It will be good. To see. After months of antigovernment protests and Political Uncertainty iraq is now grappling with the worst fiscal crisis in decades. Iraqs economy and state budgets are heavily reliant on oil income and have been hit hard by the sharp decline in Global Oil Prices the world bank has projected g. D. P. To contract by 9. 7 percent of the fiscal deficit expected to reach almost 30 percent of g. D. P. Iraqs newly appointed government led by most of the me is now faced with the challenging task of implementing long overdue Structural Reforms such as reducing Public Sector employment while also keeping popular unrest at bay im so want to get out as iraqs fiscal crisis deepens we ask what needs to be done to address it and how can the new government overcome entrenched political interests that oppose reform while also winning over a public that has lost trust in the political establishment. The World Bank Special representative to iraq talks to aljazeera. Special representative for the overall bank in iraq thank you for talking to aljazeera the world bank recently put out a new report on iraq in which it warned that the economic crisis was the worst the country has seen since the fall of Saddam Hussein in 2003 can you walk us through how we got to this point i think because the kids. And actually the report has reflected very clearly the situation that were in at this point in time and which is actually in a communication of of events that started in to sell them. Of course. The the the crisis that have hit iraq. Would have petered lee coming up a different instances in 21415. 00 where we had the drop of oil prices then the which has actually if elected lot of damages on iraq not only in terms of reconstruction but also in terms of economy so he was hit by both crisis. But isis as well. Then the doctor i. D. D. 2 would be covered out of there unfortunately the policies that would use then would in that in that i place and of course that has actually led to the protests that we had in october and the 2 that is ignition of the government and those protest would actually coming out of crisis and out of problems that they needed of the bush sort of his delivery of local jobs on missing only employment especially in a in a society that is mostly built around young people so they had a lot of expectation that unfortunately were not fulfilled and all of this actually was compounded by because with 1000 prices that iraq and the drop that 3 men the prices of chemical so all of these elements just actually accumulated all over it to end up in the situation that we are in at this point in time it seems that we are repeating the same situation over and over is the government not taking the necessary action to really address some of these structural issues its a truly as i said at the beginning its a kind of good relations to all the governments that came into office had to deal with this situation as it is and unfortunately that wasnt the kind of vision that was put in moving very fordham process forward to that has been structured issues that existed since minute one. A bit enlarged and a bloated Public Sector based on the perception. People looking at employment as being staff within the government itself to the to the to the people around the country and in generally Public Sector it is a safety net for people its a salary its a pension not only for you but even for you to avoid was and so that has been lot of things and has just flicked a lot of the budget problems and lot of actually expenses on the on the burdens of the of the government itself you mentioned the Public Sector which is one of the hottest issues if we just look at how it has evolved over the years in 2004 the public wage bill was 7 percent of Public Expenditure that grew to 27 percent in 2014 and now its almost 50 percent of the states budget realistically as a government how do you go about cutting salaries reducing Public Sector employment when that is such a big part of employment in general and also when government jobs realistically i used to buy political support. Of course this is a very difficult situation at this point to them because people feel that this is an entitlement and as i said the beginning people look at it as part of the culture so employment is looked at and linked to Public Sector employment we have we have talked a lot and i think it is the perception of governments that there should be ever speak there should be a way of looking at how to move people within their mindset as well as within practice away from the Public Sector into the private sector so that brings us to the question of creating the could use of environment for private Sector Investment because the private sector is the sector that creates jobs that brings in investment into the place and i think this is where there is a kind of where a lot of elements should come into play so if we want to look back at restructuring the Public Sector we need to create an alternative which is creating jobs outside the Public Sector with. In the private sector therefore we need to create an environment that allows but i would sector to invest or top of that we have i think to include lot of elements that would come into a regulated process so people would understand that moving out of the public into the private would keep their benefits allow distance food off of benefits the portability of benefits as we call it so this is where we actually helped at one point in time to go for a unified pension law in iraq which brings both public and private into the same place people start understanding within that if you of looking at the public and the private sector that they are almost the same in terms of looking one at the pension and most importantly looking at the salary scale between the 2 that much is sure people start having the option of moving from one to another so i think this is where we have to start thinking of that actually in the Public Sector in that process so its not only reducing its not only cutting the benefits but maybe on the other side to create that would do not have so that people start feeling that they have the option but of course this is very difficult to do especially because the protests that we have seen in iraq over the past few months one of the major grievances was the lack of employment so to be eliminating Public Sector jobs in this kind of environment is very difficult but if we just look at the figures of for example in april the government earned 1. 4 1000000000. 00 in oil and come thats about 3000000000. 00 short of what it needs just to cover public salaries we have heard the Prime Minister mr falcao them recently announced that he would be cutting salaries of the higher level Public Sector workers is that enough or does the government really need to look at reducing overall employment in the Public Sector. That is the statement that the government decides on but what we can say is that basically the bank we have done a lot of studies that the government is looking at in terms of looking at the size of the Public Sector and the expense. Is that included on the government due to that to that inflate that size of the Public Sector in terms or looking at the governance the way this Public Sector is that im looking at institutions looking at structured and of course included into that all of elements that are essential for Good Governance for a good performing Public Sector i. E. Referring to the question of corruption to the question of looking at good processes that are put in place and of course all of this implies or no good implementation of what is being done so projects are done properly people are benefiting from sort of says extremely poor people benefiting from those students 1st because there is a transparent in very clear technical process that allows these benefits to get to these people so all of these actually elements come together in looking at the form of the Public Sector itself know what the government is going to go into is something that the government decides according to their own priorities of course and understanding very well what is the political environment that allows for that to move forward but of course in that there is not only the political elite and the parliament that will be looking at this but its also the street the protesters that will be looking at any step that the government will move into that kind of forward and try to see how credible is that so that they can actually comply or probably not the thought more about that political environment because i think thats very important of course any kind of reform proposed by the current government would have to be voted on in parliament a parliament that has very much resisted any substantial reform as demanded by the protesters so realistically how can this government go about implementing some very unpopular reforms Going Forward the government at the end of the day knows very well the political environment and im sure very well aware of the dynamics that exists and definitely in opposition to describe that. But what i can see from this side of the bank is that we have provided and we are ready to provide all the essential support that is needed from the technical side because this is where they come the bank comes really with the with the expertise it has building on other experiences and other Lessons Learned from other countries in the word and try as much as possible to adapt it to the iraqi situation of course in consultation with the government then with other with other players and try to see what works best so we offer options and it is really up to the government to decide on how to move forward of course were bringing evidence based were bringing technical were bringing numbers and statistics looking at the situation that exists and i think this is where the government could engage with the policymakers with the parliament and try to see how move it in the best way possible and of course taking into consideration what the people want because at the end of the day were looking at that is increasing were looking at an employment that is increasing and again going back to a Younger Generation that is expecting a lot it has waited a lot it has been deceived a lot so i think now it is the time to give them at least a positive signal that things would move in that or that action and youve mentioned youve put forward options youve also met with the Prime Minister youve met with the finance minister what are the options that youre discussing and what kind of support is the government requesting from the world bank what i can say is that the bank has actually engage with the government of dr abdul mehdi in that the signing of a member of the standing which actually highlighted the Main Elements of the for the process that needs to be put on the table highlighting 3 main pillars mostly the looking at the diversification of the economy looking at working to create an enabling factor that for the for the private sector to come into investment and thirdly that as much as possible to see how we can build the capacity of the government toward closely with the private sector in moving things forward in a partnership what needs to be done to kickstart the. Private sector. There are a lot of things that have been put in play in to doing business doing business is the running as much as possible and to say it simply create the essential elements that would encourage private sector to come in invest starting with simple policies looking at the visa issuance looking at the establishment of a Company Looking at the possibility of starting a basic services that the Company Needs all the way up to looking at the institutional requirements to get to the proces laws in land so all of these are elements that would if adjusted well and put in place allow the private sector to be encouraged but these are also things that i have heard time and time again over the past years why have these reforms not already been implemented because they have previously been recommended by the world bank by other institutions so what has been the delay here that has been a lot of changes this place actually has seen a number of carbons come into into office and unfortunately sometimes it will happen that any new government comes in the discussion is a bit discontinued and we have to start probably from scratch again maybe adjusting it according to the directions that the government has and of course not to mention that there have been a lot of crises that have hit this place at the time when we have reached somehow equate advanced age to then we had to wait for probably sidelined a bit to try to see how we can manage the situation thats happening we can see now a commitment to move forward i think full conviction that the private sector should be encouraged to come and invest we have to make sure that we can support the government and do that and of course throughout the process we need to make sure that we are providing what is needed as a government and helping the government to do that to the extremely poor in 1st of all providing them with what is needed secondly improve their Service Provision and most importantly work on the Human Element in iraq work on the Human Capital we have to keep in mind and we have to keep focused that there are a lot of people that need to be supported and lot of people that need to be brought in to safety away from poverty. Talking about the social safety net and poverty the world bank has warned that poverty rates could up to double as a result of the most recent economic crisis but actually the government does spend quite a significant amount of its budget on social welfare including for food rations for Social Security what can be done to make the support more efficient so that it actually reaches them the most important actually has an impact on the population there are a lot of systems for support and social assistance space and its coming from different ministries in addition to the fact that there are a lot of programs of social assistance that we need to think that they would be to move into a kind of a much more targeted approach so make sure that all of these resources are focused on those who need it the most so instead of just going into programs that are big and actually just throwing or at least dispersing money in Different Directions try to focus on making those programs hitting those who need the most is there a lot of public waste because if you spend 14 percent of your budget on Social Security there should be an impact right of course and thats thats why again you have a lot of of probably of misuse the resources if i may say so we need to restructure this we need to look at this program and probably try to consolidate it based on the fact that were looking at a good database of those who are in need keep that database live in the sense that it is updated continuously but most importantly its not a question of just assisting people its a question of trying as much as possible to move these people away from poverty so this is where the other supporting programs that would help people get out of poverty come into play creating jobs opening up opportunity giving michael credits working or drool environment to create to revamp the Agriculture Sector so all of these elements that would come into a socialist. That would help actually focus more and more on those in need a fiscal space for the government instead of being somehow abused in a sense to be put in those productive projects that would get jobs and actually help people. Now when i speak to some officials in government some of them voiced concern that they believe that the support from the world bank is too theoretical they say that they want support that will actually result in real changes on the ground because the the reform areas that youre trying to address it appears there is no really long Lasting Impact that the same issues come up over and over again so what lessons can you draw from these past programs to make sure that any kind of reforms Going Forward take root within the state and actually have an impact on the ground. Let me let me get to that in a minute but let me just highlight that basically the bank is not only into the support on the financial front as you describe it through those what we call a Development Project loans but just to say that the portfolio of the bank in iraq is of 2000000000. 00 so we have a number of projects that position in terms of delivering services in terms of working on the construction in terms of working on the form of institutions so its a 2000000000. 00 portfolio on these projects just to see that this is not the one at the could put the the sense of the way youve described it so but im talking specifically about fiscal stabilization programs or maybe let me read to you. An excerpt from your own internal evaluation of one of these programs in 2010 the report read the experience demonstrated policy operation cannot work well in the high risk environment when governments are motivated by fiscal stress but that the sustainability of achievement is uncertain if the fiscal stress is removed. Can you comment on that what exactly that its or it let me go back again and say that when im discussing this portfolio is just to highlight the fact that when you go into the implementation of these projects as a government because these at the end of the day these are loans you are improving the Service Delivery you were improving the quality of life and you teaching to your citizens so this is part of rebuilding the social contract that we keep talking about of course going back to the question on what was the lesson and referring back to what you just said is at the end of the day the whole thing itll dates around the political commitment yes of course in times of distress government realize that we need to move on things and fortunately going back to the economy of iraq this is an Oil Based Economy so im sure unfortunate to say that it all depends on the oil of the on the price of oil so when the price of oil goes high of course the tendency goes this implementation of reform and unfortunately this is so unfortunate because this is when you sit on the table and you discuss the forms you expect to have a vision that regardless of the price of oil and this is where the conception of understanding that we need to diversify the economy we need to really look at oil revenues so what can you as the world bank to do to ensure a long lasting commitment to these reforms even when the oil prices go up. That thats something that we do our best to work with governments or at the end of the day. You cannot force in the government the bank this is definitely not in the process of forcing anything we come in full agreement on priorities with the government with the day to provide the support needed and of course we did as much as possible to highlight the importance of that especially in establishing the link of the the economy in general the welfare of the of the people in general and most importantly looking back at that social contact saw the Bank Provides support and the Bank Provides that advice but at the end of the day the political decision is the decision of the government i think its very illustrating to look back to february 2018 the quaid conference when the International Community raised 30000000000. 00 us dollars to help the reconstruction in areas that were most affected by the war against i saw the world bank hosted finance that conference 30000000000. 00 were raised what has become of that. The bank helped its actually the kuwaiti government who as opposed to the confidence it has helped in any event it was a big event. What happened after that unfortunately that was not followed up properly and its its not only me saying it as a bank but it is also what the minister of finance has said that clearly and i think now the government is quite serious on following up on this and i think that the visit of the minister of finance to the quit and the discussion that they have started with equate these is actually picking up on this terms of seeing how can we really go back and try to see what word the commitments in the quaid and how we can move forward on that from your perspective what was the reason why it was not followed up and what does it tell us about the states capability to actually implement these large scale projects. I think if you want to go back in order the government wants to go back and really look at the commitments and try to engage again with the countries that have expressed their willingness to pledge i think this is where the government has to present probably its current view on things things are different from what we left in kuwait so you know we have gone through a crisis and we have all seen because sequences that crisis i think the government will have to go back with a new approach its picking up on what was there in kuwait yes but with a new approach and a new vision so we will be talking and i think the government will be talking of course of what is the step what is coming up how that money is going to be spent and i think its going to give a different approach to the process that would somehow instill trust in the minds of the countries that have expressed expressed their willingness to pledge. And if think the environment is some hope wait conducive to that if its of course not just a limited capability of state institutions to implement projects but theres also the issue of corruption iraq ranks 162. 00 out of 180 countries on transparency internationals corruption in the acts and if we compare that again to 2004 it used to be 61 out of 145 so corruption has increased substantially over the past years how does that factor in your consideration. In supporting this government as an International Institution that provides support is there a feeling that the government should 1st look towards itself and address corruption before asking for external help. I think the government is quite aware of this and. We have and we have been asked and we will provide all the support needed in terms of instituting the good elements of Good Government of good institutions but again its all depends on the decision and the political commitment of the government to move into the process. I think now the government is trying to move into the process one looking at the inflate the Public Sector to organize it and most importantly how to move the private sector the Public Sector excuse me in being quite productive in their living projects in making things happen and of course when were talking of Public Sector its only fair to say that there are a lot of good elements within the Public Sector within the government situation lot of good elements and unfortunately there are some whole structure that is quite rigid and unfortunately that is a lot influenced by some political interferences so i think if there is a political will and that is that decision to move forward into a process of organizing the Public Sector one internally in a kind of an internal Kitchen Organization but most importantly in terms of moving it into a better Delivery Services that will reshape and revamp who would perception of people looking at the Public Sector in terms of of being really able to produce what it needs and again i go back to the question for the establishing a new social contract between the citizen and the government and of course you go about that because the trust between the citizens and the government has really been broken and you know if you go out and listen to the protesters what theyre saying about the government theyre asking for a complete overhaul of the political system because they consider it as not reformable this is where i think the government needs to be sending some positive signals at the end of the day unfortunately in a few of the absence of the trust you have to make the public see that there are some changes happening it is not only the problem of the Prime Minister and its not only the problem of the minister of finance or the problem of the minister of the public this is the problem. So every citizen needs to feel that they are in a problem and to be able to do that we have to be transparent the government needs to be there in spirit that really putting the problems on the table and saying listen this is where we are but also at the same time putting the solution on the table minding expectation that is that a lot of the acceptable. The situation and the political environment needs to be taken into consideration what are the priorities of the government how to really say to that to the people and how to actually deliver on what we are promising so that people would start listening and would start believing with time so hopefully they will get to trust us again so i think this is where the vision needs to be installed where people would have a say people would comment but also the government would put them in a position to say listen this is not our problem only this is everybodys problem so we approaching it as a National Unity problem certainly a difficult road ahead special representative in iraq thank you for talking to ill just thank you very much i want to thank you very much with just. On counting the cost to india is the labor reform but is it reform when they cracked the job bank fed and made millions with no redress what chinas tightening grip on hong kong will do switch Financial Hub status. 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