Editing date: 10/30/2020 17:13
On Friday, the Ministry of Finance issued a clarification regarding the delay in paying salaries for the month of October, pointing out that the government has one option to pay salaries, which is to borrow.
The Ministry of Finance stated, in a statement, that “last week witnessed the making of a number of public statements and inquiries that were raised regarding the delay in paying the salaries of October, and this comes in the wake of the delay in paying the salaries of September.”
The statement added, “The Ministry of Finance has repeatedly affirmed that the government’s current revenues, in light of low oil prices and Iraq’s commitment to OPEC decisions related to reducing oil production, are insufficient to meet the government’s current expenditures.” Current government expenditures, and we expect this situation to continue in the near future.
He continued, “To address structural imbalances in public finances, the Ministry of Finance has embarked on a three-pronged program to address short, medium and long-term issues that affect the Iraqi economy,” explaining that “for the very short period, from now until the end of 2020, you do not see The Ministry of Finance has no choice but to resort to short-term loans from state banks, which will then be deducted from the central bank. ”
He pointed out that “all other options, such as increasing revenues from customs, taxes, or levies from the electricity sector, are simply not possible in the short term,” noting that “despite the need to rationalize and activate the generation of other non-oil revenues, such measures will not “In the short term, it compensates for the shortfall in oil revenues, given the structure of our economy, and all other measures related to public sector payroll management require legislative approval before they translate into spending cuts or revenue generation.”
The finance statement added, “The ministry does not seek to increase the public debt unless it is necessary and its service is sustainable,” explaining that “Iraq’s debt at the present time is not excessive compared to the size of its economy, and public debt in the world has grown tremendously over the past twelve months, To address the negative consequences of the Corona pandemic, and at the global level, public debt as a percentage of GDP is close to 100%, and in Iraq it is still less than 75% of GDP.However, the Ministry of Finance recognizes the need to be careful in the way the deficit is financed. In public finance. ”
He explained, “The Ministry of Finance was open and transparent regarding the state of public finances and issued accurate and timely information when requested by the House of Representatives. The ministry is aware of the concerns that may arise as a result of delay in fulfilling government spending obligations,” noting that “the situation today is fundamentally different from “Previous periods when public finances were under pressure as a result of low oil revenues. Public spending not only grew rapidly in the past five years, but the decline in oil production and prices was longer and deeper than previous periods, in light of a difficult global economy.”
Regarding the borrowing law, the statement pointed out that “Finance has asked the House of Representatives to authorize it to borrow 41 trillion dinars for the remainder of the current year to meet the deficit in financing payments for salaries, retirement, and dues in 19 and 20 and other expenditures and investment projects, and the ministry plans to introduce major reforms that affect public finances. In the 2021 budget, “explaining that” if it is approved by the Council of Ministers and the House of Representatives, we believe that it will form the basis for addressing economic issues in the medium term and rationalizing public finances during the period from 2021 to 2023. ”
The statement concluded, “The Ministry of Finance played a fundamental role in leading the team that developed the white paper. This aims to analyze structural problems affecting the Iraqi economy and provide detailed solutions to solve them, and this reform program aims to reorient the axes of the Iraqi economy. The reform program will require a great deal.” Of legislative and institutional work and cannot be implemented without the support of Parliament. ”