No solutions in sight
A HARSH MESSAGE FOR IRAQIS: THE TIME FOR WARNINGS IS OVER… IRAQ’S ECONOMY IS “OUT OF CONTROL” AND HAS ENTERED “THE EYE OF THE STORM”.
For months, Baghdad Today has treated Iraqi economic indicators as early warning signs of more dangerous phases looming on the horizon: successive jumps in the parallel market exchange rate, inflationary budgets, a growing deficit, a rapidly depleting reserve, and increasing pressure on the salaries of employees and vulnerable groups. With every economic report and investigation, the central warning was clear: if radical and swift solutions are not implemented, the country is heading toward a breaking point from which no palliative measures will suffice.
Today, economist Manar Al-Obaidi describes this moment with stark clarity: we are no longer in the stage of warning or forecasting, but rather “in the eye of the storm”; in a “real hurricane vortex,” as he says, where things have spiraled out of control, and talk of a financial crisis is no longer just an analytical luxury, but an existential question: What comes after the hurricane?
From monitoring indicators to acknowledging the “hurricane”
During the past period, the economic affairs department of “Baghdad Today” monitored an escalating path of all economic and financial crises: the parallel dollar exchange rate, which jumped to around 157,000 dinars per 100 dollars, then declined slightly without returning to comfortable levels; the pressure of imports through outlets that are not fully subject to the new mechanisms; the increasing reliance on the parallel market to finance trade with Turkey and Iran; and waves of increases in the prices of basic commodities, coinciding with talk of new or stricter taxes and fees.
In parallel, discussions about non-oil revenues revealed the extent of tax and customs losses, and the size of the gap between what can be collected theoretically and what actually enters the public treasury, under a dilapidated collection system, overlapping political, partisan and commercial interests, and a division in the management of ports between the center and the region.
According to Al-Ubaidi, these indicators are no longer mere harbingers of crisis, but rather signs that we have indeed entered a new phase. He says: “There has been much talk recently about the economic crisis and the financial situation, but reality compels us to move from describing the crisis to confronting what comes after it. We are no longer in the stage of warning or forecasting, but rather in the eye of the storm itself, where any patchwork solutions or temporary remedies are no longer effective.
Things, quite simply, have spiraled out of control, and Iraq today is in the vortex of a real hurricane.” This description is consistent with what “Baghdad Today” warned against in previous reports: that insisting on postponing reform, and relying on short-term solutions to buy time, turns the crisis from a situation that can be contained into a “hurricane” whose extent of losses is difficult to predict.
A crisis deeper than the numbers: a collapse of trust between the state and its citizens.
The danger of the current moment lies not only in the size of the deficit, the exchange rate, or the inflation rate, but also in the state of trust between the state and its citizens. Al-Ubaidi puts his finger on this very point when he links the depth of the crisis to the limits of the official institutions’ ability to address it alone: ”The reality indicates that the crisis has exceeded the capacity of official institutions alone to contain and resolve it, and has become a shared responsibility that falls on all influential parties in society. The fundamental reason for this is the loss of trust between the state and its citizens, which is the greatest challenge facing any genuine reform process.”
Today, as he points out, the only remaining link between the citizen and official institutions is the ability to meet immediate financial obligations: the monthly salary of the employee and retiree, payment of dues, financing of the ration card if it exists, and immediate response to any liquidity crisis.
Any talk of deep structural reforms, or “surgical operations” in the structure of the budget and public spending, will – logically – face widespread popular rejection, because the trust that allows society to bear the painful cost of any reform has not yet been restored.
This situation leaves the state essentially “captive” to a single option: continuing to deplete current and future resources to maintain a semblance of social stability by securing salaries at any cost, calming markets by any means, and postponing confrontation with major issues, from corruption to the budget structure. However, as Al-Ubaidi points out, this approach is nearing its end.
“Continuing with this approach—based on depleting current and future resources to secure this fragile thread of stability—is nearing its end. The ability to continue in this manner has reached its final stages.”
Between Ramadan, the dollar, and taxes… double the pressure on living standards.
The worsening crisis coincides with the approach of Ramadan, a period traditionally marked by increased demand for food and basic commodities. With a volatile and high parallel market exchange rate for the dollar, higher import costs, and talk of increased or stricter taxes and fees, any price hikes will be even more burdensome for low-income families.
This means that citizens today face a double burden: on the one hand, the rising cost of imported goods, particularly food, medicine, and basic commodities; and on the other hand, the increasing tax, duty, and customs burdens, both directly and indirectly through higher service costs.
In this climate, any slight disruption in the flow of salaries or delay in funding – as we have seen discussed in some ministries and departments – immediately turns into existential anxiety for a wide segment of society, not only because they depend on the salary, but also because alternatives are almost non-existent, and the private labor market itself is affected by any shock in the exchange rate or the size of aggregate demand.
After the hurricane: Social and security scenarios
Al-Ubaidi goes beyond describing the financial crisis; he links the failure to manage this stage with the possibility of it turning into a comprehensive social and security crisis: “This harsh test will reveal Iraq’s ability to overcome its ordeal. If it manages to maintain its unity and social cohesion, then it is stronger than all the economic and political challenges it faces. But failure to overcome this stage, which is a real possibility, portends a serious social collapse and a disintegration of the national fabric, and may extend – God forbid – to security dimensions.”
This warning is not unfounded; the country carries a heavy memory of past blockades, sanctions, and collapses. The difference today is that the nature of the crisis is different: there are no comprehensive sanctions on a closed state as in the 1990s, but rather a complex web of financial pressures, the risk of sectoral or banking sanctions, a parallel market that holds prices hostage, and an inflationary budget dependent on oil in a turbulent world.
In such an environment, any further disruption could open the door to:
The parallel and unregulated economy has expanded.
Increased social tensions,
-Expanding patterns of financial and market exploitation,
– Opening up security gaps in the most vulnerable areas.
From budget cuts to exposing corruption… what is the way out?
Faced with this bleak picture, Al-Obaidi lays out a clear – albeit difficult – path to escape the “whirlpool of the storm”: “There is no real way out of this vortex except through absolute candor and transparency. Starting with opening the file of public budgets from the first budget after 2003 until today, passing through reopening all corruption files without exception, revealing where public funds were spent and where they went, and holding accountable everyone who was negligent or lax in this regard.”
This means, practically speaking, that any realistic solution requires:
-A complete review of the course of public spending over more than two decades,
-Transparent auditing of budgets, contracts, and fictitious or stalled projects,
-Clear facts before the public regarding the fate of hundreds of billions of dollars that left the state treasuries.
Al-Ubaidi adds an important symbolic dimension: reducing the expenses of senior officials and the privileges granted to them, even if it is not a radical financial solution, because it carries a political and moral message to society: “Reducing the expenses of senior officials and the privileges granted to them – even if it does not constitute a radical financial solution – represents a very important moral step that contributes to reducing the gap between society and authority, and restores some of the lost trust.”
These steps, if coupled with genuine reforms to maximize non-oil revenues, control ports, unify customs tariffs, and rationalize spending, can reshape the relationship between the state and society on new foundations, based on transparency rather than deception.
THE DELAYED BUBBLE: WHEN DENYING THE CRISIS BECOMES MORE DANGEROUS THAN THE CRISIS ITSELF.
Al-Ubaidi’s latest message is very clear, and it aligns with what “Baghdad Today” has been warning against in its economic coverage: “Any attempt to lull the public into complacency, or to suggest that there is no need for real reforms, or to promote the possibility of paying dues in full and on time without cost, is nothing but an inflation of a bubble that is about to burst. Every bubble, no matter how long it lasts, is destined to burst… and then the consequences will be dire and their aftermath will be undesirable.”
In other words, denying the magnitude of the crisis, or being content with a temporary calming of the exchange rate, or a formal reassurance about salaries, without actual reforms in the budget, spending, revenues and fighting corruption, does not mean avoiding the explosion, but rather postponing it while amplifying its effects.
Between the warnings issued over months and the admission today that we are “in the eye of the storm,” Iraq stands before a crucial choice: either to courageously open the difficult files and restore confidence through full transparency and genuine reforms, or to continue managing the crisis with the logic of “patchwork” until the bubble bursts at the expense of the entire society.
At this moment, the question is no longer: Is there a crisis? But rather: Do we choose a painful reform of our own volition, or do we wait for a collapse that imposes prices on us that we cannot afford?