Challenging Adversity Through Reforms

Qubad Talabani, Kurdistan Region Deputy Prime Minister

In the last 25 years the Kurdistan Region of Iraq has undergone unprecedented gains. From the reconstruction of villages, towns and cities destroyed by the genocide campaign of Anfal to the economic growth following the liberation of Iraq from Saddam Hussein in 2003. It is no wonder that despite a challenging geopolitical and security environment, Kurdistan forced itself onto the global political and economic map.

In efforts to curtail our growth, in 2014, the Government of Iraq cut Kurdistan’s share of the federal budget and later that year ISIS marauded through Iraq turning its sights onto the people and cities of the Kurdistan Region. Adding to these shocks came the sudden and dramatic drop in global oil prices, an influx of close to two million internally displaced people and refugees. The pressures became too great leading to increased internal political tensions.

So, despite the progress and development, when these multiple shocks hit our system, we realized that there was, and is more, that needs to be done. In 2015, our government decided that sustainable economic growth requires painful austerity, major reforms and greater transparency.

Our first steps towards recovery involved painful cuts to government spending. We slashed governmental operational expenditure of all ministries. We later were forced to withhold a percentage of civil servant salaries. So we began a long and arduous journey towards real reform and greater transparency.

We started these reforms at the Ministry of Finance. We launched a multi-track reform and modernization initiative that included putting in place a more robust Public Finance Management system, streamlining customs clearances processes through digitization, creating a new public chart of accounts, establishing a debt management office and increasing tax revenue collection by establishing a large tax payer office aimed at providing better services to large tax payers helping them be compliant with tax policies and procedures. These initiatives, coupled with eliminating excess governmental departments and reevaluating municipal and other governmental fees and subsidies, increased Kurdistan’s non-oil revenues and resulted in a better performing Ministry of Finance.

 But we didn’t stop there. We took on the sensitive and challenging task of addressing our large civil service workforce. We executed a Kurdistan-wide biometric registration program, registering anyone that earns a salary, pension or stipend from the government. This initiative, launched primarily with local staff and expertise, and using state of the art technology, registered over 1.2 million people into the Biometric Registration Program.

Parallel to Ministry of Finance and civil service reform, electricity is another sector undergoing real, tangible and substantive reform. With World Bank assistance, we are making improvements to our grid, reducing technical and non-technical losses to power that is generated, and upgrading distribution of power through installing smart metering. We are increasing private sector participation in generation, distribution and collection of revenues and aim to complete these reforms by year end 2019.

The financial crunch of the past few years has provided our government with the opportunity to forget, for the moment, about prioritizing the construction of buildings, but to focus on providing better, more streamlined services to our public.

Reforms and austerity are difficult to enact without public trust. That is why we have contracted Deloitte and Ernst & Young to undertake a complete audit and review of our entire oil and gas sector. This review covers oil production, export, sales, revenues, swaps on the local markets and debts owed to and by oil producers and traders working with and in Kurdistan.

In conclusion, over the past several years, we have faced monumental challenges. But through perseverance and determination, we have continued to make progress. Our reforms are taking hold, and our institutions are stronger for it. We have learned from our past mistakes and ambivalence, and we are laying lasting foundations for sustainable economic growth and prosperity and more effective government for the citizens and residents of Kurdistan