Iraq’s budgetary woes grow audible

Despite flaws, any delay in the ratification of next year’s budget would be most felt by disenfranchised communities and displaced people.
Sunday 25/11/2018
An Iraqi child holds banknotes in the northern Iraqi city of Mosul, last July. (AFP)
Vicious cycle. An Iraqi child holds banknotes in the northern Iraqi city of Mosul, last July. (AFP)

As speculation over the preferred choice of ministers to oversee Iraq’s security and defence institutions rages, the draft budget bill for 2019 is proving calamitously unpopular among citizenry and parliamentarians alike.

As Iraq’s oil production capacity incrementally increases so does the potential to allocate funds in high-priority areas. Experience reveals a litany of missed opportunities. However, as similar chances surface, will budgetary policies change under Prime Minister Adel Abdul-Mahdi’s government and can they drive change in a country whose institutions are administered poorly?

Despite his credentials as a former oil minister, Abdul-Mahdi is yet to win the backing of his cabinet and his constituency over the draft budget. Another point of contention is that the bill was drafted during the latest stages of Haider al-Abadi’s tenure as prime minister but passed after he left government in late October.

Budgetary allocations for the next fiscal year have been slammed by prominent lawmakers as inherently illogical and out of sync with the needs and demands of the Iraqi people.

Federal decisions and the underpinning philosophy guiding the draft, as some criticised, offer no real solutions to the economic hurdles inhibiting domestic growth.

State of Law parliamentarian Kathem al Sayadi denounced the bill as “draconian,” chastising Baghdad and going as far as blaming neighbouring countries for “scheming to crush economic growth,” as he told Dijla TV. “Basic needs are not met,” he claimed, slamming the bill as a retributive tool to punish the popular masses.

Proposed projects are nearly identical to those that have been dormant for years and long-term budgetary planning is something the government has yet to commit to.

The alternative — a monetary policy able to unshackle Iraq from its responsibility towards foreign creditors and reverse economic decline — does not exist. All the while, Iraq’s infrastructural, educational, economic and health-care needs outrun government performance and its capacity to respond timely and responsibly.

Child poverty, unemployment and mounting disillusionment manifest themselves around every corner, on every street and household, whether attention is paid or the world looks the other way.

Provisions in the draft provide strong evidence of political disinterest from the state towards its constituents, a risk, some analysts said, that is greater than that posed by the absence of a monetary policy. As alarming is the exclusion of territories whose landscapes were heavily pummelled in battles against the Islamic State from next year’s expenditures.

Proponents in Abdul-Mahdi’s government, notably the Sairoon and Fatah coalitions, defended the draft, suggesting its design fits directly into wider reform plans drafted days after Abdul-Mahdi was sworn in.

The operational expenses of programme implementation and how Baghdad intends to distribute the increase in oil income remain vague.

How then, the Iraqi street is asking, might these valuable gains in oil translate for the lay Iraqi whose government is obliged, constitutionally, to invest oil wealth to the advantage of its people?

This is not what has happened since Saddam Hussein’s toppling in 2003.

Forecast at $56 per barrel, should the projected outlay change contrary to expectations, few protections can save Iraq from the effects.

Beyond oil lies the key to unlocking Iraq’s potential for economic restoration: sectoral diversification. Diversifying the economy and local production would soften the effects of budgetary cutbacks if resorted to in the event that oil prices drastically dip. Therefore, failure to evenly distribute oil income can only aggravate fiscal imbalances.

More than just economic opportunities are present at this historical moment; the chance for Baghdad and the semi-autonomous Kurdistan region of Iraq to mend fences. Talks of a deal between both sides are under way, which could boost output and allow Kirkuk oil field production to resume following the referendum-induced fallout.

The entire country will be closely watching, desperately awaiting improvement in their standards of living. However, Iraq’s budgetary institutions have a long way to go.

Growth in oil revenue is not so much the problem as it is managing the country’s monetary policy that guides reactions to oil market shocks, Iraqi analyst and member of the now-defunct Iraq’s National Business Council David Abdul Zayer told the Iraqi Media Network. Oil projections, while hopeful, will do little to offset income losses if neglect and corruption continue to gnaw at Iraq’s fiscal potentialities and exacerbate inflationary pressures.

Despite flaws, any delay in the ratification of next year’s budget would be most felt by disenfranchised communities and displaced people. Arriving at this stage, Al-Binaa coalition MP Karim al-Baldawi maintains, will not happen without “robust planning and bookkeeping.”

The matter lies in the hands of a special committee, headed by Finance Minister Fuad Hussein, appointed by Abdul-Mahdi. Its sole responsibility is to redress the absence of reconstruction expenditure and other contentious provisions, a mission in which ordinary Iraqis and civil society have little say.