Iraq, Struggling to Pay Debts and Salaries, Plunges Into Economic Crisis

[rvmydinar]

Iraq, Struggling to Pay Debts and Salaries, Plunges Into Economic Crisis

Oil-rich Iraq, its economy hobbled by neglect and corruption, has devalued its currency and had its imported electricity cut off for nonpayment

 

The Shorja market in Baghdad last month. The market has experienced a downturn in sales due to a national financial crisis and the pandemic.Credit...Thaier Al-Sudani/Reuters

By Jane Arraf

• Jan. 4, 2021

BAGHDAD — In the wholesale market of Jamila, near Baghdad’s sprawling Sadr City neighborhood, a merchant, Hassan al-Mozani, was surrounded by towering piles of unsold 110-pound sacks of flour.

“Normally at a minimum I would sell 700 to 1,000 tons a month,” he said. “But since the crisis started we have only sold 170 to 200 tons.”

His troubles are a ground-level indicator of what economists say is the biggest financial threat to Iraq since Saddam Hussein’s time. Iraq is running out of money to pay its bills. That has created a financial crisis with the potential to destabilize the government — which was ousted a year ago after mass protests over corruption and unemployment — touch off fighting among armed groups, and empower Iraq’s neighbor and longtime rival, Iran.

Iran in the past has taken the opportunity posed by a weak Iraqi central government to strengthen its political power and the role of its paramilitaries within Iraq.

With its economy hammered by the pandemic and plunging oil and gas prices, which account for 90 percent of government revenue, Iraq was unable to pay government workers for months at a time last year.

Last month, Iraq devalued its currency, the dinar, for the first time in decades, immediately raising prices on almost everything in a country that relies heavily on imports. And last week, Iran cut Iraq’s supply of electricity and natural gas, citing nonpayment, leaving large parts of the country in the dark for hours a day.

“I think it’s dire,” said Ahmed Tabaqchali, an investment banker and senior fellow at the Iraq-based Institute of Regional and International Studies. “Expenditures are way above Iraq’s income.”

Many Iraqis fear that despite Iraqi government denials there will be more devaluations to come.

“Everyone is afraid to buy or sell,” said Mr. Khalaf, who turned to business when he couldn’t find a job with his degree in sociology.

 

Image

Money changers and customers at a foreign currency exchange market in Baghdad last month, when Iraq devalued its currency.Credit...Thaier Al-Sudani/Reuters

Mr. al-Mozani, 56, the merchant in the Jamila wholesale market, imports flour from Turkey in dollars, until recently selling it for about $22 per sack. In response to the currency devaluation, he raised the price to $30.

A restaurant manager who popped in to ask about the new price of flour, Karam Muhammad, said there was not much demand for the flour. Restaurants, he said, have been mostly empty because of the pandemic and the financial crisis.

In a stall off a narrow, winding alley of the Shorja market, one of Baghdad’s oldest, Ahmed Khalaf sells the smallest luxuries: nail polish, plastic hair barrettes, colored pencils.

Even during the pandemic, by midmorning the stalls in Shorja market would normally be thronged with shoppers buying food staples and household goods. But last week the aisles were nearly empty.

“Our customers are mostly government employees, but as you can see they’re not coming,” said Mr. Khalaf, 34.

While the currency devaluation took most Iraqis by surprise, the economic and financial crisis has been years in the making.

Public sector salaries and pensions cost the government about $5 billion a month, but its monthly oil revenue recently has reached only about $3.5 billion. Iraq has been making up the shortfall by burning through its reserves, which some economists say are already insufficient.

The International Monetary Fund concluded in December that the country’s economy was expected to have contracted by 11 percent in 2020. It urged Iraq to improve governance and reduce corruption.

Protesters set fire to political party buildings and government offices during demonstrations against salary delays in Sulaymaniyah last month.Credit...Fariq Faraj Mahmood/Anadolu Agency, via Getty Image

For 18 years oil revenue has propped up a system in which the government wins support by awarding ministries to political factions, which are given almost free rein to create jobs. Iraq’s Civil Service has tripled in size since 2004. Economists estimate more than 40 percent of the work force depends on government salaries and contracts

 

The financial crisis could put the brakes on this corruption-riddled patronage system. “Every government, they’ve managed to buy out more and more but that buying of loyalty, that buying of acquiescence is over,” Mr. Tabaqchali said by phone from London. The high public payroll has left little spending on infrastructure. Iraq’s economy has also been hit by the coronavirus pandemic, with many workers in the already weak private sector losing their jobs. Mr. Tabaqchali and other economists said the devaluation was a difficult but necessary step in helping Iraqi businesses. With the cost of imports rising, Iraqi goods such as farm produce can more easily compete.

Adding to the misery has been Iraq’s limited ability to pay Iran for electricity and natural gas. Iraq is not allowed to transfer cash to Iran, but instead it sends food and medicine in exchange for natural gas and electricity. Iran says it is owed the equivalent of more than $5 billion.

“Iraq can’t pay all the debt to Iran,” said Abdul Hussein al-Anbaki, an economic adviser to Prime Minister Mustafa al-Kadhimi. “Iran is also facing an economic crisis and we cannot buy gas without paying.”

Amid high temperatures in Baghdad last year, a web of wires drew electricity from private generators to compensate for the country’s unreliable supply.Credit...Sabah Arar/Agence France-Presse — Getty Images

 

 

Part of Iraq’s debt was created by its inability to pay, but the lion’s share, about $3 billion, remains frozen in an Iraqi bank, while Iraq struggles to comply with U.S. sanctions against Iran, Iraqi officials said.

The sanctions, aimed at forcing Iran to accept stronger restrictions on its nuclear program and to curb its support for foreign militias, have blacklisted its banking system.

“For the Iraqis, it is difficult because the mechanism to pay them is almost nonexistent because obviously the Americans are monitoring the situation very closely,” said Farhad Alaaldin, chairman of the Iraq Advisory Council, a policy research institute.

Mr. Alaaldin and others said the financial crisis could lead to renewed protests and struggles between armed groups to control Iraq’s increasingly limited resources.

That Iraq, one of the world’s largest oil producers, cannot reliably supply electricity to its citizens and has to import electricity is symptomatic of the dysfunction that led to antigovernment protests last year and brought down the previous government.

Iraq’s energy infrastructure has suffered from three devastating wars since the 1980s, destroying refineries and power plants. But since the American-led invasion of Iraq overthrew Mr. Hussein in 2003, corruption and incompetence have prevented Iraq’s government from fully restoring electricity.

In addition, although Iraq is awash in oil, most of its electricity plants run on natural gas. Iraq has vast natural gas reserves but has not invested heavily in developing its gas industry. And until the Trump administration levied additional sanctions on Iran, importing electricity gas from Iran was the easiest solution.

Gas flares at the Nahr Bin Omar Oil Refinery in Basra in 2019.Credit...Ivor Prickett for The New York Times

 

 

For the millions of Iraqis who cannot afford electricity from private generators, the power cuts and rising prices have been a double blow.

Haifa Jadu, 55, who had come to Shorja market to buy sesame seeds and walnuts, said she and her husband, a retiree who is blind, had simply done without electricity for large parts of the day.

“We used to pay money to a generator owner, but we haven’t bought power for four months because he increased the price,” she said. She said the walnuts she bought a month ago for about $3.50 a pound were now almost $5 and out of reach.

The government has proposed sweeping measures to try to bolster the economy, including tax increases, in a plan now before Parliament. But many politicians are counting on the prospect of increased oil prices this year to delay passing what economists say are urgently needed reforms.

Until that happens, unemployment is expected to grow as about 700,000 young people enter the job market each year. With few jobs to go around, they are likely to join what has become a permanent underclass of the poor and dispossessed.

Near Shorja market, Amar Musa, wearing a black mask and a military-style olive green coat, had set up artificial Christmas trees and tinsel garlands to sell on the busy main street to his Orthodox Christian customers, who celebrate the holiday in January.

Mr. Musa, 45, graduated from a technical college with a mechanic’s diploma but says he has never been able to find a job in his field. Standing next to a white Christmas tree with a deflated mylar Santa impaled on its metal branches, he explained he had a shop that went out of business and now drives a taxi.

Like many Iraqis, he also writes poetry. Asked to recite one of his poems, he pulled a cigarette out of a package, broke it in half and threw it on the ground.

“I am like a cigarette,” he said. “I burn and like a butt I would be thrown away. Do not talk to me about the homeland. We are poor and our homeland is the grave.”

Falih Hassan contributed reporting.

link :https://www.nytimes.com/2021/01/04/world/middleeast/iraq-economy-debt-oil.html

[rvmydinar]

Iraq, struggling to pay debts and salaries, plunges into economic crisis

Written By: Jane Arraf © 2020 The New York Times The New York Times

Baghdad, Iraq Published: Jan 05, 2021, 09.29 PM(IST)

 

 

File photo: A demonstrator holds an Iraqi flag near burning tires during ongoing anti-government protests in Nassiriya, Iraq. Photograph:( Reuters )

 

Story highlights

Last month, Iraq devalued its currency, the dinar, for the first time in decades, immediately raising prices on almost everything in a country that relies heavily on imports

In the wholesale market of Jamila, near Baghdad’s sprawling Sadr City neighborhood, a merchant, Hassan al-Mozani, was surrounded by towering piles of unsold 110-pound sacks of flour.

“Normally at a minimum I would sell 700 to 1,000 tons a month,” he said. “But since the crisis started we have only sold 170 to 200 tons.”

 

His troubles are a ground-level indicator of what economists say is the biggest financial threat to Iraq since Saddam Hussein’s time:Iraq is running out of money to pay its bills.

That has created a financial crisis with the potential to destabilize the government — which changed a year ago after mass protests over corruption and unemployment — touch off fighting among armed groups, and empower Iraq’s neighbor and longtime rival, Iran.

 

Iran in the past has taken the opportunity posed by a weak Iraqi central government to strengthen its political power and the role of its paramilitaries within Iraq.

With its economy hammered by the pandemic and plunging oil and gas prices, which account for 90% of government revenue, Iraq was unable to pay government workers for months at a time last year.

Last month, Iraq devalued its currency, the dinar, for the first time in decades, immediately raising prices on almost everything in a country that relies heavily on imports. And last week, Iran cut Iraq’s supply of electricity and natural gas, citing nonpayment, leaving large parts of the country in the dark for hours a day.

“I think it’s dire,” said Ahmed Tabaqchali, an investment banker and senior fellow at the Iraq-based Institute of Regional and International Studies. “Expenditures are way above Iraq’s income.”

Many Iraqis fear that despite Iraqi government denials there will be more devaluations to come.

“Everyone is afraid to buy or sell,” said Ahmed Khalaf, who turned to business when he couldn’t find a job with his degree in sociology.

Al-Mozani, 56, the merchant in the Jamila wholesale market, imports flour from Turkey in dollars, until recently selling it for about $22 per sack. In response to the currency devaluation, he raised the price to $30.

A restaurant manager who popped in to ask about the new price of flour, Karam Muhammad, said there was not much demand. Restaurants, he said, have been mostly empty because of the pandemic and the financial crisis.

In a stall off a narrow, winding alley of the Shorja market, one of Baghdad’s oldest, Khalaf sells the smallest luxuries: nail polish, plastic hair barrettes, colored pencils.

Even during the pandemic, by midmorning the stalls in Shorja market would normally be thronged with shoppers buying food staples and household goods. But last week the aisles were nearly empty.

“Our customers are mostly government employees, but as you can see, they’re not coming,” said Khalaf, 34.

While the currency devaluation took most Iraqis by surprise, the economic and financial crisis has been years in the making.

Public sector salaries and pensions cost the government about $5 billion a month, but its monthly oil revenue recently has reached only about $3.5 billion. Iraq has been making up the shortfall by burning through its reserves, which some economists say are already insufficient.

The International Monetary Fund concluded in December that the country’s economy was expected to have contracted by 11% in 2020. It urged Iraq to improve governance and reduce corruption.

For 18 years oil revenue has propped up a system in which the government wins support by awarding ministries to political factions, which are given almost free rein to create jobs. Iraq’s civil service has tripled in size since 2004. Economists estimate more than 40% of the workforce depends on government salaries and contracts.

The financial crisis could put the brakes on this corruption-riddled patronage system.

“Every government, they’ve managed to buy out more and more but that buying of loyalty, that buying of acquiescence is over,” Tabaqchali said by phone from London.

The high public payroll has left little spending on infrastructure. Iraq’s economy has also been hit by the coronavirus pandemic, with many workers in the already weak private sector losing their jobs.

Tabaqchali and other economists said the devaluation was a difficult but necessary step in helping Iraqi businesses. With the cost of imports rising, Iraqi goods such as farm produce can more easily compete.

Adding to the misery has been Iraq’s limited ability to pay Iran for electricity and natural gas. Iraq is not allowed to transfer cash to Iran, but instead it sends food and medicine in exchange for natural gas and electricity. Iran says it is owed the equivalent of more than $5 billion.

“Iraq can’t pay all the debt to Iran,” said Abdul Hussein al-Anbaki, an economic adviser to Prime Minister Mustafa al-Kadhimi. “Iran is also facing an economic crisis and we cannot buy gas without paying.”

Part of Iraq’s debt was created by its inability to pay, but the lion’s share, about $3 billion, remains frozen in an Iraqi bank, while Iraq struggles to comply with U.S. sanctions against Iran, Iraqi officials said.

The sanctions, aimed at forcing Iran to accept stronger restrictions on its nuclear program and to curb its support for foreign militias, have blacklisted its banking system.

“For the Iraqis, it is difficult because the mechanism to pay them is almost nonexistent because obviously the Americans are monitoring the situation very closely,” said Farhad Alaaldin, chair of the Iraq Advisory Council, a policy research institute.

Alaaldin and others said the financial crisis could lead to renewed protests and struggles between armed groups to control Iraq’s increasingly limited resources.

That Iraq, one of the world’s largest oil producers, cannot reliably supply electricity to its citizens and has to import electricity is symptomatic of the dysfunction that brought down the previous government.

Iraq’s energy infrastructure has suffered from three devastating wars since the 1980s, destroying refineries and power plants. But since the U.S.-led invasion of Iraq overthrew Hussein in 2003, corruption and incompetence have prevented Iraq’s government from fully restoring electricity.

In addition, although Iraq is awash in oil, most of its electricity plants run on natural gas. Iraq has vast natural gas reserves but has not invested heavily in developing its gas industry. And until the Trump administration levied additional sanctions on Iran, importing electricity and gas from Iran was the easiest solution.

For the millions of Iraqis who cannot afford electricity from private generators, the power cuts and rising prices have been a double blow.

Haifa Jadu, 55, who had come to shop at the Shorja market, said she and her husband, a retiree who is blind, had simply done without electricity for large parts of the day.

“We used to pay money to a generator owner, but we haven’t bought power for four months because he increased the price,” she said. She said the walnuts she bought a month ago for about $3.50 a pound were now almost $5 and out of reach.

The government has proposed sweeping measures to try to bolster the economy, including tax increases, in a plan now before Parliament. But many politicians are counting on the prospect of increased oil prices this year to delay passing what economists say are urgently needed reforms.

Until that happens, unemployment is expected to grow as about 700,000 young people enter the job market each year. With few jobs to go around, they are likely to join what has become a permanent underclass.

Near Shorja market, Amar Musa, wearing a black mask and a military-style olive green coat, had set up artificial Christmas trees and tinsel garlands to sell on the busy main street to his Orthodox Christian customers, who celebrate the holiday in January.

Musa, 45, graduated from a technical college with a mechanic’s diploma but says he has never been able to find a job in his field. Standing next to a white Christmas tree with a deflated mylar Santa impaled on its metal branches, he explained he had a shop that went out of business and now drives a taxi.

Like many Iraqis, he also writes poetry. Asked to recite one of his poems, he pulled a cigarette out of a package, broke it in half and threw it on the ground.

“I am like a cigarette,” he said. “I burn and like a butt I would be thrown away. Do not talk to me about the homeland. We are poor and our homeland is the grave.”

link :https://www.wionews.com/world/iraq-struggling-to-pay-debts-and-salaries-plunges-into-economic-crisis-354672

[yota691]

The New York Times: Iraq struggles to pay off debts and pay salaries, mired in economic crisis

20:29 - 01/04/2021

 

  

Information / translation ...

A report by the New York Times, on Monday, affirmed that oil-rich Iraq suffers from an economy full of neglect and corruption, which has caused the devaluation of its currency and the interruption of its imported electrical current as a result of non-payment of its debts.

The report, which was translated by Al-Maaloumah Agency, stated that, “According to the saying of a number of economists, Iraq is going through the biggest financial crisis in several decades, and the crisis is simply the country's inability to pay its bills and the quickly running out of money, which threatens the situation in Iraq on several fronts.”

He added, “With its economy affected by the epidemic and the decline in oil and gas prices, which account for 90 percent of government revenues, Iraq was unable to pay government employees' salaries for months at the same time last year, and last month, Iraq devalued its currency, the dinar, for the first time. Once decades ago, which instantly raised prices on almost everything in a country that relies heavily on imports.

For his part, an investment banker and senior fellow at the Institute for Regional and International Studies, Ahmad Al-Tabakjali, said, “I think what Iraq is going through is appalling, as the expenditures are much higher than the country's income.” While many Iraqis fear that, despite the Iraqi government's denial, there will be more cuts In the future currency value. ”

The report stated that "public sector salaries and pensions in the Iraqi state cost about five billion dollars a month, but oil revenues amount to only 3.5 billion dollars, while Iraq compensates for the shortfall by burning its reserves, which some economists say are really insufficient."

The report noted that, “Over the course of 18 years, oil revenues have supported a system in which the government wins support by granting ministries to political factions, which are given virtually freedom of movement to create jobs, which has resulted in the size of the civil service in Iraq three times since 2004.

For his part, Farhad Alaeddin, head of the Iraqi Advisory Council, an institute for policy research, said, "The financial crisis may lead to renewed protests and conflicts as happened last year."

The report stated that “the energy infrastructure in Iraq has suffered from three devastating wars since the 1980s, while more than a decade of comprehensive sanctions led by the United States have paralyzed the Iraqi economy, and air strikes in the US-led war to expel Iraq from Kuwait in 1991 destroyed the refineries and stations. energy. Since the US-led invasion of Iraq toppled Saddam Hussein in 2003, corruption and inefficiency have prevented Iraq from fully restoring electricity.

The report noted that “unemployment is expected to grow with about 700,000 young people entering the labor market each year, and with fewer jobs, they are likely to join what has become a permanent underclass of the poor and disadvantaged.” End / 25 z

[rvmydinar]

Iraq, Struggling to Pay Debts and Salaries, Plunges Into Economic Crisis

Evelyn Blackwell 2 days ago

5 minutes read

 

BAGHDAD — In a stall off a narrow, winding alley of Baghdad’s oldest market, Ahmed Khalaf sells the smallest luxuries: nail polish, plastic hair barrettes, colored pencils.

Even during the pandemic, by midmorning the stalls in Shorja market would normally be thronged with shoppers buying food staples and household goods. But last week the aisles were nearly empty.

“Our customers are mostly government employees, but as you can see they’re not coming,” said Mr. Khalaf, 34.

His troubles are a ground-level indicator of what economists say is the biggest financial threat to Iraq since Saddam Hussein’s time. Simply put, Iraq is running out of money to pay its bills.

With its economy hammered by the pandemic and plunging oil and gas prices, which account for 90 percent of government revenue, Iraq was unable to pay government workers for months at a time last year.

Last month, Iraq devalued its currency, the dinar, for the first time in decades, immediately raising prices on almost everything in a country that relies heavily on imports. And last week, Iran cut Iraq’s supply of electricity and natural gas, citing nonpayment, leaving large parts of the country in the dark for hours a day.

“I think it’s dire,” said Ahmed Tabaqchali, an investment banker and senior fellow at the Iraq-based Institute of Regional and International Studies. “Expenditures are way above Iraq’s income.”

The financial crisis threatens to destabilize the country, whose government was ousted a year ago after mass protests over corruption and unemployment.

Many Iraqis fear that despite Iraqi government denials there will be more devaluations to come.

“Everyone is afraid to buy or sell,” said Mr. Khalaf, who turned to business when he couldn’t find a job with his degree in sociology.

In the wholesale market of Jamila, near Baghdad’s sprawling Sadr City neighborhood, Hassan al-Mozani, 56, was surrounded by towering piles of unsold 110-pound sacks of flour.

He imports flour from Turkey in dollars, selling flour at about $22 per sack, but last week he raised the price to $30.

“Normally at a minimum I would sell 700 to 1,000 tons a month,” he said. “But since the crisis started we have only sold 170 to 200 tons.”

A restaurant manager who popped in to ask about the new price of flour, Karam Muhammad, said there was not much demand for it. Restaurants, he said, have been mostly empty because of the pandemic and the financial crisis.

While the currency devaluation took most Iraqis by surprise, the economic and financial crisis has been years in the making.

Public sector salaries and pensions cost the government about $5 billion a month, but its monthly oil revenue recently has reached only about $3.5 billion. Iraq has been making up the shortfall by burning through its reserves, which some economists say are already insufficient.

The International Monetary Fund concluded in December that the country’s economy was expected to have contracted by 11 percent in 2020. It urged Iraq to improve governance and reduce corruption.

For 18 years oil revenue has propped up a system in which the government wins support by awarding ministries to political factions, which are given almost free rein to create jobs. Iraq’s civil service has tripled in size since 2004. Economists estimate more than 40 percent of the work force depends on government salaries and contracts.

Updated 

 

Jan. 4, 2021, 5:00 a.m. ET

The financial crisis could mean the end of this corruption-riddled patronage system.

“Every government, they’ve managed to buy out more and more but that buying of loyalty, that buying of acquiescence is over,” Mr. Tabaqchali said by phone from London.

The high public payroll has left little spending on infrastructure. Iraq’s economy has also been hit by the coronavirus pandemic, with many workers in the already weak private sector losing their jobs.

Mr. Tabaqchali and other economists said the devaluation was a difficult but necessary step in helping Iraqi businesses. With the cost of imports rising, Iraqi goods such as farm produce can more easily compete.

Adding to the misery has been Iraq’s limited ability to pay Iran for electricity and natural gas. Iraq is not allowed to transfer cash to Iran, but instead it sends food and medicine in exchange for natural gas and electricity. Iran says it is owed the equivalent of more than $5 billion.

“Iraq can’t pay all the debt to Iran,” said Abdul Hussein al-Anbaki, an economic adviser to Prime Minister Mustafa al-Kadhimi. “Iran is also facing an economic crisis and we cannot buy gas without paying.”

The lion’s share of Iraq’s debt, about $3 billion, remains frozen in an Iraqi bank, while Iraq struggles to comply with U.S. sanctions against Iran, Iraqi officials said.

The sanctions, aimed at forcing Iran to accept stronger restrictions on its nuclear program and to curb its support for foreign militias, have blacklisted its banking system.

“For the Iraqis, it is difficult because the mechanism to pay them is almost nonexistent because obviously the Americans are monitoring the situation very closely,” said Farhad Alaaldin, chairman of the Iraq Advisory Council, a policy research institute.

That Iraq, one of the world’s largest oil producers, cannot reliably supply electricity to its citizens and has to import electricity is symptomatic of the dysfunction that led to antigovernment protests last year and brought down the previous government.

Mr. Alaaldin and others said the financial crisis could lead to renewed protests and struggles between armed groups to control Iraq’s increasingly limited resources.

Iraq’s energy infrastructure has suffered from three devastating wars since the 1980s. More than a decade of sweeping American-led sanctions imposed on the Hussein government in the 1990s crippled Iraq’s economy. Airstrikes in the American-led war to drive Iraq from Kuwait in 1991 destroyed refineries and power plants. And since the American-led invasion of Iraq overthrew Mr. Hussein in 2003, corruption and incompetence have prevented Iraq from fully restoring electricity.

For the millions of Iraqis who cannot afford electricity from private generators, the power cuts and rising prices have been a double blow.

Haifa Jadu, 55, who had come to Shorja market to buy sesame seeds and walnuts, said she and her husband, a retiree who is blind, had simply done without electricity for large parts of the day.

“We used to pay money to a generator owner, but we haven’t bought power for four months because he increased the price,” she said. She said the walnuts she bought a month ago for about $3.50 a pound were now almost $5 and out of reach.

The government has proposed sweeping measures to try to bolster the economy, including tax increases, in a plan now before Parliament. But many politicians are counting on the prospect of increased oil prices this year to delay passing what economists say are urgently needed reforms.

Until that happens, unemployment is expected to grow as about 700,000 young people enter the job market each year. With few jobs to go around, they are likely to join what has become a permanent underclass of the poor and dispossessed.

Near Shorja market, Amar Musa, wearing a black mask and a military-style olive green coat, had set up artificial Christmas trees and tinsel garlands to sell on the busy main street to his Orthodox Christian customers, who celebrate the holiday in January.

Mr. Musa, 45, graduated from a technical college with a mechanic’s diploma but says he has never been able to find a job in his field. Standing next to a white Christmas tree with a deflated mylar Santa impaled on its metal branches, he explained he had a shop that went out of business and now drives a taxi.

Like many Iraqis, he also writes poetry. Asked to recite one of his poems, he pulled a cigarette out of a package, broke it in half and threw it on the ground.

“I am like a cigarette,” he said. “I burn and like a butt I would be thrown away. Do not talk to me about the homeland. We are poor and our homeland is the grave.”

Falih Hassan contributed reporting.

 

link :https://worldnewsera.com/news/iraq-struggling-to-pay-debts-and-salaries-plunges-into-economic-crisis/

[rvmydinar]

Hit by the pandemic, struggling to pay debts and salaries, Iraq plunges into economic crisis

Synopsis
Last month, Iraq devalued its currency, the dinar, for the first time in decades, immediately raising prices on almost everything in a country that relies heavily on imports. And last week, Iran cut Iraq’s supply of electricity and natural gas, citing nonpayment, leaving large parts of the country in the dark for hours a day.

 

 

People protest the devaluation of the Iraqi currency outside Iraq's central bank, in Baghdad after Iraq's central bank announced it will devalue the Iraqi dinar by over 20% in response to a severe liquidity crisis brought on by low oil prices, a measure that has sparked public outrage as the government struggles to make payments.

 

 

BAGHDAD: In a stall off a narrow, winding alley of Baghdad’s oldest market, Ahmed Khalaf sells the smallest luxuries: nail polish, plastic hair barrettes, colored pencils.

Even during the pandemic, by midmorning the stalls in Shorja market would normally be thronged with shoppers buying food staples and household goods. But last week the aisles were nearly empty.

 

“Our customers are mostly government employees, but as you can see, they’re not coming,” said Khalaf, 34.

His troubles are a ground-level indicator of what economists say is the biggest financial threat to Iraq since Saddam Hussein’s time. Simply put, Iraq is running out of money to pay its bills.

With its economy hammered by the pandemic and plunging oil and gas prices, which account for 90% of government revenue, Iraq was unable to pay government workers for months at a time last year. 

 

Last month, Iraq devalued its currency, the dinar, for the first time in decades, immediately raising prices on almost everything in a country that relies heavily on imports. And last week, Iran cut Iraq’s supply of electricity and natural gas, citing nonpayment, leaving large parts of the country in the dark for hours a day.

 

“I think it’s dire,” said Ahmed Tabaqchali, an investment banker and senior fellow at the Iraq-based Institute of Regional and International Studies. “Expenditures are way above Iraq’s income.”

The financial crisis threatens to destabilize the country, whose government was ousted a year ago after mass protests over corruption and unemployment.
 

Many Iraqis fear that despite Iraqi government denials there will be more devaluations to come.

“Everyone is afraid to buy or sell,” said Khalaf, who turned to business when he couldn’t find a job with his degree in sociology.

In the wholesale market of Jamila, near Baghdad’s sprawling Sadr City neighborhood, Hassan al-Mozani, 56, was surrounded by towering piles of unsold 110-pound sacks of flour.

 

He imports flour from Turkey in dollars, selling flour at about $22 per sack, but last week he raised the price to $30.

“Normally at a minimum I would sell 700 to 1,000 tons a month,” he said. “But since the crisis started, we have only sold 170 to 200 tons.”

A restaurant manager who popped in to ask about the new price of flour, Karam Muhammad, said there was not much demand for it. Restaurants, he said, have been mostly empty because of the pandemic and the financial crisis.

While the currency devaluation took most Iraqis by surprise, the economic and financial crisis has been years in the making.

 

Public sector salaries and pensions cost the government about $5 billion a month, but its monthly oil revenue recently has reached only about $3.5 billion. Iraq has been making up the shortfall by burning through its reserves, which some economists say are already insufficient.

The International Monetary Fund concluded in December that the country’s economy was expected to have contracted by 11% in 2020. It urged Iraq to improve governance and reduce corruption.

 

For 18 years oil revenue has propped up a system in which the government wins support by awarding ministries to political factions, which are given almost free rein to create jobs. Iraq’s civil service has tripled in size since 2004. Economists estimate more than 40% of the workforce depends on government salaries and contracts.

The financial crisis could mean the end of this corruption-riddled patronage system.

“Every government, they’ve managed to buy out more and more but that buying of loyalty, that buying of acquiescence is over,” Tabaqchali said by phone from London.

The high public payroll has left little spending on infrastructure. Iraq’s economy has also been hit by the coronavirus pandemic, with many workers in the already weak private sector losing their jobs.

Tabaqchali and other economists said the devaluation was a difficult but necessary step in helping Iraqi businesses. With the cost of imports rising, Iraqi goods such as farm produce can more easily compete.

Adding to the misery has been Iraq’s limited ability to pay Iran for electricity and natural gas. Iraq is not allowed to transfer cash to Iran, but instead it sends food and medicine in exchange for natural gas and electricity. Iran says it is owed the equivalent of more than $5 billion. 

 

“Iraq can’t pay all the debt to Iran,” said Abdul Hussein al-Anbaki, an economic adviser to Prime Minister Mustafa al-Kadhimi. “Iran is also facing an economic crisis and we cannot buy gas without paying.”

The lion’s share of Iraq’s debt, about $3 billion, remains frozen in an Iraqi bank, while Iraq struggles to comply with U.S. sanctions against Iran, Iraqi officials said.

The sanctions, aimed at forcing Iran to accept stronger restrictions on its nuclear program and to curb its support for foreign militias, have blacklisted its banking system.

“For the Iraqis, it is difficult because the mechanism to pay them is almost nonexistent because obviously the Americans are monitoring the situation very closely,” said Farhad Alaaldin, chair of the Iraq Advisory Council, a policy research institute.
 

That Iraq, one of the world’s largest oil producers, cannot reliably supply electricity to its citizens and has to import electricity is symptomatic of the dysfunction that led to anti-government protests last year and brought down the previous government.

Alaaldin and others said the financial crisis could lead to renewed protests and struggles between armed groups to control Iraq’s increasingly limited resources.

 

Iraq’s energy infrastructure has suffered from three devastating wars since the 1980s. More than a decade of sweeping U.S.-led sanctions imposed on the Saddam government in the 1990s crippled Iraq’s economy. Airstrikes in the U.S.-led war to drive Iraq from Kuwait in 1991 destroyed refineries and power plants. And since the U.S.-led invasion of Iraq overthrew Saddam in 2003, corruption and incompetence have prevented Iraq from fully restoring electricity.

 

For the millions of Iraqis who cannot afford electricity from private generators, the power cuts and rising prices have been a double blow.

 

Haifa Jadu, 55, who had come to Shorja market to buy sesame seeds and walnuts, said she and her husband, a retiree who is blind, had simply done without electricity for large parts of the day.

 

“We used to pay money to a generator owner, but we haven’t bought power for four months because he increased the price,” she said. She said the walnuts she bought a month ago for about $3.50 a pound were now almost $5 and out of reach.

 

The government has proposed sweeping measures to try to bolster the economy, including tax increases, in a plan now before Parliament. But many politicians are counting on the prospect of increased oil prices this year to delay passing what economists say are urgently needed reforms.

Until that happens, unemployment is expected to grow as about 700,000 young people enter the job market each year. With few jobs to go around, they are likely to join what has become a permanent underclass of the poor and dispossessed.

Near Shorja market, Amar Musa, wearing a black mask and a military-style olive green coat, had set up artificial Christmas trees and tinsel garlands to sell on the busy main street to his Orthodox Christian customers, who celebrate the holiday in January.
 

Musa, 45, graduated from a technical college with a mechanic’s diploma but says he has never been able to find a job in his field. Standing next to a white Christmas tree with a deflated mylar Santa impaled on its metal branches, he explained he had a shop that went out of business and now drives a taxi.

Like many Iraqis, he also writes poetry. Asked to recite one of his poems, he pulled a cigarette out of a package, broke it in half and threw it on the ground.

“I am like a cigarette,” he said. “I burn and like a butt I would be thrown away. Do not talk to me about the homeland. We are poor and our homeland is the grave.”
 

Link https://economictimes.indiatimes.com/news/international/world-news/hit-by-the-pandemic-struggling-to-pay-debts-and-salaries-iraq-plunges-into-economic-crisis/articleshow/80099171.cms

[Longtimelurker]

Here comes the economic crash, timed perfectly with our election chaos (and economic crash?) that is about to begin... what a plan and what a distraction to the global reset? Hold on tight, things are going to get bumpy for a bit and then POW! Currency reset time!

[rvmydinar]

2 hours ago, Longtimelurker said:

Here comes the economic crash, timed perfectly with our election chaos (and economic crash?) that is about to begin... what a plan and what a distraction to the global reset? Hold on tight, things are going to get bumpy for a bit and then POW! Currency reset time!

how long are we going to wait until rv comes? weeks or months , hopefully not years. do you folks think this is the right time to buy more dinars or sell more dinars? are dinar investors out there still interested to buy more dinars?

[dinarbeleiver]

54 minutes ago, rvmydinar said:

how long are we going to wait until rv comes? weeks or months , hopefully not years. do you folks think this is the right time to buy more dinars or sell more dinars? are dinar investors out there still interested to buy more dinars?

I think weeks if that 

[Longtimelurker]

4 hours ago, rvmydinar said:

how long are we going to wait until rv comes? weeks or months , hopefully not years. do you folks think this is the right time to buy more dinars or sell more dinars? are dinar investors out there still interested to buy more dinars?

I've always felt that it would happen after the arrests became public knowledge. The first arrest is supposed to be "huge" so im thinking it might be Pence (tonight?). Who knows..

 

I think it could be Now - April. 

 

I definitely won't be selling my Dinar.

 

[davis411]

Only buy if you can afford to lose or leave tied up

 

just way I look at it 

hindsight 

you own

don’t matter how much 

[rvmydinar]

24 minutes ago, Longtimelurker said:

I've always felt that it would happen after the arrests became public knowledge. The first arrest is supposed to be "huge" so im thinking it might be Pence (tonight?). Who knows..

 

I think it could be Now - April. 

 

I definitely won't be selling my Dinar.

 

Now-april sounds good to me. And hopefully, that will really come true before the election. At least i will still keep and hold my dinar until the election.

[rvmydinar]

27 minutes ago, davis411 said:

Only buy if you can afford to lose or leave tied up

 

just way I look at it 

hindsight 

you own

don’t matter how much 

When i read the article above , i almost had a nervous breakdown. But since noone wants to sell the dinar yet, therefore this gives me a confidence that rv will happen no matter how many times i have a bad news. As adam said let's bring out more and more bad news and then boom rv happens suddenly. Thank's for the advice. I don't want to buy dinar anymore. What i have right now is enough for me and i don't want to be greedy.

[Longtimelurker]

1 hour ago, rvmydinar said:

When i read the article above , i almost had a nervous breakdown. But since noone wants to sell the dinar yet, therefore this gives me a confidence that rv will happen no matter how many times i have a bad news. As adam said let's bring out more and more bad news and then boom rv happens suddenly. Thank's for the advice. I don't want to buy dinar anymore. What i have right now is enough for me and i don't want to be greedy.

I've never been more excited about the dinar I hold! I too, am satisfied with the amount I have and won't be purchasing more. I have a feeling we could see Iraq drop the 000's and release lower denominations this month..?

[rvmydinar]

actually, iraq economic crisis has no effect on the rv. as long as cbi already printed the new lower denoms a long time ago and we can only exchange dinar for dollars in the us ( because we can"t exchange dinar for dollars in the country of iraq ), therefore the cbi can announce the rv at any time. i agree what adam said, the more we read bad news , the closest we are to the rv. the only thing we don't know for sure is date and rate, in 2003, there was a coup to overthrow the saddam husein, and the result was the rate devaluated from 1: $3.22 to 1: 4,000 iqd ( sorry if the number/rate is wrong ). this devaluation makes a sense because there was a coup to overthrow the saddam hussein. on the other hand, in december 2020, the cbi suddenly devaluated from 1190 to 1460 and this devaluation wasn"t caused by a coup. so the devaluation that was happened in 2003 had more different political situation than the devaluation that was happened in december 2020. i am just thinking ( may be hopefully i am wrong ) that devaluation in december 2020 was a part of cbi's plan and the cbi was doing it on purpose to suck all the dinar in from all iraqi citizens only who has still hidden their dinar under the mattress. the cbi should give profitable incentives to attract all iraq citizens to immediately put their monies in the bank instead of hiding them under the mattress.