Mismanagement Is Killing Iraq

Luay al-Khatteeb

Economics, Iraq

Forget corruption. Waste, inefficiency and economic distortion have brought Baghdad to the brink.

Ever since Stuart Bowen led the first attempt to account for Iraqi reconstruction funds in mid-2004, it has been clear that Iraq hemorrhages money through corruption.

Since then, things have got worse as last year the late Ahmed Chalabi found twenty-nine companies who were stealing over $4 billion with fake contracts. Stories of phantom projects and ghost employees abound, even after the last scandal in 2014 where fifty thousand names were found on the Ministry of Defense payroll, men no longer turning up to work. Commanders pocketed their salaries.

But Iraq has another silent economic killer: years of mismanagement, which have seen around $700 billion in mostly oil revenues produce little beyond a staggering seven million government employees, but not enough schools and infrastructure.

And while every administration promises to end corruption, many politicians in Iraq are oblivious to the financial black hole of mismanagement. This includes generous subsidies for anything that moves and the propping up of a host of failed state-owned companies, as well as absurdly bloated ministry payrolls and high politicians’ salaries. In fact, ministry payrolls have become a kind of jobs-for-votes scheme.

Therefore, $60 billion of Iraq’s $99 billion budget goes to state wages, blank checks for political hiring schemes. The Kurdish region has been no different, with over 70 percent of its budget going on government jobs.

In Iraq, mismanagement is driving the country off a cliff edge because of the oil price collapse. This phenomenal waste could give ISIS (who are rapidly falling back) one last chance. That chance may come some time towards the end of this year, when Iraq faces possible bankruptcy.

Meanwhile overspending endures, tied to a legacy of petrodollar-fueled socialism that would make Maduro blush. Even in the last oil price crunch in 2008, the state still expanded 30 percent.