sector.
The Institute of   progress of  the development policies ,” at a seminar held in the Baghdad by the  government for the disclosure  of the details of  internal and external debts , owed by Iraq , whether those belonging to the former regime, or those that has been borrowed  by governments   after 2003, and the clarification  of the areas of  its spending, and the extent of its   achievement  to   the aims of its borrowing   .
Former MP Mehdi al – Hafez , who moderated the symposium pointed out that the  loans of World Bank , and the Islamic Development Bank, and the European Union, and Japan, in addition to the traditional debt of some of the Gulf states stands  heralded  in foreign financial dealings of Iraq.
He noted there is a case of a misunderstanding between the different circles in the country on the international loan that will be granted to it , between supporters and opponents, calling to clarify some things related to this file, Will these loans  be important  to Iraq, or whether it can be abandoned, and reliance on vulnerable local resources with the exception of oil revenues that occupy the largest space in the financial  coverage  .
Hafiz pointed out  that  general circumstance of  the country  is bad and difficult, and unnatural, and should    address   its  political and financial  crises, through  proper  management and real review of the political, financial management, noting that Iraq  in  its  current position  is unable to decide anything because the crisis of  its political system  which is incapable of determining the interest of the country according to objective criteria, and this is a big problem, according to Hafiz.
According to reports of the US Inspector General  for the  reconstruction affairs   to a loss of 6.6 billion dollars since the change in Iraq in 2003, and the establishment of foreign Coalition Provisional Authority, Hafiz affirmed of uncertainty  of spending  of  (6.6) billion dollars from the funds of «Development Fund for Iraq»; who confirms that the standards of appropriate control on   the money of  the fund  is vulnerable to the  manipulation, waste , and abuse.
Hafiz said that ” the International Council for advice and oversight” made a lot of questions about the inefficiency of financial performance at the time.
And the al-Hafedh pointed out  that  the debt is familiar  financial issue to a lot of countries , and perhaps that it is consistent  in importance with the national needs of each country, and stressed that Iraq is committed to reorganizing its relations with the World Bank and the International Monetary Fund under Security Council resolution 1483, for the year 2003 and to seek to settle the debt with the   Paris Club  .
He added that Iraq today has two  key choices  first  the continuing desire to obtain external financial support, due to the agreement , which took place in the Paris Club in 2004, and to compel Iraq to some foreign debts and its  interests  , and the other is the search for Iraq ‘s money and restore it in  response to national interests.

The financial advisor to the Prime Minister, Dr. Mudhher   Mohammed Saleh  said reviewing important details, as he  revealed about  the value of the debt on Iraq  as follows:
Foreign debt:

……………
* the debt in 2004 , $ 100 billion were removed .
* Sovereign debt (owed) for 65 countries , 19 of them within the Paris Club 0.46 outside the club.
* Commercial debt amounting to $ 19 billion, and includes
– a small debt of 35 million,  $ 4 billion  were paid  out of $ 19 billion debt.
– Large debts reduced by 80%, and the rest has been scheduled on 18 – year,
to be paid in  semi – annual installments, and  the first Iraqi support was issued  worth 2.7% of the large debt, so the debt has fallen from $ 19 billion to $ 5 billion.
* Debt of  Gulf Countries that Salih  considered  it  a problem , although it without interest,
* Russia ‘s debt was handled within the Paris Club, it has been reduced to 100% This is useful for Iraq.
The internal debt:

………………….

And represent 45% of the value of public debt, and the central bank contributed to the availability  of these debts after deducting transfers to the lack of possibility to the other banks, but  not  with this policy , the economic situation in Iraq may have been exposed  to the great problems for the payment of salaries and wages  from the central bank reserves,  for this reason  the  reserve of  the country was fallen  according to Saleh.
The internal debt is divided into two classes:
* First   borne by banks and the Ministry of Finance undertakes  to pay it, such as the salaries of companies.
* The second   it belongs to the  former regime , and (related to print  of currency).
Saleh revealed that the real debt  amounted  by  17 billion + 6% interest +41 of  Gulf debt  + 46 domestic debt.
Thus , the  total Iraqi debt becomes almost $ 110 billion
and Salih disclosed that Iraq ‘s relationship with the World Bank and International Monetary Fund began in 2004, and we can not ignore the reasons that led to the deterioration of the situation in the country because of local politics that brought us to this situation, stressing that if  we want to take the right decisions , it should be a proper management according to the standards of governance that are managed through the democratic institutions in the country.
Paris Club: is an informal group made up of 20 state – consisting of  financial officials ,  financiers , and the economies of these countries is are one of the largest economies in the world, which provides financial services such as rescheduling the  debts for the indebted  countries  .

New loans :
• Post – conflict agreement ,  Iraq  will get under which a loan of $ 700  Million  to set the Convention, but Iraq did not receive this loan  until to be  classified within the post-conflict countries for the international community contributes to the write – off of debt by 90%, but after the rise in prices oil  , the  Monetary Fund  called Iraq  to reschedule its debts, depending on the extent of the possibility of Iraq for the  debt sustainability and repayment of it so  the case  of sustainability  and payment was amended   of 10 to 20% after the improvement of oil prices.

  • debt for the year 2017 and Iraq will get  it from the International Monetary Fund, which pledged  to give $ 5.3 billion, and  Iraq received   to 1.250 billion dollars and  the World Bank pledged  for $ 3 billion in Iraq where Iraq received a billion dollars in addition to  billion dollar  which  came as an  aid, and there are government bond worth two billion dollars, to enable Iraq  to enter  the financial markets, including the billion dollars guaranteed by the US government with  an interest rate of 2.4%.
  • There is another bond of one billion dollars noting that Iraq  during this year  will receive 1.250 billion dollars from the International Monetary Fund, and another billion from the World Bank and another billion will get it from sources (Germany and Italy) under the commitments of Seven industrialized nations that have pledged about $ 4 billion, and that the All of these are soft loans, as he said, and does not involve any prejudice against Iraq and they are repaid over 18 years, including 5 years as a grace with  simple interest.

Salih  warned of dealing with the debt profile so that the country does not reach  to the loose phase , indicating that the debt will be subject to an external auditor in accordance with international standards to shed light on   the case of  the debt in a  precise and detailed setting, the report will be issued in the coming period.
He stressed to reconsider the  Convention  of «Paris Club» before 2020 to begin repayment , which could expose the country to the crisis in  2022  ,  and the move will be through diplomatic channels, and includes a total debt of Iraq, and renegotiate  the  countries that have debt belonging to the former regime.
The head  of the Federal Board of Supreme Audit , Dr. Salah Nouri addressed in  the same symposium  another aspect of Iraq ‘s debt profile, indicating that the loans are divided into two categories:

.Class I , for the purpose of financing the deficit  in the  general budget of the state  for which   it is   going on  now  negotiations  with IMF  and the World Bank  to secure  ministerial and provinces  commitments  , including  to pay  dues of   Contractors , explaining  that these interests can not  be paid  before the approval of the Board of Supreme Audit  noting that  it has been achieved good thing  in this  field  in addition  to what has been achieved with respect  to  the dues  of  farmers , which  completion rate has reached to    80% and there are 729  billion dinars ready to pay in dues of Contractors   amounted  4.8  trillion dinars , indicating that “the Board” seeks to settle the dues , according to the completion of the audit of each batch .

  • Class II ,a developmental debt ,which is allocated to finance the  development projects in health, oil, water, sewer and other emergency project areas, which are very important projects; as they provide services to citizens, and should be followed up by the concerned  authorities to ensure that the loans  are consistent with the goals came for it .

Nuri  pointed out that  in 2012  it  was  set up  a fund linked  to the prime ministry  headed by the Undersecretary of the Ministry of Finance, and his mission is the   follow – up  and the search for Iraq ‘s money  which  is not known or is not documented, but the fund is unable to perform its mission which it was established for  it .

He disclosed for providing one of the American companies offer to follow up to $ 3.5 billion   of lost  money of Iraq and including money which is  present in Beirut   for  a commission and an agreement was signed with this company, but the agreement was cancelled  shortly after the start of work after that  the names of the employees were published in the newspapers, and therefore they would be at risk  of  liquidation because the  chairman of the company himself is a former US official.
The banking expert Samir Nasiri,  stressed that  the government to borrow is the mismanagement of public funds and failure in managing the economy and the wrong policies, and lack of access to financial abundance, calling for the disclosure   of  the details of debt file  in a framework of transparency and the right of people to hold the government accountable  .
Alnasiri urged economic elite to hold the government accountable for the budget and the mechanics of calculating the price of a barrel of oil , after rising to $ 55 , and thus it is supposed to have a difference  to fill   the budget deficit, and dispense of the country  with borrowing  and  should keep the people acquainted  on these details.

Economic expert , Dr. Abdullah al – Bandar pointed to World Bank loans despite the decline in its interest , but payable by the specified time, and does not accept compromises and the basic problem is the lack of coordination between monetary and fiscal policies during the period 2004 -2016 with regard to the debts .
And  al- Bandar added  that the   follow – up to international  grants  were not clear as well as the assets of Iraqi officials abroad are also not clear, pointing to the Audit  of contracts with contractors, which should have been done in advance  to bind the government to pay their dues without the need to check now.
And the Bander  pointed to a contradiction between Iraq ‘s obligations with the IMF included to stop the appointment in general.

Financial expert , Dr. Obaid Mahal warned of the danger of dependence on oil in the repayment of the loan, for fear of being any problem, and many problems, calling for loans that are directed to projects that gives revenues from which to pay the interests  of the loan.
He said the loans do not be addressed by  the “accounting” but “statistically ” by the Ministry of Finance, if  the record  was stolen ,   all the debts would be disappeared , stressing that ” the fund to follow – up  Iraq ‘s money abroad  was  ” born dead, because it was linked to the Prime Minister and chaired by the Undersecretary of the Ministry of Finance  sunk  in his problems , as well as its employees in it that they are  the representatives of government agencies, and they meet only once a month or even two months while to  follow the debt needs an   institution working daily, and this reveals the lack of seriousness in pursuing the recovery of Iraq ‘s money abroad noting that it has  gone years and has  not achieved anything noteworthy.

The economic expert Basim Jamil Antoine called to find a specialist administrative  and efficient system for  the management of the debt file  , a country mired in  unproductive   debts  and there is  no reform in the  industry and agriculture sectors.
The diplomat Ghalib Anbuge stressed  to activate the diplomatic side  of its both political and economic branches   by the foreign  ministry  to follow the file of  Iraq ‘s foreign debt , indicating that this is file is not pursued   by the Ministry of Foreign Affairs and this represents a clear flaw which is not bad to take advantage of the information available to some foreign people in respect of the Iraqi funds abroad in return for cash.
The expert Azzam Badie Bakir from the financial Commission, sees that it must to  bring back   the fifties experience as it  was the establishment of a council of reconstruction and the resulting  of an important projects in agriculture, irrigation, industry and others.

And he pointed out  that  the main supplier of the Iraqi economy is oil due to the   decline  in the contribution  of other sectors , and that the content of the investment budget is maintenance work , not economic projects work , and there is a big waste of money in the three presidencies , the judiciary and provincial councils , calling for a review of the debt spending  and where it has gone   because future  generations who will bear the sins of the debt that are not directed  towards real development .
But oil expert Hamza Jeweler called for a mechanism to pay the dues of contractors through the  payment  rate of up to 70% with a remaining subject to the completion of the audit in its final form, adding that the difference between the price of oil on the world market and the sale of oil  of Iraq, amounting to about $ 7 and  part of the price difference should go  to pay off the budget deficit.
The present debt, as a result of the lack of state financial revenues and the lack of  alternative productive sectors  for oil reliable despite the existence of economic fundamentals , which can be utilized to maximize the financial resources of the state.

Through the previous  studies and  researches showing that there is a debt crisis sharply, and will  be increased  if the borrowed money has tended to finance consumption and  unproductive   investments  .
And Iraq must resolve the problem of external debt or mitigation, to create a sense of balance and economic stability, it is necessary to formulate new policies to establish a climate for appropriate economic development of the country in order to address   the negative repercussions of these debts of  poverty and marginalization and subordination and dependence to international financial institutions, particularly the International Monetary Fund , which classified  Iraq  as a fragile state due to regional conflicts; resulting in a decline in gross domestic product and rising inflation, calling on Iraq to cope with low oil prices.

Shatha Khalil

Unit Economic Studies

Translated by : Mudhaffar al-Kusairi

Rawabet Center for  Research and Strategic Studies