In-depth Business Intelligence
Books on Iraq
24,001,816 (July 2002 est.)
Iraqi dinar (IQD)
Update No: 025 - (27/05/05)
A government finally
After months of negotiations, the Shiite and Kurdish alliances managed to
reach an agreement on a list of cabinet ministers. The controversy, however, was
far from over, as the role of Sunni Arab politicians remained to be defined.
Only four Sunni ministers were initially appointed to the cabinet, although it
was agreed that a fifth, the minister of defence, would be appointed later.
While five ministers would represent a fair proportion of the cabinet (out of 35
cabinet members) compared to just 17 Sunni Arab members of parliament, the
number is widely seen by Sunni Arabs as thoroughly insufficient to represent the
Sunni Arab population as a whole, which is generally reckoned to account for 20%
of all Iraqis. The Sunni politicians had asked for 9 cabinet positions, which if
achieved would have been a rather generous concession on the part of the Shiites
and Kurds. The Turkomans too received just one cabinet position, rather than the
two they had bargained for. Moreover, the two alliances, and more specifically
the Shiites, also had to accommodate the demands of several internal factions,
of which four major ones exist only within the Shiite alliance. The
dissatisfaction of the Sunni minority was stimulated, amongst other things, by
the defection of three Sunni parliamentarians from the predominantly Shiite
alliance, after complaints that they had been sidelined by their Shiite
colleagues. At the same time, a number of Sunni notables have sprung into action
and started negotiating with the occupying US forces and the government a deal,
according to which at least part of the insurgency would give up the fight and
more Sunni Arabs would be incorporated into the cabinet. Although this move was
soon undermined by a series of raids by the security forces against Sunni
clerics, this development suggests that the dominant Shiite and Kurdish alliance
might succeed in splitting the opposition. Another example of the politicians'
thirst for power might be playing in the hands of the two main factions and be
used to divide the opposition is the split which occurred within the Turkoman
front. After their electoral defeat, part of it decided to ally with the Kurds
leaving the pro-Turkish faction to play a nearly irrelevant role.
In recent months American involvement in Iraqi politics has necessarily
increased rather than decreased, as it should have been according to the plans.
US diplomats and officials are worried that the Iraqis might not be able to
establish a stable government on their own and have been pushing the Shiites and
the Kurds to compromise with the Sunni Arabs.
From the point of view of financial management, the new cabinet seems to be
heading for a bad start, as it emerged in May that it is likely that the new
budget deficit for 2005 will reach US$4.4 billion, out of a total expenditure
totalling US$23.6 billion. Such a large deficit is the result of lower then
expected revenue, which in turn was due to the failure to boost oil production,
but even more of expenditure exceeding expectation. The increase in the tax
collection, from a paltry US$31 million to a meagre US$82 million had a very
limited impact. Such a deficit would represent a major change over the previous
year, when it had not exceeded US$611 million. The fact that just US$6 billion
out of US$33 billion of pledged aid have effectively been received also
contributes to compound the problem. Iraq also continues to import US$200
million a month of gasoline, because consumption keeps increasing. Since the US
invasion, it jumped from 15 million litres a day to 23 million litres.
Initially, the US was paying for the imports, but now the Baghdad government
does. Because prices are heavily subsidized at US$0.02 per litre, of the 9
million litres imported every day 3 to 4 are re-exported illegally to countries
such as Jordan and Turkey were the price is around US$1 per litre.
The social impact of economic recovery appears to have been limited so far. A
survey published in May by the planning ministry showed that 85% of households
still have no reliable electricity supply, 46% have no access to clean water and
that unemployment is at 20%.