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“The Iraqi government has officially adopted the economic reform program prepared by the Emergency Cell for Financial Reform, which is known as the “White Paper”. 👇

The Iraqi government publishes a summary of the objectives and themes of the white paper for economic reform

Baghdad Today – Baghdad

The Iraqi government has officially adopted the economic reform program prepared by the Emergency Cell for Financial Reform, which is known as the “White Paper”.

And the Iraqi government website published a summary of the objectives and themes of the White Paper for Economic Reform, in which it stated:

(The White Paper) is a comprehensive roadmap that aims to reform the Iraqi economy and address the serious challenges facing it, which have accumulated over the past years due to wrong policies, mismanagement, corruption, and the absence of planning in addition to the almost total dependence on oil as a primary source of state revenue.

Deputy Prime Minister and Minister of Finance of Iraq d. Ali Allawi said that “the white paper aims to restore balance to the Iraqi economy, and put it on a path that allows the state to take appropriate steps in the future to develop it into a diversified, dynamic economy that creates opportunities for citizens to live a decent life.”

Although the current financial crisis that Iraq is going through is linked to the sharp decline in oil prices and the repercussions of the Corona pandemic, the (White Paper) clearly indicated, supported by figures and facts from specialized international sources, that the roots of the crisis go back decades.

The White Paper reviewed a series of factors that distorted the Iraqi economy and undermined its ability to provide a decent life for large segments of Iraqis, and led to its failure to keep pace with the economic developments that the world witnessed, including:

The state’s role in the economy expanded
Perhaps one of the main reasons that led to the deterioration of the Iraqi economy, which were identified by the “white paper” is the expansion of the Iraqi state’s role in the economy.

For decades, the Iraqi economy was exposed to a series of shocks that led to the creation of an economy directed by the state, starting with the nationalization policies of vital sectors in the seventies of the last century. Then wasting opportunities to change this trend since 2003 and the failure of the new political system in Iraq to build a free and diversified economy in accordance with the principles of the Iraqi constitution.

The expansion of the role of the state, especially the increase in the number of workers in the public sector of various types and the expenses of their salaries and the salaries of retirees, came at the expense of spending on the basic infrastructure in the country and investment in it.

For example, from 2004 to 2020, state expenditures on salaries of employees and retirees increased by 400% in real terms, and the total number of workers in the public sector more than tripled.

Between 2006 and 2018, average public sector salary payments increased by 134%, more than the increase in labor productivity, which rose only by 12%, or the cost of living, which rose by 28% during this period.

Over the past 17 years, the salary expenditures of the employees, who today number 4 and a half million employees, and the retirees, who number two and a half million retirees, have become the most growing expenditures in the successive Iraqi budgets during this period.

Decline of the private sector
The expansion of the state’s role, in addition to the complex administrative system and the weakness of successive governments in imposing the rule of law, in addition to the militarization of society and the growing influence of non-state actors in public institutions, led to the decline of the Iraqi private sector, with the exception of a number of small and medium companies operating in the oil and telecommunications sectors in addition to Very small companies operating in the fields of trade, retail, transportation, construction, hospitality and textiles, with almost complete absence of these companies in the field of manufacturing goods for sale.

Most of the largest companies in the private sector depend on providing services to the state and government contracts.

Collapse of oil imports and the Corona pandemic
The White Paper also identified other factors that led to the deteriorating economic situation that Iraq is going through, most notably the collapse of oil imports and the Corona pandemic, mismanagement, lack of planning and weak financial institutions in Iraq, especially the Ministry of Finance, the absence of modern coherent systems for managing imports, and the weakness of the system Banker, and the absence of automation in government procedures, in addition to the destruction of infrastructure and the costs of the war against these terrorist gangs by ISIS.

Two strategic goals
The White Paper seeks to achieve two strategic objectives. The first is to initiate an immediate reform program to address the budget deficit to provide the time and financial spaces for implementing reform plans in the medium term.

While the second goal seeks to put the economy and the budget on a sustainable path, after which Iraq can finally decide and choose the economic direction. Thus, immediate reforms and reforms in the medium term need between 3 to 5 years to implement.

Axes of reform
The (white paper) identified reforms in the following areas:

The first axis: achieving sustainable financial stability and providing an opportunity to achieve other structural reforms
The most prominent trends of this axis:

Reducing the primary budget deficit from 20% to 3% of GDP and reducing salary expenditures from 25% to 12.5%
Collecting electricity wages from all users according to the real fuel price in global markets
Activating the program to recover stolen and stolen money
Increase customs and tax revenues
Reform the retirement fund and gradually stop financing it from the budget
Financial management systems reform
Study the current exchange rate of the dollar against the dinar
The second axis: achieving strategic economic reforms and providing sustainable job opportunities
The most prominent trends of this axis:

Rehabilitation of the banking system through the development of private banks, the reform of government banks, and the introduction and activation of the (basic banking system) in the Rafidain and Rasheed banks.
Accelerate the development of electronic banking services
Opening specialized markets such as the commodity market and the currency exchange market
Activating the sectors driving the economy, such as agriculture, oil and gas
Achieving an actual increase in the private sector’s contribution to economic activity by activating the private sector support fund and simplifying procedures
Providing job opportunities in the private sector and supporting small and medium enterprises
Adopting a national strategy for education and training that links educational outcomes with the future need for the labor market
The third axis: improving the basic infrastructure
The most prominent trends of this axis:

Increasing the effectiveness of the performance of the various joints of the electric power system in Iraq
Developing digital infrastructure, by introducing advanced technology (fourth generation) at the beginning of next year, and preparing for the introduction of (fifth generation) technology
Modernizing the legal and regulatory framework for the transport sector in order to achieve increased financing for infrastructure projects in it by moving towards attracting investments and building partnerships between the public and private sectors.
Development of industrial cities and free zones in Iraq
The fourth axis: Providing basic services and protecting vulnerable segments during and after the reform process

The most prominent trends of this axis:

Providing potable water, irrigation and completing sanitation networks
Begin building 1,000 new schools within the period of the reform plan
Completely redrawing the social protection system, and unifying the different types of support
Establishing a unified and financially sustainable pension system for all Iraqis working in the public, private, cooperative and mixed sectors
Completing the health insurance bill and implementing it, in a way that guarantees basic health services for all citizens
The fifth axis: developing governance and legal systems to enable institutions and individuals to implement reforms
The reform program determines the completion of the National Information Center project to automate the process of providing service to citizens, especially the procedures for obtaining citizenship, passports, retirement and social security as a priority. The White Paper on Economic Reform

The most prominent trends of this axis:

Review and amend instructions for implementing government contracts
Cooperating with criminal investigation organizations to reduce the large sums that are smuggled out of Iraq
Introducing an electronic governance system in the field of government contracting and tax and customs collection
Completing the National Information Center project to automate the process of providing service to citizens, especially the procedures for obtaining citizenship, passports, retirement and social security
Implementation of the electronic signature and electronic transactions law and the phasing out of paper transactions
A detailed implementation plan will be launched later that includes the required procedures, the concerned parties for implementation, timelines and mechanisms to follow up the implementation of the White Paper.