Iraq’s parliament discusses bill to release billions in urgent funds

Delay in forming new government seven months after national elections has led to financial chaos

Iraqi MPs, who will to continue debating a draft bill that allows the caretaker government to unlock billions of dollars to meet urgent spending needs. EPA

Iraq's parliament continued debating a draft bill on Tuesday that allows the caretaker government to unlock billions of dollars to meet the country's urgent spending needs.

Political wrangling over the formation of a new government — more than seven months since Iraq held elections on October 10 — has led to financial chaos, delaying the approval of the federal budget, limiting government spending and affecting businesses.

With the absence of the budget, the government can only spend a 12th of the previous year’s budget amount each month mainly on salaries but not for new projects.

Last year's budget was 130 trillion Iraqi dinars ($89.65 billion), with an estimated deficit of 28.7tn dinars.

The plan originally set aside 27tn Iraqi dinars, but this is likely to be reduced amid calls from some parties to restrict spending only to essential needs.

The bill calls for the allocation of 8tn Iraqi dinars ($5.5bn) to the Ministry of Trade to buy wheat from local farmers and international suppliers and to keep the government-run food ration programme afloat.

It also sets aside 10tn Iraqi dinars ($6.85bn) for development projects across the country as well as 3tn dinars ($2.05bn) for the Electricity Ministry to buy gas from Iran to supply power to homes.

October's election was the fifth parliamentary vote for a full-term government since the 2003 US-led invasion that toppled Saddam Hussein. It came in response to one of the core demands of a nationwide pro-reform protest movement that erupted in 2019.

Despite emerging a clear winner in the October elections, the Sadrist bloc led by Shiite cleric Moqtada Al Sadr has failed to form a government.

It won 73 of the 329 seats in parliament and teamed up with winners among Sunni and Kurdish political parties in an attempt to form a majority government, excluding Iran-backed parties.

This has come as a setback for the Iran-backed Co-ordination Framework, which had been aiming to form the government.