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Why Is KRG Bankrupt?

Before it goes bankrupt, the KRG was warned twice. In 2009 the emergence of the Gorran was the first. In 2011, the February 17 and later days demonstrations was the last one, but the PUK-KDP ruling elites denied to take any serious steps. They continue to do that until they are removed from power.

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Is KRG Broke?

Erbil- In London, on December 5, 2016, at Kurdistan Oil and Gas conference, Kurdistan Deputy Prime Minister Qubad Talabani referred to three reasons that led the Kurdistan Regional Government (KRG) to a terrible budget deficit the region has ever seen. He mentioned the fight against self-proclaimed Islamic State of Iraq and Levant (ISIL), the budget cut by Baghdad, and finally the plunging price of oil. However, the oil price drop factor had an adverse impact on any petrostate, but to go bankrupt and failing to pay public employees’ payments is neither the oil price nor the fight against terrorism or the influx of the IDPs.

In fact, the cost of the fight against ISIL is primarily funded by the international coalition. The United States has provided hundred of millions of dollars to Peshmerga in military assistant, equipment, and in cash as well. The KRG does not provide funds to the IDPs other than security and land. The International NGOs are bringing millions of dollars to the Region and created thousands of job opportunities as well. Additionally, the majority of the IDPs are not living in the camps, but renting houses and apartments in Kurdistan which boosted the KRG economy.  The real reason is politics and the mismanagement of public revenue by the ruling elites.

In February 2011, the people of Kurdistan warned the KRG of a disastrous outcome of the corruption when tens of thousands of demonstrators went on the street across Kurdistan Region and demanded radical reforms. Unfortunately, the KRG officials did not take the demands seriously and responded the demonstrations with bullets. After two months, the demonstrations ended by force.

Back then, the KRG was receiving the full budget share from Baghdad, but the growing unemployment rate, the lack of transparency, the oil smuggling, and lack of essential services in many parts of Kurdistan pushed the people to assemble in the public squares and express their disapproval of the KRG.

The KRG officials, especially leaders of the two ruling political parties the Kurdistan Democratic Party (KDP) and the Patriotic Union of Kurdistan (PUK), verbally welcomed the demonstrations and vowed to adopt radical reforms. The talks with then opposition groups kicked off. The Change Movement (Gorran) led the opposition talks along with the two major Islamic Parties and prepared six reform packages for negotiations.The PUK-KDP delegation held series of meetings, but they refused to take serious steps. Later, the KDP senior leader Fazil Mirani said that the reform packages sought the restructuring of the KRG which was not acceptable by the PUK and the KDP. The reform packages were a roadmap to limit KRG’s over spendings and overstaffing, but that could lead to drastic reduction of the KDP-PUK votes as well. So, the meetings were to kill time and mislead the public.

After cracking down on demonstrations, instead of reforms, the ruling elites continued on the tradition of two years term cabinet for the PUK and two years for the KDP. Eventually, the progress made by the PUK candidate Barham Salih in employment system, loans for villages, agricultural loans, and reforms in the high education system were all hindered by the coming back of the KDP candidate Nechirvan Barzani.

Before the demonstrations of 2011, the KRG was shaken by the emergence of the Gorran in 2009. The two ruling clans, the Barzani and Talabani who have been sharing the KRG rule since 1992, almost lost majority vote and were faced by the largest opposition group in the KRG’s history.

The Gorran came as a response to the growing grievances among the public about corruption, nepotism, and lack of social justice. On a daily basis, the Gorran and its media outlets published dozens of reports on the KRG corruptions and financial mismanagement, overstaffing the public institutions, extreme inequality, and politicizing Peshmerga forces. In parliament, the Gorran lawmakers and other opposition members conducted intensive investigations on the same topics as well.

The people were educated about the budget and the details of expenditures and how the ruling clans are taking a lion share from the budget coming from Baghdad. Consequently, the public lost trust in the KRG and its promises.

Nevertheless, the KDP and the PUK sustained the same policy by employing thousands of their supporters and adding the party members to the public employees’ payroll list. The strategy to counter the growing opposition groups and the public grievances was massive employment and registering tens of thousands of party members on retirement benefit network.

The ruling elites were aware of the growing budget deficit, but they kept a blind eye on it. In 2011, during a hearing at Kurdistan parliament, then Kurdistan Prime Minister Barham Salih said that his cabinet had $1.5 billion deficit. Since then, the deficit is growing and KRG’s debts ceiling exceeded $20 billion.

The KDP had a plan to employ almost everyone, and it was one of the promises of 2013 elections. In an election ad, KRG Prime Minister Nechirvan Barzani said:” Our plan is to share oil revenue with every single person in Kurdistan. We will introduce a bill in the parliament in which people of Kurdistan can directly benefit from oil revenue by becoming shareholders at Kurdistan’s company for oil production.” The idea was very much similar to the Gulf States model which is sharing the small cake with the public to take the bigger one peacefully. The KDP was betting on the ambitious project of the “independent oil sale.” It was entirely dependent on oil. Thanks to the oil price drop, the dream of duplicating Gulf States model collapsed.

The skyrocketing of the KRG employees began after the emergence of the Gorran in 2009, but it reached its peak in 2015. Now, out of 2.2 million eligible voters, the KRG claims to have 1.4 million payrollees which include the employees, the retirees, and others who are on social benefit networks. However, according to the latest data available in Baghdad, the KRG’s actual payrollees are over 700,000, the rest are believed to be members of the KDP, and the PUK, the bodyguards of the two parties’ leaders, people who are working at the political parties’ headquarters and branches across Kurdistan. Therefore, if you remove the political parties members who are not doing anything to the government, the KRG will be able to pay the payments and sustain the investment projects as well. But the burden of the two parties members will remain as part of the system because it is regulated by the law.

Unless the Gorran and the Islamic parties are able to win the majority to form the government without the PUK and the KDP, no reform plan such as biometric system can resolve this issue because it is rooted in the system. The only way to get rid of it is to embrace a radical reform and restructure the entire KRG. It is difficult and will face tremendous pressure, but it is doable because this fundamental reform can never be implemented by those who invented it. Also, the public is not going to trust the PUK-KDP claims.

About Sarkawt Shamulddin (54 Articles)
Sarkawt Shamsulddin is a political analyst on Middle East Affairs and co-founder of the Kurdish Policy Foundation

1 Comment on Why Is KRG Bankrupt?

  1. well done

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