Iraq Economic News and Points To Ponder Friday Morning 2-20-26
It's Not Just About Salaries... It's About "National Security": What Would Happen If Iraq Laid Off Its Employees?
Baghdad Today – Baghdad
Hardly a discussion takes place in Iraq without mentioning the "government employee"—their inflated numbers, their salaries that devour the budget, the growing talk of "zero productivity," and warnings of "economic collapse by 2030" if spending continues at this rate. In the background lies a rentier economy almost entirely dependent on oil, a fragile private sector, and a labor market where young people flee to government jobs as the only relatively safe haven.
The simplistic idea is that the solution begins and ends with the employee: reduce their numbers, regulate their salaries, encourage some to take extended leave or early retirement, and public finances will automatically improve.
However, a deeper reading of the figures, along with the opinions of economic and legal experts, reveals that the picture is far more complex, and that the real question is not simply about the number of employees, but rather about the way the state is managed itself, and the intricate relationship between the public sector and the structure of the economy as a whole.
The Payroll Bill Grows With Every Budget... How Did We Get Here?
Over the course of nearly two decades, the Iraqi state has become the country's largest employer. Consistent official and local estimates indicate that more than 4,000,000 employees work today in various state institutions, including centrally funded ministries and departments, as well as institutions in the Kurdistan Region.
Meanwhile, the income of more than 10,000,000 citizens is directly or indirectly linked to the public treasury each month, through employee salaries, pensions, social safety nets, and various subsidies.
The imprint of this trend is clearly visible in successive budget figures. The wage bill and employee compensation consume a significant portion of operating expenditures, approaching half in some estimates when pensions and social security are included.
This means that the majority of public funds are allocated to current spending, while investment in infrastructure and essential services dwindles. With each increase in oil prices or revenue growth, the surplus is often reinvested in new appointments or salary increases, rather than in boosting the economy's productive capacity.
This trajectory was not accidental. After 2003, government employment was used more as a tool for social and political appeasement, a means to absorb the resentment of unemployment and buy stability, than as a tool for governance and development.
The widespread appointments often came in response to political and factional pressures, internal compromises, or electoral commitments, without any accompanying genuine restructuring of state functions or the establishment of a modern administrative apparatus.
The result was an overstaffed bureaucracy comprised of units with numbers exceeding their actual needs, and others suffering from staff shortages, particularly in health, education, and direct citizen services.
"Zero Productivity": A Simple Myth Masking Complex Problems
In this context, it has become easy to blame all economic crises on the government employee. "Estimated" tables proliferate on social media platforms, comparing the employee's salary with the output they are supposed to provide, then concluding with one catchy phrase: "The employee's productivity equals zero."
Economic expert Dirgham Muhammad urges caution in using this term. Speaking to Baghdad Today, he explains that employee productivity cannot be measured using the same metrics employed in factories and production lines, because a government employee, by the very nature of their work, provides a "public service," not a quantifiable commodity.
Attempting to reduce this service to a simple mathematical figure, he says, often leads to misleading conclusions.
Mohammed says that “the productivity of the Iraqi employee in state institutions cannot be measured by the traditional standards and measurements in circulation, because the government employee provides a public service and not a productive service in the commonly understood economic sense,” indicating that “what some people present in terms of numbers and measurements, especially the talk about the employee’s productivity being zero, is an unobjective and illogical proposition.”
He adds that employees are "tasked with managing state affairs, ensuring the continuity of work, and communicating with citizens, and there are no clear units of measurement by which the productivity of a government employee can be calculated," noting that "many employees of state departments work even during official holidays to accomplish their duties, which confirms that these proposals lack accuracy and responsibility and fall within the realm of merely stirring controversy."
This does not absolve the government apparatus of its inefficiency, but it shifts the discussion from condemning individual employees to critiquing the administrative structure itself.
The first problem lies in the unequal distribution of the workforce within the country, where thousands of positions are concentrated in offices and departments that do not require such a large number of staff, while health centers, schools, and service departments on the outskirts of cities and villages suffer from a severe shortage of doctors, teachers, engineers, and technicians.
The second problem is that the lack of digitalization and procedural modernization creates layers of paperwork that allow for a large number of employees trapped in a cycle of bureaucracy. If services were redesigned and automated, there would be a genuine need for fewer employees, but with more specialized and responsible roles.
In this sense, talk of "zero productivity" becomes more of an emotional description than an economic analysis. Yes, productivity is low in many areas, but the responsibility is distributed among job design, management style, work environment, and the monitoring and accountability system, and not solely on the employee as the weakest link in this structure.
2030: A Prophecy Of Collapse Or A Warning Of A Changeable Path?
Amidst soaring salaries and the state's near-total dependence on oil, a prophecy has circulated in recent years stating that "the Iraqi economy will collapse in 2030." Some treat this date as an inevitable fate, based on a linear reading of budget trends and financial deficits.
Dhirgham Muhammad describes this rhetoric as "irresponsible," pointing out that economic collapses don't occur according to fixed schedules, but rather as a result of a complex interplay of internal and external factors that cannot be confined to a single year.
He recalls that similar warnings were issued about ten years ago, and that talk of an "imminent collapse" was repeated frequently, yet the state remained able to pay salaries and finance part of its obligations, albeit at the cost of debt and increasing pressure on its fiscal flexibility.
However, this warning cannot be entirely ignored. The current trajectory indicates that continued inflation in current spending, coupled with revenues remaining dependent on oil prices, will gradually narrow the state's capacity to absorb shocks. Any sharp drop in oil prices could, at any moment, transform from a "passing crisis" into a direct threat to the stability of salaries and basic services if serious steps are not taken to alleviate the burden on the budget and diversify revenue sources.
The difference between propaganda and serious analysis is that the former transforms 2030 into a "doomsday date," while the latter places this date within a manageable trajectory. If policies continue as they are, fiscal space will shrink, our ability to cope with crises will weaken, and any shock in the oil market will become far more severe than it is today.
However, if genuine reform begins, this moment can be transformed from a "prophecy of collapse" into a "reform pressure" that compels the state to restructure its spending patterns and resources.
The Government Employee As A Social Refuge... When People Flee From The Market To The State
The bloated number of public employees cannot be understood solely from a public finance perspective. In Iraq, a government employee is not merely a number on a payroll, but rather the embodiment of a comprehensive social contract between the citizen and the state.
In a fragile labor market and a private sector that often fails to provide social security or job stability, a government job becomes the most viable option for those seeking a steady income, guaranteed retirement, and relatively adequate health insurance.
Labor market data indicates that a large proportion of the workforce is employed in the public sector, while the remainder are divided between largely informal private sector jobs, unregulated employment, and outright or disguised unemployment.
Meanwhile, the private sector's contribution to GDP remains far below the country's potential, and the business environment suffers from procedural complexities, bureaucracy, and corruption, making serious investment in industry, agriculture, and high-value services the exception rather than the rule.
Given these circumstances, talk of "restructuring the workforce" or "reducing staff numbers" without a comprehensive plan to revitalize the private sector and create decent jobs within it becomes akin to a gamble. Every employee pushed towards early retirement or extended leave means a family losing a portion of its financial security if there is no viable alternative in the job market. And every reduction in hiring without reforming the investment climate means a new wave of young people heading towards unemployment, emigration, or informal work.
Herein lies the stark contradiction: the state wants to alleviate the burden of salaries, while society still sees the state as its only refuge. The solution cannot be found in dismantling this refuge before building a new foundation upon which people can stand.
From "Government Economy" To "State Economy"... Where Does Reform Begin?
Economist Dirgham Muhammad succinctly summarizes the core of the problem in a striking statement: what is needed is a shift from a "government-run economy" to a "state-run economy." In a government-run economy, the government's role is reduced to that of a fund that receives oil revenues and distributes them as salaries and benefits, and the employee's function is reduced to receiving a salary at the end of the month and completing a minimum of transactions.
In a state-run economy, the government becomes the central authority that manages resources, formulates policies, and creates the legal and institutional environment for the growth of the private sector, without relinquishing its role in providing essential services and protecting vulnerable groups.
On a practical level, this transition means redefining the role of the public employee. In a state-run economy, the administrative apparatus becomes smaller in number but more specialized and efficient, operating in the areas of regulation, oversight, and planning, and providing services that the market cannot provide on its own.
Meanwhile, the private sector is left with greater scope to produce and create jobs. In return, private sector establishments are required to enroll their employees in social security, and fair competition rules are enforced to prevent the reduction in public sector employment from pushing people from "tiring but secure jobs" to "work without rights."
Reforming the payroll in this context cannot be reduced to isolated measures such as freezing hiring or tightening leave controls. Rather, it must be part of a comprehensive package that includes reforming the wage system, expanding the tax base, improving the collection of non-oil revenues, and increasing investment in infrastructure and services that encourage private sector expansion. Without this integrated vision, piecemeal measures remain merely temporary fixes that only exacerbate the problem instead of solving it.
A Test Of The Political System Before It Becomes A Financial Equation.
Legal expert Ali al-Saadawi places the issue within a broader context than just figures and tables. Speaking to Baghdad Today, he argues that what Iraq is experiencing today "cannot be viewed merely as a financial crisis, but rather as a true test of the political system's ability to redefine its priorities in resource management and achieving sustainable development."
Al-Saadawi says that crises "reveal structural flaws, but at the same time they open a window for serious reforms if the political will and courage to make decisions are present." He adds that the country now stands "at a crossroads," either the economic pressures will become an impetus for restructuring public spending, diversifying income sources, and strengthening transparency and good governance, or the current phase will continue to be managed "with a mindset of temporary patching," thus perpetuating stagnation and postponing reform requirements instead of confronting them.
Al-Saadawi emphasizes that what is required is "not just immediate measures, but a long-term strategic vision that places the Iraqi people at the heart of the development process and links economic stability with institutional reform," considering that this stage is "sensitive but could be a historic opportunity if it is properly utilized."
From Employee Condemnation To Holding The Entire Model Accountable
In conclusion, it seems easy to blame the government employee for the deficit and debts, and to hide behind the phrase “zero productivity” to justify everything. However, a deeper look reveals that the employee is merely the clearest mirror of an entire economic and political model that has been based for many years on oil rents and expanding employment in the state instead of enabling people to do productive work.
The current stage is not about the number of employees as much as it is about the nature of the state itself in the next decade; either the continuation of the distribution fund state that receives money from the sale of oil and converts it into salaries and allowances, or a gradual shift towards a management and development state that redefines its role in the economy, opens the way for a productive private sector, and involves society in bearing part of the responsibility for the future within clear and transparent rules.
Between these two paths, the position of the salary, the role of the employee, and the limits of the private sector’s contribution are redefined, and the features of a new contract between the citizen and the state are taking shape; a contract that can remain captive to the equation of “salary in exchange for loyalty and silence,” or, on the other hand, can develop into a broader partnership based on efficiency, justice, and sustainability, and make public work part of a long-term development project, not just a fixed item in the budget.