Iraqi Kurdistan's deputy prime minister Qubad Talabani
ERBIL, Kurdistan Region--Iraqi Kurdistan's deputy prime minister Qubad Talabani told Reuters on Thursday that his region may be devastated by an economic "tsunami" which could fatally undermine the fight against Islamic State (ISIS) terrorists.
"The world is focused on the war against ISIS but nobody wins a war bankrupt," he explained. "I think this is something the coalition against ISIS really do need to factor into the equation."
He pointed out that the failure of the regional government to pay the salaries of state employees has undermined morale and may in the long-term compromise the fight itself. Many Peshmerga soldiers combating ISIS on the Kurdistan Region's front-lines with that group haven't been paid in months.
"The most dangerous impact it can have is on morale," Talabani told Reuters, "We are getting desertions. People are leaving their posts -- it will increase."
A lot of revenue for the Kurdistan Region comes from oil and after Baghdad withheld its budget in early 2014 Erbil has sought to export oil independently. However the global drop in the price of oil (down from $100 a barrel just two years ago to a mere $30 today) has further augmented Kurdistan's economic woes.
Talabani doesn't believe it will make any different whether Erbil opts to export oil independently or try to return to some kind of revenue sharing agreement with Baghdad. "At this oil price, a couple of hundred thousand barrels here or there is not going to fix Baghdad's problems and it's not going to fix ours. We have to think of another formula to fix our economic problems."
"We're not bankrupt yet but if we don't enact structural and actual reforms the current situation is not sustainable," Talabani explained adding that reforms are underway. Primary changes to be made will be downsizing the very large public sector which most of the working population depends on for their pay as well as privatizing parts of the region's electricity sector.
"This is a tsunami," he added, "Either we react and respond to it or get dragged under. The initial step is to stop the ship from sinking."
On the war front Talabani is not optimistic about a liberation of Mosul by the end of 2016. "I don't think the Mosul offensive could happen this year. I don't think the Iraqi armed forces are ready and I don't think the [American-led] coalition is confident in the ability of everyone to get ready in time for an offensive this year," he said.