PM Masrour Barzani speech on the current financial situation
My fellow citizens,
On the occasion of our Ramadan feast, I extend my warmest wishes to you all. At this time, I call upon you to continue to comply with our health guidelines in order to protect yourselves and your loved ones from the coronavirus pandemic while observing this holy feast.
The whole world, including the Kurdistan Region, is going through a difficult economic period due to the implications of the outbreak and falling oil prices. These are challenging times for the Kurdistan Regional Government. From the outset of this economic crisis, we have been doing our best to ease the financial burden on people throughout our region.
My fellow citizens,
From the start of this cabinet, we exerted all our efforts to resolve problems with Baghdad and to save the Kurdistan Region’s economy from the risks of relying on a single source of revenue.
This difficult economic situation is largely the result of the misplaced policy solely to depend on unstable oil revenues.
As for our relations with Baghdad, we took serious steps to improve our relationship. Immediately after we assumed office in July last year our first visit was to Baghdad. In addition, we expressed complete readiness for a constitutional solution to the various problems with the federal government, and proposed a number of solutions to the issue of oil exports. But unfortunately unrest erupted in Baghdad in October last year, forcing the Iraqi cabinet to resign amid public protests. From then on, the Iraqi government did not take responsibility to resolve the outstanding issues, including Kurdistan Region’s constitutional rights and entitlements, which they have failed to deliver since 2005.
Now that there is a new government in Baghdad, led by Mustafa Al-Kadhimi, we reiterate our readiness to resolve all problems in a way that guarantees the constitutional rights of the Kurdistan Region as a federal entity, as recognised by the Iraqi constitution.
Recently, a KRG delegation visited Baghdad three times to negotiate a deal on these issues. Dialogue will continue until we reach a fair and constitutional solution to these problems.
This financial crisis makes us even more committed to the strategy of diversifying our economy and the ongoing reform process, as well as putting an end to historical issues regarding public administration and finances.
Our citizens appreciate that correcting these wrongs and putting in place a stable economy needs more time and support from all sides.
Last week I chaired a cabinet meeting and approved the plan to combat this financial crisis. We also issued a number of measures related to the implementation of the Reform Law which remains an important part of the government’s agenda.
We are committed to continuing the reform process and putting an end to the waste of public wealth. Of course, these reforms threaten the interests of a number of individuals involved in corruption. That is why they resist and create obstacles. Reform is a demand from the vast majority for our citizens, and I will remain on their side. And with the help of our citizens, reforms will continue. We will not reverse course.
Of course, these reform measures must be comprehensive and apply to us all. No individual or faction must be allowed – for personal or political interests – to block reform.
I call on all sides to recognise their solemn responsibility to support us, protect our unity, and help the government in modernising the economy and public administration and improving public services.
In particular, I call on the Kurdistani representatives in the federal parliament to put aside individual and political interests and to unite behind protecting the constitutional rights of the Kurdistan Region.
This financial crisis is the result of a number of historical and political factors. This is in addition to the budget cut from the Iraqi government, as well as the global financial slowdown. However, this difficult situation cannot be used as a political tool to undermine each other, sow internal divisions or break up any part of our region under any pretext whatsoever.
In the government’s agenda, it clearly states a commitment to work to decentralise powers to governorates in a way that is in line with the region’s legal and administrative framework. Furthermore, provincial duties and responsibilities, in accordance with the law and under the supervision of the cabinet, will be devolved to prevent corruption and the abuse of power. We therefore support decentralisation in a way that continues to protect the integrity of the Kurdistan Region.
We have done everything possible to provide for citizens’ needs and public salaries. In the nine months the new cabinet has been in office, we have paid public sector salaries for eight months, with only one payment delayed.
We have also taken a number of decisions to reduce the burden on low-income families and those who, as a result of the public health and safety measures, have incurred losses.
But we must find a way to adapt to any unforeseen crisis. In line with our revenues and capacity, we have put in a place a plan for this difficult stage: the budget and expenses of government bodies and salaries will be organised and in accordance with measures outlined in the Reform Law.
In my inauguration speech in the Kurdistan Parliament, I made clear that the government is in debt. This now stands at $27 billion. Most of the responsibility for this debt rests with previous Iraqi governments for their failure to deliver the budget of the Kurdistan Region. As a result, unfortunately the government has no reserves, forcing us to depend on revenues received monthly.
This leads to great uncertainty whenever financial crises emerge.
This is no secret. Unfortunately, this fact is often ignored. Indeed, political and national issues are ignored and the focus is put on salaries, despite critics knowing well the sources of these salaries.
When the income from our oil revenues stood at $700 million a month, over $400 million was spent on production, as well as transport and loan payments. Only $300 million was deposited in government accounts. Furthermore, only $383 million was received from Baghdad. This is inadequate to provide public sector salaries, and a significant amount of internal revenues was therefore used to pay salaries. On top of this, the necessary funds for running government and services were used from internal revenues. Nevertheless, there was still a $60 million monthly deficit.
Now, oil prices have fallen significantly. For example, last month, the total net revenue from oil sales deposited in the treasury was just $30 million. Internal revenues were merely $60 million. And the federal payments from Baghdad have been delayed. This financial crisis has not only affected Kurdistan Region, but the entire world. Some countries face financial collapse.
It is clear that in the past government spending has been both unjust and mismanaged.
80% of our revenue goes to public sector salaries; public sector beneficiaries make up 20% of the population.
This ratio, according to common global standards, is far more than necessary for the Kurdistan Region. In the best of financial circumstances, 15% of the budget was used for running government and services, leaving less than 5% for investment.
This unfair distribution has come at the expense of both potential reserves for the future and investing in the next generation.
This nation cannot prosper by only paying salaries. We need a stronger foundation.
It is not possible for citizens to only collect salaries but have no access to more water and electricity, better schools and hospitals, and safer roads. And even to be in need of basic public services.
Governance is not only about paying salaries.
That is why we together – as citizens, government and political parties – need to make a consequential decision that even in better financial circumstances most of the revenues cannot be spent on public sector salaries. We must use a significant part of the budget for increasing public services and building a stronger economy.
No government can employ so many citizens in the public sector and pay salaries. Only through developing our economic foundations, and encouraging investment, can more job opportunities be created. Our nation’s income and resources therefore must be spent towards this goal.
We must all, together, have a plan to correct this current financial system. This is not an easy decision. For our region, it is a consequential decision, between two choices, forward and backward. This issue, for the sake of a prosperous future, is important for our region, and cannot be used as a tool for rivalry or be politicised.
This difficult situation which experts predict may continue for some time requires us all to help to reduce the burden on low-income families. I assure you that this government, since the start of this crisis, has put in place a plan for medicine and food security. In accordance with this plan, public and private depots, at least until the end of the year, have been filled with food and medicine, and there will be no shortage of either in the markets of the Kurdistan Region. Moreover, trade in medicine and food continues.
In accordance with our plan, and besides the monthly food rations, the government will soon start to distribute food directly among low-income families.
We in the Kurdistan Region took early measures with social distancing to counter the coronavirus. Protecting ourselves is the best response. I thank you all for complying with the measures. But in recent days compliance has fallen.
We appreciate the burden on you and your families, but we must all understand that this disease continues to be a threat around the world.
The public safety measures for everyone - such as wearing face masks in public and regularly washing hands and avoiding large public gatherings - must continue.
Those who do not follow these measures are actively risking the lives, not just of themselves, but those of their families and fellow citizens.
According to the World Health Organisation and others, the Kurdistan Regional Government social distancing and public safety measures have been very successful. Yet unfortunately there are individuals who downplay the importance of those efforts.
Despite all the pressure and the ongoing financial crisis, the government’s response to the coronavirus has emerged as a successful example of containing the spread of the disease.
I assure you, our citizens, that the government cares first and foremost about your safety and well-being. I urge you not to be deceived by false and unrealistic propaganda. We listen to your criticisms and your comments, and we take into account legitimate and realistic demands. We also understand them. But all of us must also have a comprehensive understanding of the difficult situation we find ourselves in.
I thank you for your resilience and for your sacrifice.
I am certain that with your help we will get through this difficult chapter, and that Kurdistan will move forward together toward prosperity. In that moment, I am certain that many will emerge to claim the success and achievements.
In closing, I wish you all again a happy Eid. And I urge you all to continue to comply with the vital public health measures. This is a national, religious and human duty.
I wish you all continued health and safety.