BAGHDAD (AP) — Iraqi lawmakers Wednesday passed a crucial bill allowing the country to finance a widening fiscal deficit amid an unprecedented economic crisis spurred by falling oil prices and the pandemic.
Of 329 members of parliament, 168 voted in favor of a law enabling domestic and foreign borrowing by the government, a key legal step for Iraq to access funds and pay state salaries as revenues take a hit with plummeting oil prices.
Iraq depends on oil exports to fund the lion’s share of it’s state expenditures, including a bloated public wage bill. But month-to-month earnings have been half of what the government had projected to fund the 2020 budget as oil prices hover between $20-$30.
The bill’s passage was necessary to enable the government to request loans both internally and through international monetary agencies because the 2020 budget was not passed due to political deadlock.
“(The law) prevents the government from taking loans without prior approval from the Council of Representatives,” said Kurdish lawmaker Sarkawt Shamseddine, explaining why the vote was necessary.
To pay public sector workers in the short term the government plans on borrowing from state banks, according to three Iraqi officials. But this is expected to require another parliament vote. The officials spoke on condition of anonymity in line with regulations.
The government is in talks with the International Monetary Fund, but to qualify for budgetary support Iraq will have to initiate major reforms. A recent move to cut public sector salaries and pensions was rejected by lawmakers in a major blow to the government’s reform efforts.