Anger is mounting in Iraq over new customs tariffs and taxes imposed by the government since the beginning of this year; a move authorities say was prompted by a slump in oil prices – the country’s main source of revenue.
Iraq, Opec’s second-largest producer after Saudi Arabia, has oil reserves of about 153.1 billion barrels and is highly reliant on crude revenue, which make up about 95 per cent of its income.
Oil prices on the international market have been bearish since last year due to several factors, including oversupply and Opec’s decision to maintain output levels.
As part of measures to compensate for losses and meet high financial obligations, Iraq's government approved a broader fiscal strategy to increase non-oil revenue and reduce the budget deficit.
The measures include reconsidering public expenditure such as salaries and allowances of senior employees. It has also reinstated a 20 per cent sales tax on mobile phone and internet recharge cards, which was initially introduced in 2015 and then cancelled in 2022. Customs tariffs have been also increased, from between one and 5 per cent to between 6 and 30 per cent.
The increased levies prompted traders to stage a demonstration in the Baghdad's commercial district on Thursday. A similar outpouring of anger last week among traders in neighbouring Iran after a record drop in the Iranian rial, has sparked nationwide protests against the government over economic hardship.
Saad Al Kubaisi, a goldsmith and owner of a gold import company, was among dozens of merchants protesting against the Iraqi government's new measures outside the Baghdad Chamber of Commerce building in one of the capital’s main wholesale markets.
Tariffs on imported gold were increased from 250,000 Iraqi dinars (about $190) a kilogram to as much as 12,000,000 dinars, Mr Al Kubaisi told The National.
“This is a very, very unfair percentage,” he said, saying he cancelled an order from Dubai last month when the government announced the measures. “Our work is totally paralysed,” he added.
“These are impulsive decisions. This is gold, who accepts paying more than its price on the international market?” he added. “I don’t know how they approved this tariff without consulting us.”
Angry shouts filled the air as merchants gathered in Al Nahar Street, the main hub for gold, clothing and accessories businesses in Baghdad’s bustling commercial area. They accused the authorities of strangling businesses by imposing financial burdens and red tape.
“No, no to the new tariffs,” some chanted. Other held banners that said: “High tariffs do not protect the market, they disrupt it”, and “We want economic solutions, not new restrictions that cripple imports and inflate prices.”
The Iraqi economy faces significant challenges including corruption, poor service delivery and a lack of job opportunities, that have fuelled widespread protests since the 2003 US-led invasion that toppled Saddam Hussein.
The International Monetary Fund estimates that Iraq requires an oil price of $84 a barrel to balance its budget due to rising spending, mainly on the public sector which is characterised by significant politically-driven expansion, particularly in security.
Benchmark prices showed a slight rise on Thursday, with Brent crude futures at $60.55 a barrel and West Texas Intermediate reaching $56.57, according to Reuters.
Critics of the government's new taxes and tariffs say they disproportionately affect vulnerable populations and exacerbate economic instability in Iraq.
The new tariffs will “cripple the Iraqi economy and the poor Iraqi family will be the only one to suffer because we will add that to prices”, Mahmoud Abbas, a food merchant, told The National.
He said the tariff he paid of 4 million dinars for each container he imports has been increased to 30 million dinars.
“Who will be affected? The people, mainly the poor because you can’t stop eating,” he added, calling on Prime Minster Mohammed Shia Al Sudani to reconsider the “wrong decision”.
He has goods worth $7 million to $8 million waiting outside Iraq, he said.
The looming economic crisis adds to the challenges that Iraq's next government, which is being formed following the November 11 general election, will have to deal with, in addition to other political and security issues.
