Iraq grapples with rampant corruption, failed planning as billions vanish and billionaires spawn
Shafaq News/ Iraq is grappling with a deep-rooted corruption crisis that has siphoned off billions of dollars from its state coffers over the past two decades. According to official estimates, as much as $250 billion may have been squandered, a figure that experts believe could be significantly higher.
Despite Iraq's vast oil wealth, the country continues to struggle with poverty, unemployment, and a crumbling infrastructure. The rampant corruption has led to a surge in the number of billionaires, with Iraq now home to more billionaires than nine other countries combined, according to local sources. Critics argue that this concentration of wealth is directly linked to the misappropriation of public funds, with billions of dollars siphoned off through graft and embezzlement. The emergence of such a wealthy elite while the majority of Iraqis struggle to make ends meet has fueled public anger and disillusionment. Nationwide protests erupted in 2019, with demonstrators demanding accountability and an end to the impunity enjoyed by the corrupt.
The Iraqi government has acknowledged the severity of the problem and has launched several initiatives to combat corruption, including efforts to recover stolen assets and improve financial transparency. However, these efforts have been hampered by a complex web of patronage networks and a lack of political will. Calls for fiscal reform and increased government efficiency have grown louder in recent years. Many Iraqis believe that the government needs to focus on maximizing revenue and reducing wasteful spending.
Enough Money To Build Countries
In previous statements, former Finance Minister Ali Allawi revealed that over $250 billion was lost due to administrative corruption out of more than $1 trillion allocated in Iraq's budgets over 17 years (from 2003 to 2020). "The misuse of these funds has financially benefited certain entities, leading to a decline in the state's capabilities," Allawi said, emphasizing that the squandered money was enough to build several countries.
Allawi's claims about the extent of financial corruption in Iraq have been met with skepticism by economic experts, who argue that the losses are significantly higher than reported. Some suggest that the misappropriated funds are even greater. They estimate that Iraq's total budgets since 2003 have exceeded $1.1 trillion, and the $250 billion figure cited by the former finance minister only accounts for funds lost without official expenditure records.
Experts estimate that the actual "lost" amount ranges between $400 and $450 billion, representing roughly 40% of Iraq's total budgets. They argue that these funds could have been used to construct 400,000 model schools at $1 million each, 20,000 model hospitals at $20 million each, purchase 28,000 F-16 fighter jets at $16 million each, or provide $10,000 to every Iraqi citizen.
Experts believe that the primary channels through which Iraq's funds have been squandered were "fraudulent and inefficient" practices that have drained the nation's resources, citing "phantom contracts, inflated contract prices, non-existent employees, operational expenses, investment projects, and contract transfers" as the major avenues of waste. The most significant wastage, however, stems from "mismanagement, poor planning, and the politicization of the economy."
The experts explain that Iraq's workforce ballooned from approximately 850,000 employees before 2003 to over 4.5 million, many of whom are in roles that have become "time and money sinks." They note that only 30% of Iraq's budgets have been spent on services such as education, health, and defense, with the remainder lost to corrupt officials, mismanagement, and a reliance on imports at the expense of local production.
Judge Haider Hanoun, head of the Integrity Commission, stated in a February 23, 2024, interview with Russia's RT channel that "Iraq's development has improved our ranking on the global corruption index to 154th from 157th (out of 180 countries), an improvement of three places." Hanoun added, "Our stolen funds are substantial and are held by some countries in their major banks, integrated into their economies. The main challenge is uncovering the full amount, the quantities smuggled, and the names of account holders in foreign banks."
Hanoun continued, "We are striving for greater access to the stolen funds, but the reality is that vast amounts have been stolen over the past 19 years, deposited in giant banks, integrated into large economies, and some funds have even been diverted to terrorism."
The Integrity Commission's 2023 annual report reveals that "the total amount recovered since its establishment exceeds 391 billion Iraqi dinars, plus $500,000. The value of funds prevented from being wasted amounts to over 82 billion Iraqi dinars and five million USD, while the funds embezzled abroad, according to the report, exceed $11 million and include ten properties in a single investigative case."
Iraq's Elite
The French Center for Research on Iraq reported on May 12, 2024, that the country is home to 36 billionaires, each with a net worth exceeding $1 billion and 16,000 millionaires, each possessing over $1 million.
The head of the center, Adel Bakhwan, said that despite Iraq's substantial youth population, they face significant challenges in securing a stable future. "Sixty-eight percent of Iraqis are under 30 years old, with an unemployment rate of 40% within this demographic," he said. These challenges are largely attributed to climate change issues.
Echoing this sentiment, economic expert Nabil al-Marsoumi noted that the number of billionaires in Iraq surpasses those in nine countries, including Kuwait, Lebanon, the UAE, Nigeria, Hungary, Romania, the Netherlands, Portugal, and Denmark. Al-Marsoumi stated, "This extremely wealthy group, small in number compared to the total Iraqi population, emerged through illicit trades such as arms, drugs, dollars, scrap metal, and fuel, leading to the rise of this class."
Hoshyar Malu, head of the Kurdistan Foundation for Human Rights Monitoring, revealed on March 17, 2024, that "poverty rates are steadily increasing in Iraq due to government and state interference in the market." He explained that "Iraq lacks any economic program to combat the high poverty rates in the country."
Despite Iraq's large budget, Malu lamented that the nation still lives as if it were in the 1950s and 1960s. "The current ruling mindset does not accept the idea of a free market. The Iraqi state and government interfere in the market, causing poverty rates to rise day by day," he added.
Rising Poverty Levels
The Strategic Center for Human Rights in Iraq reported on July 9, 2024, that over 10 million Iraqis are living below the poverty line, highlighting the absence of provisions in the 2024 budget to support these vulnerable groups.
The ongoing economic crisis, coupled with the rising exchange rate of the dollar and its impact on the prices of essential goods, has exacerbated poverty levels. Statistics indicate that southern governorates lead in poverty rates, with Muthanna governorate at 52%, followed by al-Diwaniyah, Maysan, and Dhi Qar at 48%. Baghdad's poverty rate stands at 13%, Nineveh at 34.5%, and central governorates at 18%.
Hazem Al-Rudaini, Deputy Head of the Center, stated that the Ministry of Labor, through the Social Welfare Department, provides monthly stipends to only 2 million families. In comparison, over 1 million deserving families are not accounted for in the 2024 budget, which lacks new allocations for the social protection network. Additionally, more than 1.65 million registered unemployed individuals remain unsupported by the labor department.
Previously, the United Nations' World Food Programme (WFP) revealed in a comprehensive report that youth unemployment in Iraq stands at 35%, with poverty rates increasing since 2018. Currently, 29.6% of Iraqis live below the poverty line, amounting to 12.27 million people out of a population of 41.2 million, with youth constituting 70% of the population.
The Ministry of Planning announced in 2023 that the national poverty rate had reached 25%. The Ministry also stated that it is developing strategies to support poor and marginalized groups and improve living standards in various sectors, including health, housing, education, and income enhancement.
Government efforts
On July 21, 2023, Iraqi Minister of Labor and Social Affairs Ahmed Al-Asadi announced that government measures had significantly improved Iraq's ranking in global poverty indices. "The actions taken by the government have raised Iraq's position by 20 places in the international poverty rankings, according to the United Nations," Al-Asadi stated. "Through these steps, Iraq moved from 86th to 66th in the latest UN report, and we will continue our efforts to achieve further advancements."
Observers emphasize the need to support small businesses by providing loans to low-income and impoverished citizens. This, they argue, represents a crucial shift in poverty alleviation strategies, enabling individuals to become self-reliant and increase production, particularly those with low incomes or living below the poverty line.
Experts assert that comprehensive developmental and investment policies are essential for the optimal utilization of Iraq's natural and human resources. They argue that it is inconceivable for millions of Iraqis to suffer from poverty in a country rich in oil, gas, minerals, and other natural resources.
Changing The Budget Model?
Economic and financial expert Mustafa Ahmed Hantoush criticized Iraq's post-2003 budget model in a conversation with Shafaq News Agency, arguing that it overly centralizes the state by increasing employee salaries and initiating various investment projects. "This model was supposed to build Iraq's infrastructure, completing all its components such as electricity and other services by 2012, and then shift focus to employment," Hantoush said.
He explained that "unfortunately, Iraq's budgets are still spent on the same projects. We are working on projects that began in 2006, hindered by delays, deterioration, and stoppages."
Hantoush advocated for a new budget model that was divided into three sections. "The first should be a state model with specific government programs, not thousands of incomplete projects. The second should allocate funds to the private sector for initiatives like creating industrial cities and developing roads. The third section should focus on loan budgets to enhance employment," Hantoush expressed opposition to the Ministry of Planning's budget, which includes thousands of uncompleted projects due to their sheer number.
