{"id":1130,"date":"2021-03-27T12:34:25","date_gmt":"2021-03-27T09:34:25","guid":{"rendered":"https:\/\/www.baidarcenter.org\/en\/?p=1130"},"modified":"2026-02-01T10:42:15","modified_gmt":"2026-02-01T07:42:15","slug":"public-sector-reform-a-way-forward-for-iraq","status":"publish","type":"post","link":"https:\/\/www.baidarcenter.org\/en\/posts\/1130","title":{"rendered":"Public Sector Reform: A Way Forward for Iraq?"},"content":{"rendered":"

Faisal Al-Suhail<\/span><\/em><\/strong><\/span><\/p>\n

The public sector in Iraq accounts for the majority of employment in the oil-rich country.<\/span>Plummeting oil prices and the COVID-19 pandemic have resulted in economic crisis and an ever increasing budget deficit.<\/span> Where there is crisis however, there is opportunity: will 2021 bring a much needed reform of the public sector in Iraq?<\/span><\/p>\n

When the Iraq anti-government protests erupted in 2019, the protesters demanded<\/span>heavy reforms<\/span><\/a>. Their request was threefold: provide basic public services, reduce unemployment, and tackle the corruption that has been rampant throughout the country.<\/span> The corruption of the ruling political class<\/span><\/a>, and resulting economic mismanagement, is widely considered as the root cause of the aforementioned issues.<\/span><\/p>\n

The country has been confronted with two major developments outside of its control, namely the COVID-19 pandemic and plummeting oil prices.<\/span> In a nation where petroleum accounts for 90% of the state revenue, such developments prove to have catastrophic consequences.<\/span> As a result, the Iraqi Government was faced with a liquidity crisis which led to a severe budget deficit.<\/span> Action needed to be taken to avoid an economic collapse.<\/span>One of the largest challenges to tackle in this crisis will be public sector reform.<\/span><\/p>\n

A bloated public sector<\/span><\/h2>\n

Due to the liquidity crisis, the majority of Iraqi civil servants had their monthly payments delayed in 2020.<\/span> In a nation where the public sector is responsible for the majority of employment, such a scenario poses a considerable challenge for the Iraqi state.<\/span> The UN estimates that public sector employment provides for nearly<\/span> 60% of all employment<\/span><\/a>,\u00a0 leading to a bloated public sector that totals a yearly spend of approximately<\/span> 25 % of the nation\u2019s GDP<\/span><\/a>. The recent decline in oil-revenue has hindered the government\u2019s ability to pay these wages, without descending into economic ruin and large debts.<\/span> Protests from civil servants<\/span><\/a> in response to the government\u2019s inability to make these payments highlights the current state of political fragility within the nation.<\/span><\/p>\n

The Iraqi Government recognised this problem and, in October 2020, published<\/span> a whitepaper<\/span><\/a> outlining its intention to shift from a centrally planned economy towards a market economy.<\/span> It suggests a significant reduction of civil servants, together with a push for more private sector employment.<\/span> However, a closer look into this document shows us that there are no exact details on how to achieve this.<\/span><\/p>\n

In order to pay the salaries of the civil servants, the Central Bank of Iraq decided<\/span> to devalue the Iraqi Dinar by 23 % against the US Dollar<\/span><\/a>. This currency devaluation caused a high inflation in the country\u2019s economy.<\/span> From an economic point of view, this austerity programme was inevitable, but the Iraqi people highly criticised this move.<\/span> The prices continue to rise\u00a0 on almost every good and service in a country which<\/span> imports the majority of its products<\/span><\/a>. As a pre-emptive measure,<\/span> the Iraqi state deployed security forces near important financial offices in Baghdad in fear of protests.<\/span><\/a> A move which portrays the political sensitivity of this decision.<\/span><\/p>\n

The patronage system of Iraq<\/span><\/h2>\n

The political elite of Iraq has utilised the public sector as a patronage system: support the political elite and receive a job in the public sector in return, is the rationale.<\/span> This system is unsustainable and it is a matter of time before it fully implodes, since the Iraqi economy is not diversified enough to maintain such public expenditure.<\/span><\/p>\n

The spoils of the oil-revenue have also raised the issue of the so-called<\/span> \u201cghost\u201d employees<\/span><\/a>. High level political figures employed fictional employees towards their payroll.<\/span> This is done for personal financial gain.<\/span> For instance, these wages are often part of a fraud scheme where they get sold for a high amount of money to the public.<\/span> Another example is simply receiving these wages towards their own monthly income through the use of different bank accounts.<\/span> Estimates put the number of ghost employees at around 300 000, a clear indication of the mismanagement of the public sector.<\/span><\/p>\n

Unsurprisingly, even amidst an economic crisis, the Iraqi Government showed no intention of decreasing its public expenditures and reforming the public sector.<\/span> The 2021 Federal Draft Budget maintains a high level of spending largely dependent on oil-revenue with no indication of meaningfully reducing the budget deficit.<\/span> From a political point of view, it is understandable: with the upcoming 2021 October elections, reducing the number of civil servants could be considered\u00a0 political suicide.<\/span> Furthermore, the political class is seemingly sticking to its patronage system as it intends to<\/span> increase jobs for young people<\/span><\/a> in the public sector in response to the anti-government protests.<\/span> In the long-term, this is bound to fail.<\/span> The public sector cannot sustain this strategy, considering that<\/span> 700 000 young Iraqis<\/span><\/a> come on to the job market every year.<\/span><\/p>\n

Forecast<\/span><\/h2>\n

The risk of further destabilization or political unrest is a realistic possibility.<\/span> An important factor to pay attention to will be the 2021 Federal Budget, which is currently being discussed in the Parliament to vote.<\/span> If the budget remains unchanged from the draft, another large devaluation will most likely be needed.<\/span> Simply devaluing the Iraqi Dinar will not be enough.<\/span> It must be accompanied by significant public sector reforms, which the Iraqi political powers are not willing to push through.<\/span> There is recognition among policy makers that reform is needed, however the reform required would have a significant impact on the Iraqi population through the reduction of large amounts of civil servants.<\/span>Therefore, it is highly unlikely that the Iraqi government will push towards public sector reform.<\/span> As a result, no matter what decision the Iraqi leadership will take, it is likely that political unrest and widespread protests will remain prevalent against a backdrop of economic insecurity.<\/span><\/p>\n

The October 2021 elections will be a decisive event for Iraq\u2019s socio-economic outlook.<\/span>With new electoral laws passed, there are reasons to be optimistic as the young Iraqi\u2019s who formed the backbone to the protests<\/span> begin to form their own, new parties and participate in the elections themselves<\/span><\/a>. More political participation from the Iraqi people can certainly be seen as a step in the right direction towards a new start for the land of the two rivers.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

Faisal Al-Suhail The public sector in Iraq accounts for the majority of employment in the oil-rich country.Plummeting oil prices and the COVID-19 pandemic have resulted in economic crisis and an ever increasing budget deficit. Where there is crisis however, there is opportunity: will 2021 bring a much needed reform of the public sector in Iraq? …<\/p>\n","protected":false},"author":1,"featured_media":1131,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[31],"tags":[54,53,50,55],"coauthors":[327],"class_list":["post-1130","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-economy-and-energy","tag-development","tag-economics","tag-iraq","tag-public-sector"],"_links":{"self":[{"href":"https:\/\/www.baidarcenter.org\/en\/wp-json\/wp\/v2\/posts\/1130","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.baidarcenter.org\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.baidarcenter.org\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.baidarcenter.org\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.baidarcenter.org\/en\/wp-json\/wp\/v2\/comments?post=1130"}],"version-history":[{"count":2,"href":"https:\/\/www.baidarcenter.org\/en\/wp-json\/wp\/v2\/posts\/1130\/revisions"}],"predecessor-version":[{"id":2301,"href":"https:\/\/www.baidarcenter.org\/en\/wp-json\/wp\/v2\/posts\/1130\/revisions\/2301"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.baidarcenter.org\/en\/wp-json\/wp\/v2\/media\/1131"}],"wp:attachment":[{"href":"https:\/\/www.baidarcenter.org\/en\/wp-json\/wp\/v2\/media?parent=1130"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.baidarcenter.org\/en\/wp-json\/wp\/v2\/categories?post=1130"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.baidarcenter.org\/en\/wp-json\/wp\/v2\/tags?post=1130"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/www.baidarcenter.org\/en\/wp-json\/wp\/v2\/coauthors?post=1130"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}