Iraq’s Era of the All-Providing State Is Over, Think Tank Warns

ERBIL (Kurdistan24) – Iraq stands at a precipice far more dangerous than the transient liquidity crunches or salary delays that have characterized its recent fiscal history, with a premier research institute issuing a stark warning that the nation’s foundational economic structure is buckling under the weight of an exhausted social contract. In a report published on Thursday, the Rawabet Center for Research and Strategic Studies outlined a grim prognosis for the federal state, asserting that the era in which the government could function as the sole provider of livelihood and services has reached its definitive end.

The report categorizes the looming struggle not merely as a budgetary dispute, but as a battle for the survival of the country’s economic model, requiring a radical transition from a rent-dependent state to a diversified, regulatory economy.

The analysis provided by the Rawabet Center dismantles the prevailing narrative often embraced by Baghdad’s political elite—that the current economic malaise is a temporary shock resolvable through short-term grants, exceptional administrative decisions, or a rebound in global oil prices.

Instead, the Center argues that Iraq is facing a historical turning point driven by the simultaneous convergence of near-total dependence on oil revenues, rapid population growth that outpaces job creation, and the comprehensive deterioration of infrastructure, healthcare, and education.

These factors, combined with mounting threats to water and food security and a hostile investment climate, indicate that the crisis has transcended simple budget deficits. It represents the total exhaustion of the "state that provides everything" model, a system that has fostered a deep-seated reliance on government rent rather than productive responsibility.

To fully grasp the magnitude of the challenge, the report dissects the situation into three interconnected layers that extend beyond mere fiscal numbers.

The first layer is the rent-based economic model itself, where the state acts as the primary, and often sole, employer. This dynamic has created a weak private sector that is suffocated by bureaucracy and corruption, leaving the nation without a real productive base in agriculture, industry, or technology. Consequently, citizens are conditioned to wait for state salaries rather than generating independent wealth.

This economic fragility is compounded by a second layer of crisis in governance and administration, characterized by a distinct lack of long-term planning. The report notes that institutional systems have been undermined by quotas and weak accountability, resulting in high public spending that yields almost nonexistent developmental outcomes.

The third layer identified by the Center is perhaps the most difficult to address: a crisis of societal economic culture.

Decades of oil-funded welfarism have entrenched a constant expectation that the state will solve every problem, fostering a consumer culture that prioritizes immediate spending over long-term investment. This mindset has created significant social resistance to necessary reforms, which are frequently misinterpreted by the public as a "loss of rights," even when such measures are designed to protect the long-term viability of the nation.

These layers ensure that the crisis is not a singular explosive event but a chronic condition seeping into daily life, from failing schools to the scarcity of basic services.

Decision-makers in Baghdad now face two divergent paths, each leading to a radically different future for Iraq.

The report identifies the first option as the "Path of Slow Collapse."

This trajectory involves maintaining the status quo by increasing government hiring under public pressure, expanding operational spending at the expense of investment, and borrowing to cover deficits rather than addressing root causes.

The Center warns that while this approach may purchase temporary stability, it is a strategy of printing money and financing deficits through hidden inflation. The ultimate result of this path is the decline of purchasing power, the weakening of the currency, and the continuous deterioration of services, effectively draining the state’s ability to provide dignity to its citizens while burdening future generations with insurmountable debt.

Conversely, the "Path of Rewriting the Economic Contract" offers a difficult but necessary alternative.

This route demands a fundamental restructuring of public spending toward investment and essential services, alongside a fair reform of salaries and subsidies that protects vulnerable groups rather than providing blanket support.

It calls for launching real tax reform to link taxation with service delivery, thereby transforming citizens from burdens into partners. Furthermore, this path requires liberating the private sector from regulatory suffocation and building a smart social protection system.

The report acknowledges that this path will face immense resistance, as it requires confronting deeply rooted interests that benefit from the current chaos and clashing with corruption networks threatened by reform. However, the Center posits that the cost of reform today is significantly lower than the catastrophic cost of total collapse tomorrow.

The Rawabet Center’s analysis also delves into the political psychology behind the delay in implementing these urgent measures.

Governments frequently avoid reform because it entails a short-term loss of popularity and forces confrontation with powerful interest groups. Instead, political leaders often opt to buy time through "painkilling" solutions, using media channels to project false reassurance while attacking experts who present data-driven warnings.

The report emphasizes that time in economics is unforgiving, and every year of delay exponentially increases the difficulty and cost of the eventual correction.

Ultimately, the report frames the coming battle as one that is societal as much as it is governmental.

A sustainable economy cannot exist if citizens continue to view themselves as entitled without contributing to production, or if entrepreneurs remain trapped by extortion and favoritism.

The transition requires promoting the value of work over rent and demanding transparency rather than surrendering to apathy.

The Rawabet Center concludes that the real question facing Iraq is not whether there will be a salary crisis, but what kind of future the nation desires: a fragile economy tethered to oil and short-term political whims, or a diversified system where responsibility is shared and the corrupt are held accountable.

The upcoming struggle is defined not as an economic war against citizens, but as a war against delay, denial, and the fear of truth, aimed at securing a dignified life for the next generation.