Economic and political analysts confirm that the size of Iraq ‘s accumulated debts have exceeded $ 100 billion, with many of the problems suffered by the Iraqi economy, and the amount of public debt that has accumulated on the country , this was the result of the collapse in oil prices, and the costs of the war being waged against al Daesh.
They also affirm that the termination of the file of Iraq ‘s foreign debt and settling it is very important process because it will be positively reflected on the country ‘s economy and encourage foreign companies to invest in the country and the development of the banking sector.
The Institute of progress of the development policies ,” at a seminar held in the Baghdad by the government for the disclosure of the details of internal and external debts , owed by Iraq , whether those belonging to the former regime, or those that has been borrowed by governments after 2003, and the clarification of the areas of its spending, and the extent of its achievement to the aims of its borrowing .
Former MP Mehdi al – Hafez , who moderated the symposium pointed out that the loans of World Bank , and the Islamic Development Bank, and the European Union, and Japan, in addition to the traditional debt of some of the Gulf states stands heralded in foreign financial dealings of Iraq.
He noted there is a case of a misunderstanding between the different circles in the country on the international loan that will be granted to it , between supporters and opponents, calling to clarify some things related to this file, Will these loans be important to Iraq, or whether it can be abandoned, and reliance on vulnerable local resources with the exception of oil revenues that occupy the largest space in the financial coverage .
Hafiz pointed out that general circumstance of the country is bad and difficult, and unnatural, and should address its political and financial crises, through proper management and real review of the political, financial management, noting that Iraq in its current position is unable to decide anything because the crisis of its political system which is incapable of determining the interest of the country according to objective criteria, and this is a big problem, according to Hafiz.
According to reports of the US Inspector General for the reconstruction affairs to a loss of 6.6 billion dollars since the change in Iraq in 2003, and the establishment of foreign Coalition Provisional Authority, Hafiz affirmed of uncertainty of spending of (6.6) billion dollars from the funds of «Development Fund for Iraq»; who confirms that the standards of appropriate control on the money of the fund is vulnerable to the manipulation, waste , and abuse.
Hafiz said that ” the International Council for advice and oversight” made a lot of questions about the inefficiency of financial performance at the time.
And the al-Hafedh pointed out that the debt is familiar financial issue to a lot of countries , and perhaps that it is consistent in importance with the national needs of each country, and stressed that Iraq is committed to reorganizing its relations with the World Bank and the International Monetary Fund under Security Council resolution 1483, for the year 2003 and to seek to settle the debt with the Paris Club .
He added that Iraq today has two key choices first the continuing desire to obtain external financial support, due to the agreement , which took place in the Paris Club in 2004, and to compel Iraq to some foreign debts and its interests , and the other is the search for Iraq ‘s money and restore it in response to national interests.
The financial advisor to the Prime Minister, Dr. Mudhher Mohammed Saleh said reviewing important details, as he revealed about the value of the debt on Iraq as follows:
* the debt in 2004 , $ 100 billion were removed .
* Sovereign debt (owed) for 65 countries , 19 of them within the Paris Club 0.46 outside the club.
* Commercial debt amounting to $ 19 billion, and includes
– a small debt of 35 million, $ 4 billion were paid out of $ 19 billion debt.
– Large debts reduced by 80%, and the rest has been scheduled on 18 – year,
to be paid in semi – annual installments, and the first Iraqi support was issued worth 2.7% of the large debt, so the debt has fallen from $ 19 billion to $ 5 billion.
* Debt of Gulf Countries that Salih considered it a problem , although it without interest,
* Russia ‘s debt was handled within the Paris Club, it has been reduced to 100% This is useful for Iraq.
The internal debt:
And represent 45% of the value of public debt, and the central bank contributed to the availability of these debts after deducting transfers to the lack of possibility to the other banks, but not with this policy , the economic situation in Iraq may have been exposed to the great problems for the payment of salaries and wages from the central bank reserves, for this reason the reserve of the country was fallen according to Saleh.
The internal debt is divided into two classes:
* First borne by banks and the Ministry of Finance undertakes to pay it, such as the salaries of companies.
* The second it belongs to the former regime , and (related to print of currency).
Saleh revealed that the real debt amounted by 17 billion + 6% interest +41 of Gulf debt + 46 domestic debt.
Thus , the total Iraqi debt becomes almost $ 110 billion and Salih disclosed that Iraq ‘s relationship with the World Bank and International Monetary Fund began in 2004, and we can not ignore the reasons that led to the deterioration of the situation in the country because of local politics that brought us to this situation, stressing that if we want to take the right decisions , it should be a proper management according to the standards of governance that are managed through the democratic institutions in the country.
Paris Club: is an informal group made up of 20 state – consisting of financial officials , financiers , and the economies of these countries is are one of the largest economies in the world, which provides financial services such as rescheduling the debts for the indebted countries .
New loans :
• Post – conflict agreement , Iraq will get under which a loan of $ 700 Million to set the Convention, but Iraq did not receive this loan until to be classified within the post-conflict countries for the international community contributes to the write – off of debt by 90%, but after the rise in prices oil , the Monetary Fund called Iraq to reschedule its debts, depending on the extent of the possibility of Iraq for the debt sustainability and repayment of it so the case of sustainability and payment was amended of 10 to 20% after the improvement of oil prices.
•debt for the year 2017 and Iraq will get it from the International Monetary Fund, which pledged to give $ 5.3 billion, and Iraq received to 1.250 billion dollars and the World Bank pledged for $ 3 billion in Iraq where Iraq received a billion dollars in addition to billion dollar which came as an aid, and there are government bond worth two billion dollars, to enable Iraq to enter the financial markets, including the billion dollars guaranteed by the US government with an interest rate of 2.4%.
•There is another bond of one billion dollars noting that Iraq during this year will receive 1.250 billion dollars from the International Monetary Fund, and another billion from the World Bank and another billion will get it from sources (Germany and Italy) under the commitments of Seven industrialized nations that have pledged about $ 4 billion, and that the All of these are soft loans, as he said, and does not involve any prejudice against Iraq and they are repaid over 18 years, including 5 years as a grace with simple interest.
Salih warned of dealing with the debt profile so that the country does not reach to the loose phase , indicating that the debt will be subject to an external auditor in accordance with international standards to shed light on the case of the debt in a precise and detailed setting, the report will be issued in the coming period.
He stressed to reconsider the Convention of «Paris Club» before 2020 to begin repayment , which could expose the country to the crisis in 2022 , and the move will be through diplomatic channels, and includes a total debt of Iraq, and renegotiate the countries that have debt belonging to the former regime.
The head of the Federal Board of Supreme Audit , Dr. Salah Nouri addressed in the same symposium another aspect of Iraq ‘s debt profile, indicating that the loans are divided into two categories:
.Class I , for the purpose of financing the deficit in the general budget of the state for which it is going on now negotiations with IMF and the World Bank to secure ministerial and provinces commitments , including to pay dues of Contractors , explaining that these interests can not be paid before the approval of the Board of Supreme Audit noting that it has been achieved good thing in this field in addition to what has been achieved with respect to the dues of farmers , which completion rate has reached to 80% and there are 729 billion dinars ready to pay in dues of Contractors amounted 4.8 trillion dinars , indicating that “the Board” seeks to settle the dues , according to the completion of the audit of each batch .
•Class II ,a developmental debt ,which is allocated to finance the development projects in health, oil, water, sewer and other emergency project areas, which are very important projects; as they provide services to citizens, and should be followed up by the concerned authorities to ensure that the loans are consistent with the goals came for it .
Nuri pointed out that in 2012 it was set up a fund linked to the prime ministry headed by the Undersecretary of the Ministry of Finance, and his mission is the follow – up and the search for Iraq ‘s money which is not known or is not documented, but the fund is unable to perform its mission which it was established for it .
He disclosed for providing one of the American companies offer to follow up to $ 3.5 billion of lost money of Iraq and including money which is present in Beirut for a commission and an agreement was signed with this company, but the agreement was cancelled shortly after the start of work after that the names of the employees were published in the newspapers, and therefore they would be at risk of liquidation because the chairman of the company himself is a former US official.
The banking expert Samir Nasiri, stressed that the government to borrow is the mismanagement of public funds and failure in managing the economy and the wrong policies, and lack of access to financial abundance, calling for the disclosure of the details of debt file in a framework of transparency and the right of people to hold the government accountable .
Alnasiri urged economic elite to hold the government accountable for the budget and the mechanics of calculating the price of a barrel of oil , after rising to $ 55 , and thus it is supposed to have a difference to fill the budget deficit, and dispense of the country with borrowing and should keep the people acquainted on these details.
Economic expert , Dr. Abdullah al – Bandar pointed to World Bank loans despite the decline in its interest , but payable by the specified time, and does not accept compromises and the basic problem is the lack of coordination between monetary and fiscal policies during the period 2004 -2016 with regard to the debts .
And al- Bandar added that the follow – up to international grants were not clear as well as the assets of Iraqi officials abroad are also not clear, pointing to the Audit of contracts with contractors, which should have been done in advance to bind the government to pay their dues without the need to check now.
And the Bander pointed to a contradiction between Iraq ‘s obligations with the IMF included to stop the appointment in general.
Financial expert , Dr. Obaid Mahal warned of the danger of dependence on oil in the repayment of the loan, for fear of being any problem, and many problems, calling for loans that are directed to projects that gives revenues from which to pay the interests of the loan.
He said the loans do not be addressed by the “accounting” but “statistically ” by the Ministry of Finance, if the record was stolen , all the debts would be disappeared , stressing that ” the fund to follow – up Iraq ‘s money abroad was ” born dead, because it was linked to the Prime Minister and chaired by the Undersecretary of the Ministry of Finance sunk in his problems , as well as its employees in it that they are the representatives of government agencies, and they meet only once a month or even two months while to follow the debt needs an institution working daily, and this reveals the lack of seriousness in pursuing the recovery of Iraq ‘s money abroad noting that it has gone years and has not achieved anything noteworthy.
The economic expert Basim Jamil Antoine called to find a specialist administrative and efficient system for the management of the debt file , a country mired in unproductive debts and there is no reform in the industry and agriculture sectors.
The diplomat Ghalib Anbuge stressed to activate the diplomatic side of its both political and economic branches by the foreign ministry to follow the file of Iraq ‘s foreign debt , indicating that this is file is not pursued by the Ministry of Foreign Affairs and this represents a clear flaw which is not bad to take advantage of the information available to some foreign people in respect of the Iraqi funds abroad in return for cash.
The expert Azzam Badie Bakir from the financial Commission, sees that it must to bring back the fifties experience as it was the establishment of a council of reconstruction and the resulting of an important projects in agriculture, irrigation, industry and others.
And he pointed out that the main supplier of the Iraqi economy is oil due to the decline in the contribution of other sectors , and that the content of the investment budget is maintenance work , not economic projects work , and there is a big waste of money in the three presidencies , the judiciary and provincial councils , calling for a review of the debt spending and where it has gone because future generations who will bear the sins of the debt that are not directed towards real development.
But oil expert Hamza Jeweler called for a mechanism to pay the dues of contractors through the payment rate of up to 70% with a remaining subject to the completion of the audit in its final form, adding that the difference between the price of oil on the world market and the sale of oil of Iraq, amounting to about $ 7 and part of the price difference should go to pay off the budget deficit.
The present debt, as a result of the lack of state financial revenues and the lack of alternative productive sectors for oil reliable despite the existence of economic fundamentals , which can be utilized to maximize the financial resources of the state.
Through the previous studies and researches showing that there is a debt crisis sharply, and will be increased if the borrowed money has tended to finance consumption and unproductive investments .
And Iraq must resolve the problem of external debt or mitigation, to create a sense of balance and economic stability, it is necessary to formulate new policies to establish a climate for appropriate economic development of the country in order to address the negative repercussions of these debts of poverty and marginalization and subordination and dependence to international financial institutions, particularly the International Monetary Fund , which classified Iraq as a fragile state due to regional conflicts; resulting in a decline in gross domestic product and rising inflation, calling on Iraq to cope with low oil prices.
Unit Economic Studies
Translated by : Mudhaffar al-Kusairi
Rawabet Research and Strategic Studies Center