Economic shocks arising from the pandemic and collapsing oil markets expose Iraq’s fragile governance and food insecurity.
As the Coronavirus pandemic batters Iraq, the Iraqi state is grappling to respond to the evolving outbreak. At the same time, the government is trying to fill a $40 billion deficit in the state budget arising from plummeting oil prices, which is estimated to have slashed the government revenues by half. With the pandemic and economic challenges taking top priority for the Iraqi government, Iraq is exposed to the prospect of food insecurity. Compounded by antiquated and competing state institutions underfunded and plagued by bureaucratic inefficiency and complexity, Iraq’s government needs rapid institutional and policy reform in addition to a reorganization of its safety net systems to respond to the risks of food insecurity.
Iraq struggles from chronic structural and emerging challenges that have hampered its food production over the years. Iraq’s population has been multiplying, from 23.5 million in 2000 to around 39 million Iraqis in 2019. This amounts to a 66 percent increase in population in 20 years. Food supply, both locally produced and imported, has been struggling to catch up with the population growth. Moreover, Iraq’s political turmoil and instability, the cyclical conflict and wars, and the corruption and mismanagement of state resources exacerbate this problem. Food supply increased from 13.8 million tons in 2000 to an estimated 20 million tons in 2019, a 44 percent increase in the same period.
Concurrently, Iraq’s urban population almost doubled over those two decades, largely due to migration from rural areas in search of employment. Climate change has negatively impacted agricultural communities. In particular, reduced the water supply from Tigris and Euphrates Rivers and the salinization of water tables has caused mounting desertification. Compounding these issues is the economic collapse—which began with UN sanctions and worsened during the collapse of state institutions following the U.S. invasion of 2003—and subsequent conflict and wars. The economic and political toll of rounds of conflict—starting with Gulf War and continuing with the Islamic State’s rampage in Iraq’s food basket governorates—and the waves of human displacement have all wreaked havoc on Iraq’s food system in terms of local production and in its ability to procure food. The pandemic has only added more stress to the fragile food system, disrupting food supply chains, increasing food costs, and decreasing Iraqi household purchasing power as more Iraqis slide into poverty.
Today, the institutions at the core of Iraq’s food system remain persistently misunderstood and neglected, given the continuous degradation of the Iraqi state. Policy and institutional reform – specifically governing the agriculture and food sector – have taken a backseat as successive Iraqi governments and the international community have prioritized food and agricultural aid in response to the country’s crises and challenges. However, Iraq will likely struggle to mitigate the effects of current crises on food security unless it reforms the complex web of institutions governing food production and supply, empowers and consolidates state organizations, and reforms the institutional environment of food production.
In Iraq, the state is involved in every single step of the food value chain. From pre-seeding to placing food on each Iraqi’s table, the Iraqi state has impelled government dependency across its population through continuous state intervention and involvement. This is similar to other Arab countries with a socialist regime history such as Egypt and Syria. In the production of food, State Owned Enterprises (SOEs) under the Ministry of Agriculture, support farmers from land preparation and harvesting by providing tools, machinery, seeds, fertilizers, and pesticides at subsidized rates or for free. The ministries of Water Resources and Finance also provide water and irrigation at almost no cost and mask subsidies in the form of low-interest loans to farmers that are often not paid back. Under the ministries of Trade and Industry, SOEs then store or buy the agricultural produce from Iraqi farmers, process it, and distribute it into the markets. They use social safety net programs such as the Public Distribution System (PDS) or state outlets and a chain of private shops and bakeries to distribute state food products. Additionally, the SOEs foot the food supply deficit by importing food and agricultural products. Iraq imports almost 50 percent of its food needs. Therefore, in the event of global food supply chains shocks or the collapse of the state budget—Iraq depends on oil for 90 percent of state revenues—the food system becomes vulnerable as the government becomes unable to shoulder a system that is entirely dependent on state intervention and support.
A complex web of twenty-seven government organizations, including ministries, SOEs, and governmental bodies (parliamentary and cabinet committees), are actively involved in the food system. Additionally, 18 governorate and 120 district-level councils and bodies operate in the food system with certain degrees of autonomy from the central government due to Iraq’s federalist and regional structure. Each organization has its own interests and influence in the food system. These interests vary according to mandate, financial resources, and distributive authority which are driven by sectarian, ethnic, and tribal divisions that run deep through Iraqi society. These organizations have competed over the years for dwindling financial resources. For example, one of the biggest two food programs, the Public Distribution System (PDS)—a social safety net comprised of a food basket distributed to each Iraqi family—cost around $1.43 billion in 2019. Another program is the $1.25 billion Wheat and Barley Purchase Program. This subsidy program buys wheat and barley straight from farmers at double the international prices. The Iraqi population’s dependency on these decades-old programs and the direct and indirect subsidies they provide poses a significant risk going forward. The decline of the PDS and Wheat and Barley Purchase Program’s budgets since 2015 combined with this year’s unprecedented drop in oil prices will affect both the food security of Iraqi households and the financial standing of most Iraqi farmers. These farmers, who have been struggling to survive the rounds of conflict and economic challenges, are at risk of not getting paid for their production this year. The Iraqi state cannot afford such programs in their current form, nor can it implement them efficientlydue to enshrined corruption and political interests.
Today’s heavy government control over the entire food system stems from decades of state policy beginning under the Baath regime. This system remained even after the Iraqi state collapsed following the U.S. invasion of 2003 – albeit some sporadic efforts were made only to subside under public pressure due to the population’s ongoing reliance on state aid. With such entrenched state dependency, successive governments feared to dismantle this system of social welfare and the institutions that underpin it. These institutions are both the biggest employer of Iraqis and a source used by different political parties and factions for nepotism and securing private interests. Thus, the institutional context has intentionally remained constant despite the government of Prime Minister Haidar Abadi’s efforts to consolidate some state institutions in 2015.
At the core of the complex web of state institutions and competition, the Ministry of Agriculture (MOA) is weak in terms of human resources, operations, budget and mandate, which is restricted to agriculture production only. Despite running two SOEs, the Mesopotamian State Company for Seeds—which buys and sells grain seeds to farmers – and the State Company for Agricultural Supplies—which distributes agricultural machinery —the MOA is subjugated and lacks influence in the food system. Depressed oil prices, federalization, the devolution of the ministry’s powers, the aging of experienced staff, lack of technical capacities, and damage to the ministry’s infrastructure by conflict have reshaped the MOA. Now, the MOA is understaffed and unequipped to address the challenges of food security and sustainable agriculture development. The MOA does not manage either of the aforementioned programs—the PDS and the Wheat and Barley Purchase program—despite its intuitive responsibility for agriculture and food security. Rather, the Ministry of Trade, through its two gigantic SOEs—the State Company for Food Trading (SCFT) and the State Company for Grain Trading (SCGT)—controls these two programs. This creates unnecessary institutional complexity, inefficiency and added cost in addition to further weakening the MOA as a leading institution within the food system.
The MOA’s budget has been declining since 2015 when the price of oil slumped and Iraq’s overall budget decreased. Even when the federal budget began to increase in 2016, and parts of the country liberated from the Islamic State (IS) needed post-conflict stabilization through agricultural development, the MOA’s budget share continued to decline. The successive governments allocated less for the MOA even though the overall budget rebounded after the oil price crash of 2015. In 2015, the MOA’s budget was around $426 million. By 2019, the MOA’s budget had decreased to $142 million, and it essentially covers employees’ salaries alone—leaving the ministry disempowered to tackle food insecurity and respond to any food price shocks.
The pandemic, coupled with the crash of oil markets, is exposing the fragility of the food system, its governing structure in Iraq, and accelerating the need to mitigate food insecurity risks actively. Without urgent empowerment and reforms, Iraq will not be able to withstand the coming global food supply chain shocks arising from the pandemic and the economic fallout that will drive them.
Hadi Fathallah is a director at NAMEA Group. The views expressed in this article do not necessarily represent those of the institutions he works for or is affiliated with. Follow him @Hadi_FAO.
Source: https://carnegieendowment.org/sada/81976
