Iraqi Kurds Implementing Harsh Reforms to Tackle Economic Crisis

ARA News – 19 March 2016 – Deputy Prime Minister of the Kurdistan Regional Government (KRG), Qubad Talabani, on Thursday said the Kurdish government is implementing hard-hitting reforms through transparency, reducing bureaucracy and cutting salaries. “The biggest problem for Iraq is not Daesh [ISIS], or political tensions, it’s the economic and financial crisis,” Talabani said.

The Kurdish government is suffering from an economic crisis as a result of the low oil prices, influx of 1.8 million displaced people and refugees, and the war against the Islamic State [ISIS].The oil prices have dropped below $30 dollar, while the years before the oil was sold for $90 to $100 dollars per barrel, generating billions of revenue for the Iraqi government, and the Kurds.

Adil Abdulmahdi, the Iraqi Oil Minister, said that the high revenues were a “sickness” for Iraq. “We are like a fat man; we have become lethargic; need to turn that fat into energy and slim down,” Abdulmahdi said. “Our slogan should be ‘oil for construction’, not ‘oil for food’,” he added.The Kurdish government has started to cut salaries, and is working on stopping the employment of ghost employees, who have double or triple salaries without working.

“When you have problems with your economy, you cannot fight, nor can solve your political disputes,” Talabani said during the Sulimani Forum, organized by the American University of Iraq, in Sulaimani.

“We have not stopped, and sitting and crying, and asking help from our friends,” he said. “No, we have started reforms,” Talabani added.Therefore, the KRG DPM detailed two areas of reform: increase transparency, lower subsidies, and increase the revenue. “Our first move was to make a balance in between the revenues and expenses by cutting the employment salaries,” he said.As a result of decreasing expenses, some ministries now work with 45 per cent less of the original budget. “We also decreased other expenses for fuel and cost power generation,” Talabani said.

The Kurdish government is also moving towards privatizing the energy sector, while the local Kurdish civilians have been suffering from bad electricity and power cuts.

“In 2014, the KRG paid 3 billion dollars for only electricity, but the public was not happy. Can you imagine paying 3 billions dollars for power generation, and the people were not happy!”Therefore, the KRG is planning to stop the use of expensive gasoline for power generation, and start using natural gas instead.Moreover, the KRG official said the Kurdish government in Iraqi Kurdistan has been weak in collecting taxes from electricity and water bills, “Because in the end of the day, it has to go back to [the Iraqi central government in] Baghdad.”In addition, the Kurds are planning to tackle the bloated state bureaucracy which is based on outdated laws from the 1940s by introducing an e-government system and manage the huge number of employees.”They [authorities] need three weeks just to pay the public salaries. It’s all done by hand! Can you imagine,” he said.The Kurdish government has asked the ministries for the number of employees, so they can manage the system. Sibel Kulaksiz, an economist from the World Bank, said the roadmap of the Iraqi and Kurdish governments is inclusive in its reforms.”It’s crucial that the KRG gets help to implement these reforms,” she said. “The pressing problem in the Kurdistan Region is financial recession.”

Nevertheless, she warned that further reforms are needed to downsize the oversized public sector. “Decreasing government spending will increase savings,” she added.