The Iraqi economic scene – the past years – has witnessed intensive discussions on the importance of establishing a sovereign fund that entrusts it to develop the financial resources of the state and invest in the long term, and this step comes in light of the government’s efforts to diversify the sources of income and reduce dependence on oil as a main source of budget.
The idea of establishing this fund was not the result of the moment, but rather to the aspirations of previous governments, which were unable to bring this project into existence, the Mustafa Al -Kazemi government presented the idea of establishing a sovereign fund, but the project did not see the light, and it remained just a media talk, according to The officials ’statements.
On August 31, 2021, former Prime Minister Mustafa Al -Kazemi announced the start of the “Fund of Generations” project, which will protect the people from full dependence on oil.
The sovereign wealth fund is an investment that manages the financial surpluses of the state through assets outside the borders, but it is not affiliated with the Ministry of Finance or the Central Bank, as it differs from the foreign cash reserves.
Amer Al -Adra, Adviser to the Prime Minister, confirmed that the Reform Administration Cell is working to prepare a study to create a sovereign fund
Deliberate plans
Amer Al -Adad, Adviser to the Prime Minister, confirmed that the establishment of any sovereign fund requires parliamentary legislation through a law that the government prepares and is presented to the House of Representatives to vote on it, indicating that what was proposed by the sovereign fund in the previous government did not exceed the media talk.
On August 24, 2021, Al -Kazemi stressed the importance of laying the basis for the establishment of the generations fund, which aims to secure the future of future generations, and the government can adopt it within the economic reform policy that it started as a way to advance the economy to serve the country’s present and future.
Al -Adham said – in an interview with Al -Jazeera Net – that the establishment of the fund is not limited to the presence of cash liquidity, but also needs a general policy and a case study, adding that there are many sovereign funds established as the Development Fund, but the Reform Management Cell works on studies to establish the fund, while the previous departments did not It is considered a study, but I only talked about it, and even the coming of the current government has not found any previous study.
He explained that the sovereign funds are types, including the generations fund, which depends on investing oil revenues for the post -oil stage, including a fund to invest increases from oil revenues to cover the deficit period of low prices, in addition to other funds that work to invest in Iraq such as development boxes and the retirement fund.
Al -Adham indicated that there is a theory to link these funds to be multi -activities, explaining that the merging of existing funds or the establishment of a new fund must be studied according to the investment strategies of each fund and determine its goals before the establishment.
He stressed that the Reform Administration cell is working to prepare a study to establish a sovereign fund, and that each fund has different sectors, so the oil imports installation fund – as he says – is investing in non -oil sectors to ensure that it is not affected by the decline in oil prices, as well as the development fund works on development projects within the country, As for the retirement fund, it works on long -term investments, such as infrastructure.
Lost opportunity
Economic researcher Omar Al -Halbousi explained the reasons for not establishing a sovereign fund until the moment, explaining that the government did not take the opinions of experts in the economy, and it consumed excess funds in appointments and projects of an electoral political nature.
Al -Halbousi said during his talk to Al -Jazeera Net, “It is well known that the countries of the world are tending to establish sovereign investment funds that contribute to diversifying the state’s investments and maximizing their financial imports, which contributes to the formation of a barrier to prevent shocks and risks or mitigate them in the event of any global crisis similar to the Corona pandemic.”
He stressed that the presence of a sovereign fund means that the state has emerged from the rentier -based rentier economy, and diversifying its revenues, which protects the state fluctuations in oil prices, as oil will be secondary and not first in the event of a distinguished sovereign fund that invests in high -profit and sustainable assets.
Al -Halbousi explained that most of the countries of the world established their sovereign funds from the financial surpluses resulting from the increase in oil prices. Iraq was in a good position after the Korona pandemic when the oil prices rose, and it achieved a large financial surplus that enables it to create a sovereign fund.
He added, “But (Iraq) consumed the surpluses in operations that are not profits, which led to the exacerbation of the financial and economic risks facing Iraq amid the expansion of public finances and the exacerbation of the financial deficit, as well as the atauguration of oil prices and the possibility of their decline.”
Political power
Al -Halbousi indicated that the sovereign fund, if he saw the light, supports the Iraqi economy by diversifying it, increasing its strength and protecting it from global economic tremors, as well as strengthening political relations with countries.
He said that most of the countries of the world use their sovereign funds politically and economically, noting that countries are investing in a specific country and maximizing their financial imports and at the same time enhancing interdependence and political relations with the country invested in it, which gives the owner of the fund a political force with a solid relationship as well as strengthening its economy.
Al -Halbousi stressed that Iraq did not possess a sovereign fund because the politicians did not listen to the advice of economists who recommended the government to establish a sovereign investment fund that contributes to maximizing the economy and constitutes a barrier in the face of economic crises.
He added that the government preferred to consume excess funds in appointments and projects that were of an electoral political nature, which contributed to the depletion and loss of funds, and missed it a great opportunity to create a sovereign fund.
