Iraq’s 2018 Budget Passed, Angers Kurds And Hashd Questions IMF

On March 3, 2018, Iraq’s parliament passed the 2018 budget. The bill had been stalled for months due to arguments over allocations. Sunni parliamentarians for example wanted more money for reconstruction. Kurds on the other hand were angered when their 17% was cut, and then done away with. Eventually Shiite and Sunni MPs came to an agreement and passed the legislation, while the Kurds boycotted. Some Hashd elements were also upset over their salaries and benefits. The budget also raised questions over whether Iraq was following its agreement with the International Monetary Fund to impose austerity measures.

The 2018 budget is for 104 trillion dinars, roughly $88 billion. 24.6 trillion dinars of that, about $20.2 billion is for the capital budget aimed at investment and reconstruction. It is based upon 3.8 million barrels a day in oil exports selling at $46 per barrel. The Kurdistan Regional Government is to provide 250,000 bar/day of that total. There is a projected 12.5 trillion dinar, $10.58 billion deficit. The highest the country’s oil exports have reached since 2003 is 3.5 million barrels a day, which happened in November and December 2017. Differences between Baghdad and Irbil in the aftermath of the September 2017 independence referendum also means the Kurds will not be delivering any oil to the central authorities anytime soon. That being said Iraqi oil is selling for over $60 per barrel, which means those two may not be major issues.

The Kurds were also the major losers in the budget. During early debates over the bill, MPs cut the KRG’s allocation from its traditional 17% down to 12.67%. The final version of the law did not have any set amount for Kurdistan saying it would get a portion based upon its population, which was a step towards treating the region’s three provinces like the other 15 in Iraq. It also stated if the Kurds didn’t export their quota of oil those revenues would be deducted from their allocations. The Kurdish parties had been arguing over these points and starting in February boycotted parliament in protest. In the end, they were not needed to find a quorum and pass the budget. They are now talking about asking President Masum who is from the Patriotic Union of Kurdistan to veto the budget, while others have threatened a lawsuit. Baghdad and Irbil have argued over the budget for years. Under the Maliki administration, the government cut off sending money to the KRG over objections to its oil policy. After the September referendum, Prime Minister Haidar Abadi imposed sanctions upon Kurdistan. The reduction of the region’s budget is part of that policy. The Kurds have no leverage in this matter, and were out voted in parliament. The premier on the other hand has no desire to make a deal until after the May elections since it will help him in his campaign.

Another group complaining about the new law is the pro-Iran Hashd. The Fatah list, which represents many of these groups such as Badr claimed that the budget did not give the Hashd equal pay and pensions as the Iraqi forces, which had been promised since 2016. Asaib Ahl Al-Haq’s Qais Khazali, and others have voiced similar views. They have charged the government with ignoring their sacrifices in the war by not giving them what is due.

Finally, the new budget brings up questions for Iraq’s agreement with the IMF. A few years ago, oil prices collapsed and Iraq went to the International Fund for assistance. As a result, Iraq has to implement austerity measures and set aside money for reconstruction. In the next five years, Iraq is to come up with $50 billion from its budget for rebuilding war damage. That is within the means of Baghdad, but it has to allocate those funds and spend it wisely. Because of poor planning, lack of capacity, and corruption, Iraq has always had a hard time using its capital budget. On the austerity and reform front there has been varying reports. On the one hand, parliament, the president’s and premier’s offices, and cabinet cannot appoint any new officials. It also sets a 5% sales tax and 20% tax on mobile phones. On the other hand, the sales tax was supposed to be 10% but was reduced, the cuts in salaries and pensions for government workers were ended, the cabinet can add money for salaries and pensions if there are shortages, and fired employees from the Interior and Defense Ministries would be re-hired. That’s quite a mixed bag. There’s also the fact that since 2005 Iraq has never implemented any of its reform plans despite years of work with the IMF, World Bank and various U.S. agencies such as the United States Agency for International Development (USAID).

SOURCES

Aboulenein, Ahmed and Rasheed, Ahmed, “UPDATE 2-Iraqi parliament approves budget, Kurdish lawmakers boycott vote,” Reuters, 3/3/18

Baghdad Post, “Kurdish blocs to resort to Federal court to challenge state budget,” 3/2/18

- “Most important clauses of Iraq’s 2018 state budget,” 3/3/18

Buratha News, “The Fatah Alliance holds parliament responsible for ignoring the rights of the sons of the popular crowd,” 3/3/18

- “Sheikh Qais al-Khazali: the inequality of the popular crowd with their counterparts in the security services is a betrayal,” 3/4/18

Al Forat, “Information on the 2018 budget in dollars,” 3/3/18

Kullab, Samya, Tahir, Rawaz, “2018 budget passes despite Kurdish boycott,” Iraq Oil Report, 3/3/18

Al Mada, “Parliament approves budget law and provincial elections in the absence of Kurds,” 3/3/18

Al Mirbad, “Deputy explains the important paragraphs of the 2018 budget, which was passed today,” 3/3/18

Rudaw, “Abadi unwilling to hold budget talks with president and speaker,” 2/18/18

- “LIVE: Kurdish MPs say most demands not met in boycotted budget bill including Peshmerga salaries,” 3/1/18

- “MPs: Kurdistan’s effective budget share is far less than 12 percent,” 3/3/18

- “Updated: Shiites and Sunnis pass Iraqi 2018 budget bill, Kurds boycott,” 3/3/18

Sotaliraq, “Parliament takes a decision to cut salaries, compensates the staff of the region and increases taxes,” 2/11/18

Tabaqchali, Ahmed, “’It’s not the donations, stupid’: Key points from the Kuwait conference,” Iraq Business News, 2/21/18