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Tishwash:  World Bank and EU to Help Iraq Strengthen Public Financial Management Oversight & Accountability

The Government of Iraq, the World Bank Group, and the European Union signed today a grant agreement aimed at strengthening the Government of Iraq’s institutions and mechanisms of fiscal accountability and oversight at federal and sub-national levels.

The project titled “Strengthening Public Financial Management (PFM) Oversight and Accountability Institutions” will benefit from jointly implemented US$12.5 million and is part of a technical assistance grant program signed back in September 2018 with the European Union to strengthen public financial management (PFM) oversight and increase the efficiency of public service delivery.

The program aims at improving PFM systems by strengthening payroll management through an IT platform. It will support transparency and accountability in the oil sector through the Extractive Industry Transparency Initiative. It will foster the anti-corruption agency which can help retrieve stolen assets and the auditor general as well as support the reform of State-Owned Enterprises. Other features will be strengthening procurement systems through e-procurement and supporting integrity in reconstruction programs. The project will also assist in further tackling revenue mobilization and fiscal federalism and can be revisited in one year to align further with government priorities.

This project compliments the ongoing World Bank-financed project titled "Modernization of Public Financial Management Systems” of US$41.5 million, which aims to improve financial information management and transparency, cash management, public investment management and public procurement modernization at selected federal and governorate agencies.

“Now, more than ever, the importance of a strong public financial management system is critical”, said Ramzi Afif Neman, Head of World Bank Iraq Office. “The World Bank is committed to helping equip the Government of Iraq with mechanisms of fiscal accountability that are essential for sustainable reform, creation of a positive economic impact, and the restoration of public trust in the country’s financial institutions.”

“The efficient management of public finances and the delivery of services is critical in the achievement of public policy objectives, as well as for restoring the trust and social contract between Iraqi citizens and the country's institutions”, said Martin Huth, European Union Ambassador to Iraq.

The project will support economic governance reforms at the federal level and in the Kurdistan region through technical assistance to many fiscal agencies, under the guidance of the Federal Ministry of Finance and the Prime Minister’s office.

The project is in line with the economic reform “White Paper” recently published by the Government of Iraq which supports the overall World Bank Group’s development objectives and portfolio in Iraq. The project is also in line with the SDGs and European Union’s development objectives.  link

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Tishwash:  Next week, the Kurdish delegation will return to Baghdad to complete the talks on oil and the budget

Informed Kurdish sources revealed, on Thursday, an agreement within the regional government to return the negotiating delegation to Baghdad next week to resume discussions with the federal government, and the

source said, in an interview with Mawazine News, that "it was agreed today and during the meeting of the Prime Minister The region, Masrour Barzani, with the Kurdish delegation negotiating, to return to discussions with the federal government on the issues of oil and the general budget during the next few days. "

He added, "During the meeting, the latest developments regarding the course of the talks with the federal government were presented," noting that "the negotiating delegation stressed the need for discussions with the federal government to continue, with the aim of reaching an agreement that guarantees the rights and financial dues for the Kurdistan region under the constitution."
The Kurdish negotiating delegation will return to Baghdad next week to resume talks with the federal government.  link

Cutebwoy:  Iraq's reform budget heads to parliament

Jan 27, 2021

The Iraqi parliament is debating the 2021 state budget, while voting is anticipated before the end of January 2021.

The state budget is projected at $113.2 billion, with an estimated deficit of $50.3 billion to be covered via borrowing, additional taxes and a currency devaluation by 18.5%.

On Oct. 14, 2020, the government approved an economic reform plan called the White Paper, which involves a shift in the country’s economic approach from a centrally planned economy to a market economy. It also consists of lowering the number of civil servants, supporting the private sector, reducing corruption and opting for good governance.

Iraqi Oil Minister Ihsan Abdul Jabbar statedJan. 14 that oil prices are forecast to range between $42 and $44 per barrel in the 2021 budget, out of fear that "COVID-19 causes market fluctuation.” He added, “Iraq currently sells oil at a price higher than $50 per barrel. The additional dollars will go to the treasury.”

The budget involves ending the double payment of salaries, identifying ghost civil servants who cost the state nearly $9 billion per year, providing support for economic projects such as the Faw Port and Baghdad Railway projects, reforming the gas sector and activating the Iraqi-Chinese economic deal. Attached to the budget proposal was a letter Finance Minister Ali Allawi addressed to Parliament, which stated that the 2021 budget addresses long-standing problems while preserving economic stability, providing basic services and supporting investments. Allawi said the budget involves a progressive income tax rate of up to 30% on public sector employees earning higher than 500,000 dinars ($345). This is while a 40% tax rate on income is to be paid by the prime ministers, the presidents of the republic, parliament speakers and the judiciary, with a 10% rate on retirees’ pensions.

Allawi noted that taxable income and pension generate $2.8 billion in total revenue. Yet $3.6 billion will be allocated to social welfare programs designed to reduce poverty and vulnerability, which would ease the impact of the recession on these segments. He explained that public debt is reported at nearly $68.9 billion at present and is expected to hit $99.3 billion by the end of the year, including an internal debt of $70.3 billion.

Public spending on the energy sector is the largest, with $22.7 billion in the budget for 2021, followed by $21.6 billion in social services spending, $15.8 billion on provincial management, $15.1 billion for the reimbursement of domestic and foreign debt, and $8.2 billion allocated to the education sector.

Speaking to Al-Monitor, Iraqi parliament's Finance Committee member Mohamad Darraji said "the budget for this year involves higher expenditures, something that parliament should reduce in order to save the country from an economic breakdown or from going bankrupt.” Darraji said there are more than 70 trillion dinars in the budget deficit.

He noted that the state needs to shift to a market economy and support the private sector so as to reform the economy.

Demonstrations being held in the central and southern parts of the country are raising demands for the provision of services, employment opportunities, ending corruption in the state departments and reforming the economy, starting with the 2021 budget. This is as members of parliament for the Basra and Dhi Qar provinces refused to vote for the budget law unless allocations for the provinces are increased.

Intisar al-Jubouri, a member of parliament for Ninevah province, told Al-Monitor that while Ninevah has been almost fully destroyed, the financial allocations continue to be very poor.

She called for more justice in this regard and higher financial allocations, as more than 30% of citizens live below the poverty line.

Under the budget, Baghdad and Erbil — whose economic relations have intensified since 2014 — agreed on allocating $9.58 billion to the Kurdistan Region of Iraq in exchange for Erbil delivering 54.3% of its exports to the Federal Oil Ministry, 50% of the revenue from border crossings and fees, and settling their mutual debt.

Speaking to Al-Monitor, Kurdistan Regional Government (KRG) spokesperson Jotiar Adil indicated that the KRG will abide by the agreement with the central government. Oil and other revenues will be handed over [to the central government.]”

The budget law is one of the most debated bills in Iraq, given the political struggles it involves. Parliament is expected to pass the bill into law in late January or early February.

Economy and trade

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Tishwash:  Discussion of the White Paper at the Press Syndicate

The General Secretariat of the Council of Ministers, in cooperation with the Journalists' Syndicate, held a panel discussion on "The role of the general budget for 2021 by applying the contents of the white reform paper", including a series of lectures, which were divided between three axes, including the budget of 2021, its money and its income, the role of fiscal and monetary policy by determining the exchange rate of the dinar, and the public-private partnership to achieve economic development.

The session was moderated by economic researcher Dr. Alaa al-Fahd, who said: "The package of reforms called the "White Paper" is a desire of the government to achieve reforms and change the course to improve the situation of Iraq's difficult conditions."

"We are all working to get the country on the right track," said Journalists' Captain Moayad al-Lami. Economically and socially."

Haidar Majid, spokesman for the General Secretariat of the Council of Ministers, delivered a speech in which he noted that "one of the most important objectives of the seminar is to reach creative visions that translate the paragraphs of the white reform paper into a field action that the citizen feels and reaps its fruits, so the secretariat opens up to institutions and seeks to reach strategic solutions like me."

Budget speech

"This seminar presents the budget speech to the public," said Dr. Mazher Mohammed Saleh, finance advisor to prime minister, noting that "the 2021 budget came on the ruins of a crisis, and the deterioration of Iraq's economy, following the collapse of oil prices, resulting in a deficit and forced austerity to critical limits, amid the suspension of investment, the 2021 budget came to avoid the contraction of the economy and create a wave of work."

The first said the "budget 2021 is what it has and what it has to do", said Obeid Mahal Freih, director of the banking studies department at the Ministry of Finance: "The laws that are included in the general budget, and the structural imbalance in it, indicating the seriousness of borrowing in dealing with the financial crisis."

"Oil revenues make up 87 percent of the budget, and in 10 years only 13 percent of the budget," he said, adding that this is due to "the predominance of income spending and the weakness of the private sector."

Exchange rate

"There are exits if they are better invested to fill the budget deficit, including tourism, taxation, agriculture, industry, private sector development and natural resources," said Dr. Ikram Abdel Aziz, an economist.

The seminar concluded with the economic seminar, "Public-Private Partnership for Economic Development", focusing on the importance of increasing productivity in all economic sectors.

 link

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