Iraq's Parliament Confirms New Cabinet Amidst Severe Economic Headwinds

Iraq's parliament has finalized the formation of Prime Minister Ali al-Zaidi's government, approving the remaining cabinet positions and three deputy prime minister roles. Notably, one of the approved deputy prime ministers is currently under US sanctions. The parliamentary vote on Thursday confirmed 11 ministerial portfolios, including Nayef al-Shammari as the new defence minister and Yasir al-Maliki as interior minister. Positions for planning minister, culture minister, and minister of higher education and scientific research were also approved. However, a vote on the nominee for migration and displacement minister was postponed due to inter-party disagreements.

Among the approved deputy prime ministers is Laith al-Khazali, a prominent figure in the Iran-backed Asaib Ahl al-Haq movement and brother to its leader, Qais al-Khazali. The US designated Asaib Ahl al-Haq as a foreign terrorist organization in 2020 and has sanctioned both brothers, citing their involvement in attacks, including one in 2007 that resulted in the deaths of five US soldiers. The Treasury Department had previously sanctioned the brothers in 2019 for their role in the killing of protesters in Iraq.

Following the cabinet's approval, Prime Minister al-Zaidi expressed his gratitude to parliament and urged his deputies and ministers to perform their duties with the utmost commitment, competence, and integrity. He stated that the government is now entering a phase of intensive work to tackle the significant economic and security challenges exacerbated by the US-Israel war on Iran, which commenced on February 28.

Iraq is currently grappling with severe liquidity shortages directly linked to the ongoing conflict. Prior to the war, Iraq's daily oil exports, primarily through the Strait of Hormuz, generated approximately 90 percent of the government's revenue. Al-Zaidi emphasized that the war has imposed, and continues to impose, extraordinary economic difficulties on the nation.

To manage essential public spending and ensure the payment of government salaries, al-Zaidi, a former banker, implemented a devaluation of the Iraqi dinar by nearly 15 percent against the US dollar. He revealed that his administration inherited public debt exceeding 208 trillion Iraqi dinars (approximately $139 billion at the new exchange rate) upon taking office in May, raising questions about the previous administration led by former Prime Minister Mohammed Shia al-Sudani. Al-Zaidi indicated that the state requires approximately 10 trillion dinars ($6.7 billion) monthly to cover salaries and critical expenditures.

Al-Zaidi has pledged to combat corruption, disarm non-state armed groups, and bolster national sovereignty by facilitating the complete withdrawal of US forces from Iraq.