Iraq Battles Drop In Oil Prices

The drastic drop in oil prices is having an effect on Iraq's budget. Parliament recently decided to cut the budget by seven percent, but a large deficit is still expected.

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ALEX COHEN, host:

From NPR News, it's Day to Day. It wasn't too long ago that we heard how Iraq had billions of dollars tucked away in unspent oil revenue. Now, though, the country is feeling the repercussions of the global financial meltdown. Falling oil prices have forced Iraq to slash its budget repeatedly and now, both reconstruction and jobs are at risk. NPR's Lourdes Garcia-Navarro reports from Baghdad.

LOURDES GARCIA-NAVARRO: It's a sunny spring afternoon, and Numa Awad Rati(ph) stands in front of the Green Zone holding up a sign asking Iraqi Prime Minister Nuri al-Maliki to give him a job. Numa says the government department he was recently assigned to didn't have the money to pay him.

Mr. NUMA AWAD RATI: (Through Translator) It's because of the budget. They say they don't have the money for new employees. I hope my voice reaches those in power to help me win back my job so I can keep my family from starvation.

GARCIA-NAVARRO: He's not alone. Since the U.S.-led invasion, Iraq's economy has not flourished. The majority of the Iraqi workforce is employed by the government, in some fashion, still. A recent hiring freeze put in place has left many people here without any prospects. Even the security services, which were until recently on a hiring spree, are no longer putting people on the payroll.

General MARK LACEY (Deputy Commanding General): They're having to make some very difficult choices as far as the budget is concerned this year.

GARCIA-NAVARRO: British Brigadier General Mark Lacey is the deputy commanding general of the coalition's Iraqi Training Operation. He says Iraq is struggling to equip the security officers it already employs.

General LACEY: I think the biggest challenge they've got is, as with almost every other country in the world, they are having to deal with the impacts of a world recession. They are hoping to have an overall budget of about $58 billion. And that means that some of the aspirations, or some of the things that they want to do, in the security ministries - in both ministry of defense and the ministry of the interior as far as building and developing capacity - is going to have to slow down.

GARCIA-NAVARRO: That means, for example, the two mechanized divisions, which were supposed to have tanks and other armored vehicles, won't be able to be established anytime soon.

General LACEY: Iraq is looking at how they might want to buy equipment over a number of years instead of perhaps putting in an order to buy a substantial amount of equipment in any one year.

GARCIA-NAVARRO: The financial crisis couldn't have come at a worse time for Iraq. The government is trying to capitalize on recent security gains promising jobs and services. But with less of their own money to invest and the U.S. government no longer pumping in billions of dollars here, it will be an uphill battle. The new budget passed by parliament this month did not touch workers' salaries, pensions or the social support system of food rations and health care. But incoming provincial council members will face budgets that have been cut in half, and that will affect every part of this country. Sheik Ahmed Abu Risha heads the party that won the most votes in Anbar province in January's provincial elections.

Mr. SHEIK AHMED ABU RISHA (Sunni Leader, Al-Anbar, Iraq): (Through Translator) Of course it will affect us, but this is an economic crisis so we have to think about alternatives.

GARCIA-NAVARRO: Sheik Abu Risha is part of the Awakening, tribal members who turned against Al-Qaeda and allied themselves with the Americans. Now, they are the political leaders of the province. They've promised to rebuild Anbar, destroyed by six years of bloody war, corruption and neglect. Their fear, though, is if people don't see those promises kept, they could again resort to violence. Abu Risha says he's expecting to make up the budget shortfall by attracting international investors.

Mr. ABU RISHA: (Through Translator) We will welcome well known international firms like Shell, General Electric, General Motors and Japanese companies.

GARCIA-NAVARRO: In February, General Motors, on life support from the U.S. government, announced it was laying off another 10,000 workers. With the global economic crisis looking unlikely to abate anytime soon, Abu Risha's message that Anbar is open for business may fall on deaf ears. Lourdes Garcia-Navarro, NPR News, Baghdad.

COHEN: Stay with us, NPR's Day to Day continues.

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