War and falling oil prices widen Iraq crisis
BAGHDAD - With plummeting oil prices and the costly war against the Islamic State (ISIS), many Iraqis see the poverty and economic hardships gripping their petroleum-rich nation as just as much a danger as the militants commanding parts of it.
Iraq, which sits atop the world’s second-largest proven oil reserves, has been unable to generate much revenue outside its Organisation of the Petroleum Exporting Countries (OPEC) share, as prices on the black market have hit a low of $10 per barrel.
To cope with the financial crunch, the Baghdad government has opted for austerity, while anxious Iraqis offered solutions ranging from charity to desperate belt-tightening, such as giving up expensive imported chocolate.
Iraq’s parliament has endorsed an $88 billion budget with a $20 billion deficit for fiscal year 2016. Critics deemed the shortage unrealistic, given oil prices in the $30- $35 a barrel range while the budget assumes the government will sell oil at an average of $45 per barrel.
The budget also envisages an unlikely growth in oil exports at a time when demand is dwindling. Exports are estimated at 3.6 million barrels per day (bpd) in 2016, compared to the 3.2 million bpd average in 2015.
Export expectations include 500,000 bpd from the northern autonomous Kurdish region, which had a fallout with Baghdad and revoked an essential oil-sharing deal. The Kurds, who face their own financial crunch, have started exporting oil independently. They are likely to continue doing so, meaning that several billion dollars in revenue may not be shared with the Iraqi central government.
The economic slowdown is being felt by Iraqis across the country.
Abu Marwan, a daily labourer from east Baghdad, left a rented apartment and shared a room with his four-member family in an orchard because he was unable to afford the rent. He guards the orchard in exchange for the free room. Six months ago, he was earning as much as $550 a month but his income has dropped to about $200.
The dire economic situation prompted charity organisations to create the “Mercy Wall”, which includes people donating used clothes. They are left on main city squares with a sign saying: “If you need these clothes, please take them.”
In some Baghdad bakeries signs read: “Bread is free for people who cannot afford to buy it”.
Doctors post outside their clinic that medical treatment is free for the needy.
Economic analyst Samir al-Nassiri said the lack of government planning, widespread corruption and reliance on oil for revenues have led to economic chaos.
“The lame Iraqi economy is limping on one leg, which is oil and even this leg is weak now,” Nassiri said.
Oil exports account for 90% of total federal revenues. Iraq’s Prime Minister Haider al-Abadi said oil revenues have fallen to 15% of what they were two years ago, despite increased production.
In the first batch of promised reforms brought about by street protests, Abadi cancelled some senior government posts and cut spending on VIP protection. The moves enjoyed public support but that soon faded when Abadi ordered a 3% salary cut for all public servants, saying the funds would go to the army and militias fighting ISIS.
The Iraqi cabinet approved a law that demands that people pay for services received in public hospitals and clinics. That meant cutting back on free healthcare, which had been available for decades. A Health Ministry statement suggested fees be levied on people visiting hospitalised patients.
Critics accused Abadi of “losing direction” and said the savings were made at the expense of the poor, rather than corrupt officials.
The worst might be yet to come. A parliamentary committee said the unemployment rate in 2016 could be as high as 40%.
Younadam Kana, the head of parliament’s Labour Committee, said thousands of factories and businesses have closed in the past two years. He blamed the slowdown on the drop in oil revenues and the war with the Islamic State.
As more people lose jobs, crime, robberies and kidnappings are on the rise in Iraqi cities. The Iraqi Interior Ministry website is full of statements on crimes and arrested criminals. In early February, the Supreme Judiciary Council said Baghdad courts handed down 40 death sentences and 60 life-in-prison sentences to people involved in kidnappings.
Interior Ministry spokesman Brigadier-General Saad Maan blamed the mounting crime wave on swelling unemployment and economic hardship.
Yet this has also given rise to humour among frustrated Iraqis. Senior Shia cleric Jalal al-Din Ali al- Saghir recently urged Iraqis to stop eating chocolate to save money.
The advice ignited nationwide criticism, especially in social media. Some Facebook users replaced the picture of a boy on a locally popular chocolate bar with Saghir’s photo. Small rallies were staged in which demonstrators waved Iraqi flags and chocolate bars, chanting: “We want chocolate.”