Kurdistan’s independence referendum from an economic point of view
By Tara Shwan
This is not a political opinion, but an economic point of view. Some people in the Kurdistan Region oppose the proposed referendum for independence just because it's adopted by a certain party, while others argue that this isn't the right time for a serious step like that as the Region is suffering from severe economic crisis.
However, looking at the current economic situation of the Kurdistan Region, we can conclude that the best solution is Independence.
The economic situation in the Kurdistan Region is the worst has ever been, since 2014, the main reason being its, and Iraq’s, dependence on oil for 95 percent of its revenues. Yet for Kurdistan the crisis was way bigger than it was for the rest of Iraq. There are of course several other factors that could be summarized as follows:
1. Despite an increase in overall oil production, oil revenues have decreased significantly since 2014 due to a sharp decline in oil prices.
2. Disputes with the central government over oil, where the central government opposes KRG’s independent exports, which the KRG claims to be its “constitutional right” to manage its resources. As a result relations between Erbil and Baghdad have worsened. 17% of the national annual budget is earmarked for to the KRG, but since the beginning of 2014 when the federal government blocked Erbil’s budget no funds have been disbursed. Even when the KRG was supposedly getting its 17% share of Iraq’s budget, in reality it received much less than that. In addition it has had to care for hundreds of thousands of Iraqi refugees.
3. The expansion of the Islamic State (ISIS) and its war against the Kurdistan Region.
4. A big wave of internally displaced people (IDPs), and refugees to the Kurdistan Region, amounting to 1.8 million.
These were other factors that led to this financial crisis, which has halted nearly 6,000 projects and led to a market slowdown. According to some estimates, the Kurdish Government’s debts had reached $20 billion by January 2016.
In the midst of all this, KRG's hands are tied. It cannot adopt any methods that other countries can in rescission times, because the KRG is not an independent country. It has to turn to Baghdad for everything, and we all know there is no hope for any solution through Baghdad, as relations between Erbil and the center have been worsening day after day.
Not being an independent country the KRG:
1. Cannot print money.
2. Cannot reevaluate exchange rate
3. Cannot borrow money.
4. Does not have control over monetary policy.
Once the Kurdistan Region declares independence it can adopt all the abovementioned methods that any country could do to overcome an economic crisis. The present situation of being tied to Iraq lessens any hope for a recovery.
In the meantime, long-term solutions to the economy is that the KRG improves and develops other economic sectors such as: agriculture, industry, commerce, banking, and tourism.
The Kurdistan Region should therefore be very serious and active in declaring independence and shouldn't worry about approval from the international community. No country would ever come and help or encourage the Kurdistan Region to become independent, as the international community has its own obligation towards Iraq as a sovereign country. Once the Kurds insist on independence, most countries, especially the United States and European countries will support them. These countries have democratic systems and would be unlikely to oppose the will of the Kurdish nation in pursing their dream for independence.
The views expressed in this article are those of the author and do not necessarily reflect the position of Rudaw.
This is not a political opinion, but an economic point of view. Some people in the Kurdistan Region oppose the proposed referendum for independence just because it's adopted by a certain party, while others argue that this isn't the right time for a serious step like that as the Region is suffering from severe economic crisis.
However, looking at the current economic situation of the Kurdistan Region, we can conclude that the best solution is Independence.
The economic situation in the Kurdistan Region is the worst has ever been, since 2014, the main reason being its, and Iraq’s, dependence on oil for 95 percent of its revenues. Yet for Kurdistan the crisis was way bigger than it was for the rest of Iraq. There are of course several other factors that could be summarized as follows:
1. Despite an increase in overall oil production, oil revenues have decreased significantly since 2014 due to a sharp decline in oil prices.
2. Disputes with the central government over oil, where the central government opposes KRG’s independent exports, which the KRG claims to be its “constitutional right” to manage its resources. As a result relations between Erbil and Baghdad have worsened. 17% of the national annual budget is earmarked for to the KRG, but since the beginning of 2014 when the federal government blocked Erbil’s budget no funds have been disbursed. Even when the KRG was supposedly getting its 17% share of Iraq’s budget, in reality it received much less than that. In addition it has had to care for hundreds of thousands of Iraqi refugees.
3. The expansion of the Islamic State (ISIS) and its war against the Kurdistan Region.
4. A big wave of internally displaced people (IDPs), and refugees to the Kurdistan Region, amounting to 1.8 million.
These were other factors that led to this financial crisis, which has halted nearly 6,000 projects and led to a market slowdown. According to some estimates, the Kurdish Government’s debts had reached $20 billion by January 2016.
In the midst of all this, KRG's hands are tied. It cannot adopt any methods that other countries can in rescission times, because the KRG is not an independent country. It has to turn to Baghdad for everything, and we all know there is no hope for any solution through Baghdad, as relations between Erbil and the center have been worsening day after day.
Not being an independent country the KRG:
1. Cannot print money.
2. Cannot reevaluate exchange rate
3. Cannot borrow money.
4. Does not have control over monetary policy.
Once the Kurdistan Region declares independence it can adopt all the abovementioned methods that any country could do to overcome an economic crisis. The present situation of being tied to Iraq lessens any hope for a recovery.
In the meantime, long-term solutions to the economy is that the KRG improves and develops other economic sectors such as: agriculture, industry, commerce, banking, and tourism.
The Kurdistan Region should therefore be very serious and active in declaring independence and shouldn't worry about approval from the international community. No country would ever come and help or encourage the Kurdistan Region to become independent, as the international community has its own obligation towards Iraq as a sovereign country. Once the Kurds insist on independence, most countries, especially the United States and European countries will support them. These countries have democratic systems and would be unlikely to oppose the will of the Kurdish nation in pursing their dream for independence.
The views expressed in this article are those of the author and do not necessarily reflect the position of Rudaw.