Iraq has $70bn in reserves to keep economy afloat for 6 months to a year: MP
ERBIL, Kurdistan Region – Baghdad can weather the economic impact of coronavirus and the collapse of world oil prices for six months to a year by dipping into foreign reserves worth $70 billion, a member of the Iraqi parliament’s finance committee told Rudaw.
Even if the ongoing political deadlock in Baghdad is resolved and MPs pass the delayed 2020 budget, Iraq’s coffers are steadily being emptied by the coronavirus lockdown and a plunge in the price of oil – the government’s primary source of income.
Sherwan Mirza, a Kurdish lawmaker and a member of the Iraqi parliament’s finance committee, told Rudaw on Saturday the country will weather the storm by dipping into its substantial foreign reserves.
“In cases of emergency, Iraq will resort to its reserves available at the Central Bank amounting to $70 billion,” Mirza said.
World oil prices fell below $30 per barrel last week as a result of a standoff between rival producers Saudi Arabia and Russia.
At least 90 percent of Iraq’s federal funds come from oil sales. Analysts warn the ongoing political deadlock in Baghdad is anchoring Iraq to the spot when it ought to be preparing for rough economic seas ahead.
“Iraq is able to bear the situation for around six months to one year to pay its civil servants and fund other sectors,” Mirza said.
“Iraq is experiencing a bad economic situation. And if the situation continues, it will get worse. Around 93 percent of Iraq’s revenues come from oil sales.”
Borrowing might be Iraq’s best chance of navigating these challenges, Mirza said.
“Borrow money internally and externally to prepare to respond to the coronavirus threat on one hand, the fight against extremist groups such as Daesh [the Islamic State], which still maintains a presence, on the other, if the oil price continue to drop,” he said.
Although the Islamic State group (ISIS) lost all of its urban strongholds in Iraq in late 2017 and in Syria in early 2019, ISIS remnants and sleeper cells continue to launch attacks against military and civilian targets in the disputed territories between federal Iraq and the Kurdistan Region.
The massive reconstruction and stabilization effort Iraq requires has now been set back by the need to contain the coronavirus.
As of Friday, the total number of confirmed cases nationwide has reached 458. Forty people have died and 122 have recovered since the outbreak began.
Businesses have been forced to close and free movement curtailed, leaving many out of work and without a steady income.
No budget
Already three months into the year, parliament is yet to approve a budget plan for 2020. Mirza expects the terms of the 2019 budget will be carried over.
Public sector workers in Iraq and the Kurdistan Region are concerned they will not be paid owing to the disruptions caused by the COVID-19 lockdown and political disarray.
“According to the 2019 budget law the Kurdistan Region’s employees will not face any problems as Baghdad sent the full 12-month salary of the KRG civil servants last year,” Mirza said.
Another lawmaker has also predicted a 2020 budget won’t materialize given the collapse of world oil prices.
“If the current crisis of oil continues, the Iraqi parliament will be unable to approve the 2020 budget plan,” Haitham al-Jiboury, head of the Iraqi parliament’s finance committee, told Rudaw English in a recent telephone interview.
The KRG needs 894 billion dinars ($755.5 million) each month to pay its employees. More than half of the money, 453 billion dinars ($382.8 million), is paid by Baghdad.
There have been frequent delays to employee salaries in recent years due to the ISIS conflict, repeated financial crises, and federal budget cuts.
Deadlock
Iraq has not had a fully-functioning government since last December, when caretaker Prime Minister Adil Abdul-Mahdi resigned in the face of mass protests over unemployment, corruption, and the lack of basic services.
His replacement, Mohammed Tawfiq Allawi, also resigned in early March after he failed to win parliamentary approval for his cabinet.
The task has now fallen to former Najaf governor Adnan al-Zurfi – an unpopular choice among Iraq’s powerful Shiite blocs and anti-government protesters.
The deadlock has hobbled Baghdad’s response to protester demands and post-war reconstruction. Conflict and insecurity continue to blight the country.