“It is not true.” An economic vision about the World Bank’s figures on Iraq’s public debt, 21 AUGUST

 During a recent presentation, economist Nabil Al-Marsoumi shared his economic insights on the Central Bank’s figures regarding Iraq’s public debt. He also discussed the budget law’s potential impact on the overall debt volume.

According to a post by Al-Marsoumi on Al-Sumaria News, the World Bank’s reported public debt figures for Iraq are incorrect. Al-Marsoumi claims that the actual public debt for the year 2023 is $152 billion, with $50 billion being external debt and $102 billion as internal debt. Additionally, the ratio of public debt to gross domestic product is 58.3%.

He stated that the figures provided are based on the assumption that the 2023 budget will be fully executed, leading to an increase of approximately $31 billion in the overall public debt. However, it is anticipated that the budget may not be fully executed, particularly due to its delay until August, which raises concerns about the accuracy of these estimates.

Al-Marsoumi noted that Iraq’s external debt, including the frozen Gulf debts, amounts to $61 billion, not $50 billion. After implementing the full budget, the debt is expected to reach approximately $70 billion.

He stated that the current internal debts total 70 trillion dinars. However, once the budget is put into action, the amount will increase to 100 trillion dinars, which is approximately 77 billion dollars, not 102 billion dollars.

According to the legal expert, the total public debt will amount to $138 billion if the budget is fully implemented, which is different from the World Bank’s estimation of $152 billion.

In a report titled “Renewed Pressures: RecoveryIraqat risk,” the World Bank discussed the economy of Iraq and its debts. The report highlighted the stagnation in non-oil GDP, industries, and agricultural activities, along with high inflation rates. The current government of Iraq lacks large-scale structural reforms to strengthen the economy beyond oil.

He stated that the government’s annual budget has seen a significant increase in public spending by 59% compared to last year. This accounts for 74.3% of total expenses and will result in a large fiscal deficit of 51.6 trillion Iraqi dinars, equivalent to 39.7 billion dollars. This represents 14.3% of the total value of public imports and is more than half of the recent record reserves accumulated due to the increase in oil prices. He also discussed the Central Bank’s policy of devaluing the local currency.

According to the World Bank, the devaluation of the Iraqi dinar resulted in a rise in headline and core inflation. This was due to the country’s heavy reliance on imports, as domestic production is weak and not backed by government authorities. This has exposed the fragility of Iraq’s economy.

According to the World Bank report, the currency auctions carried out by the Central Bank have resulted in a decrease in the value of the dinar against the dollar, as hard currency has been redirected to the parallel market due to the adopted transaction standards.

As per the World Bank, the lack of diversification of income sources in Iraq has resulted from the chaotic policies of successive governments. This has caused a contraction in gross domestic product by 1.1% in the year 2023. Additionally, the country’s public debt has increased to 58.3% from the previous year’s 53.8%, which amounts to $152 billion, an increase of $10 billion. The total external debt stands at $50 billion, while the internal debt amounts to $102 billion. It is noteworthy that the government has borrowed around $60 billion internally in the previous three years at an annual rate of $15 billion. Furthermore, the annual interest on internal debts is approximately 16 to 17% of the debt volume.

The economic future prospects of Iraq are still at great risk, according to the bank. This is due to their excessive dependence on oil, which makes them vulnerable to shocks in the oil market and global demand. Recent declines in oil prices have highlighted this vulnerability. Additionally, there are basic challenges to the economy, such as widespread corruption, poor service delivery, lack of infrastructure development, and security risks that contribute to its fragility.

According to the World Bank, if the government continues with these policies, it will benefit political parties that have hindered development and caused significant imbalances in the country’s budget, despite two decades passing since the end of the war.