Iraq’s Finance Min Resigns Over Lack Of Reforms That Were Never Going To Happen

(Iraq Business News)

August 16 Iraq’s Finance Minister Ali Allawi resigned. He said he was disappointed that the Kazemi government never carried out the reforms that he advocated for. When Allawi took office Iraq was in the middle of an economic crisis due to the collapse of oil prices. The minister’s plans were consistently blocked by parliament and then dropped all together when petroleum prices went back up.

 

In 2020 Iraq faced two challenges. First a price war between Russia and Saudi Arabia and then COVID led the oil market to plummet. Iraqi oil sold for an average of $61.09 per barrel in 2019. Suddenly prices fell to $13.80 a barrel in April 2020. Revenues went from $6.1 billion in January to just $1.51 billion in April 2020. As the most oil dependent country in the world this had a devastating effect upon the country. Iraq for instance has a large and growing public work force and pensions. This was all threatened by the decline in the oil industry.

 

Finance Minister Allawi talked about a series of measures to deal with this situation. That included cutting government salaries, pensions and benefits, devaluing the dinar and borrowing to cover costs and controlling the borders and instituting tariffs and taxes to increase revenue. Much of this was included in a White Paper but little of it was implemented due to opposition by the ruling parties.

 

Allawi’s proposals were largely stymied by parliament. The lawmakers for instance passed one borrowing bill but then rejected another saying it opposed any foreign borrowing which Allawi proposed. Baghdad had to borrow from the Central Bank of Iraq. The cabinet passed several spending cuts in an austerity package but that was rejected by parliamentarians. Finally, he pushed for Baghdad to assert control over the border crossings and impose tariffs but the central government proved feckless in the face of political parties, the Hashd and the security forces that ran them for their own profit. The only thing he succeeded in was devaluing the dinar which reduced its large foreign spending and preserved its foreign reserves. In 2019 Iraq bought $21 billion in non-oil goods for instance. The ruling parties felt that Allawi’s plans would threaten their patronage and profit networks. Handing out jobs for instance is one of the main ways the elite maintain their bases and they would not accept any reductions in this system.

 

Overall Allawi seemed to be fooling himself about his role. First Prime Minister Mustafa Kazemi heads a caretaker government. It has no mandate to do anything let alone trying to change the way the economy operates and how the ruling parties run the state. Second Iraq has only carried out serious reforms one time with the land reform program of General Qasim. That broke up the power of the large landlords that were one of the main bases of the monarchy and accounted for most of the members of parliament. This came after a coup and the ending of the kingdom by murder. Otherwise, the elite has maintained its power through all the different regimes and the present is no exception. With oil prices back up to over $100 a barrel with the war in Ukraine all talk of change has ended. As a result, there really was no reason for Allawi to stay in office.

 

SOURCES

 

AIN, “The Minister of Finance pledges the disbursement of salaries to employees by voting on the borrowing law,” 10/4/20

 

Aldroubi, Mina and Mahmoud, Sinan, “Iraq faces economic shock after currency devaluation,” The National, 2/21/20

 

Bas News, “Iraqi Finance Minister Resigns,” 8/16/22

 

Gebeily, Maya, “Without urgent reform, Iraq economy will face irreparable shocks: minister to AFP,” Agence France Presse, 6/22/20

- “’Worse than a jungle’: the cartel controlling Iraqi borders,” Agence France Presse, 3/28/21

 

Al Mada, “The Minister of Finance fails to persuade the House of Representatives to vote on the borrowing law,” 6/10/20

 

Porter, Lizzie, “Economic reforms hampered by political divides,” Iraq Oil Report, 3/14/22

 

Porter, Lizzie, Hussein, Mohammed, Tahir, Rawaz, “Facing liquidity crisis, Iraq presses for more emergency borrowing,” Iraq Oil Report, 10/6/20

 

Sowell, Kirk, “Iraq’s Dire Fiscal Crisis,” Sada, Carnegie Endowment for International Peace, 11/2/20

 

Zidane, Salam, “Iraq automates its customs service to reduce corruption at border crossings,” Al Monitor, 6/22/21