BAGDAD – Long-time Iraqi official Qusay Abdul-Amma panicked when his monthly salary was delayed. Days of waiting turned into weeks. He was behind with rent and other bills.
As a graphic designer for the Department of Health, he pays his monthly rent of nearly 450,000 Iraqi dinars, about $ 400 on about half his salary. If he doesn’t pay twice in a row, his landlord will evict him and his family, he fears.
“These delays affect my survivability,” said Abdul-Amma.
The Iraqi government is struggling to pay the salaries of growing public sector workers in an unprecedented liquidity crisis caused by low oil prices. Salaries in September were delayed by weeks and October was still unpaid as the government tried again to borrow Iraqi currency reserves. The crisis has fueled fear of instability ahead of the mass demonstrations this week.
The government outlined a vision for a drastic overhaul of the Iraqi economy in a “white paper” presented to lawmakers and political groups last week. However, given the upcoming early elections, prime ministerial advisors fear there is little political will to carry them out in full.
“We are calling on the same people we are protesting and criticizing to reform the system,” said Sajad Jiyad, an Iraq researcher.
Do me a favor: please SHARE this post.
The White Paper’s call for a cut in public sector payrolls and a reform of public finances would undermine the patronage systems with which the political elite have anchored their power.
Much of this patronage consists of giving government jobs for support. The result is a threefold increase in the number of civil servants since 2004. The government pays 400% more salaries than 15 years ago. Around three quarters of government spending in 2020 will flow into the public sector – a massive burden on dwindling finances.
“Now the situation is very dangerous,” said Mohammed al-Daraji, a lawmaker on the parliament’s finance committee.
A government official said political groups deny the need for change and believe that oil prices will rise and “we will be fine”.
“We’re not going to be okay. The system is unsustainable and sooner or later it will implode, ”said the official on condition of anonymity to discuss internal politics.
Iraqi activists called for a march on October 25th, which is expected to attract large crowds. A year since massive anti-government protests brought tens of thousands onto the streets, calling for reforms and an end to the corrupt political class.
“Nothing has changed in terms of meeting our demands,” said Kamal Jabar, a member of the Tishreen Democratic Movement, which was founded during the protests last year. “For us, the white paper is a joke.”
Abu Ali, a merchant in Baghdad’s Shorjah business district, fears what the next few months will have in store. The state is the main source of employment for Iraqis and civil servants are the lifeblood of their business.
“The delays in wage payments have had a direct impact on the market,” he said. “If these delays continue our business, the economy will collapse.”
Abdul-Amma’s September salary was 45 days late and he still has not received the October salary that was due to come on the first of the month. He’s also worried about the months ahead.
“I have a history of chronic heart disease and one of my daughters is sick too,” said the father of four. He pays $ 100 a month in medical fees.
For the architects of the reform paper, however, it is part of the problem: the inflation of the public sector is the number one priority for reform.
“We hope that the civil service and bureaucracy will see a need for change,” Treasury Secretary Ali Allawi said in a recent interview with The Associated Press.
Iraq relies on oil exports to finance 90% of state revenues. That revenue has dropped to an average of $ 3.5 billion a month since oil prices collapsed earlier this year.
That’s half of the $ 7 billion a month it takes to cover urgent expenses. According to the Treasury Department, US $ 5 billion of this is accounted for by public sector salaries and pensions. Iraq also imports almost all of its food and medicines. With foreign exchange reserves of $ 53 billion, the World Bank estimates the country can sustain these imports for another nine months. Foreign debt accounts for another $ 316 million.
The poor productivity of public sector workers is at the heart of the problem, Allawi said.
“We have a low productivity, high cost public sector that doesn’t really make a living,” he said. “One way or another, this problem needs to be addressed, either by reducing the number of politically difficult people, lowering salaries … or increasing productivity.”
The White Paper calls for public sector payments to be reduced from 25% of GDP to 12%, without specifying how. Officials said one move could be to restore taxes on civil servants’ services that previous administrations had overturned.
In order to meet its monthly obligations now, the government had to borrow internally from its foreign exchange reserves. Application for a second loan of USD 35 billion b
–
