VZCZCXRO8981
RR RUEHBC RUEHDA RUEHDE RUEHIHL RUEHKUK
DE RUEHGB #1297 1181048
ZNR UUUUU ZZH
R 271048Z APR 08
FM AMEMBASSY BAGHDAD
TO RUEHC/SECSTATE WASHDC 7047
INFO RUCNRAQ/IRAQ COLLECTIVE

UNCLAS BAGHDAD 001297 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EFIN ELAB IZ
SUBJECT: IRAQ'S CIVIL SERVICE APRIL PAY RAISE 
 
¶1. (SBU) On April 10, the Iraqi Council of Representatives 
(CoR) passed the Civil Service Salary Law in its third 
reading; the law now awaits endorsement at the Presidency 
Council.  This law will substantially increase the monthly 
wages for the first time since 2004 of the approximately 2 
million member civil service (not including those employed by 
the Kurdistan Regional Government (KRG), who are paid from 
the KRG's 17 percent allocation of the 2008 federal budget). 
Although we still do not have a translated copy of the final 
law, discussions with GoI officials indicate this pay raise 
could cost an extra 1.7 trillion Iraqi dinar (ID) (USD 1.42 
billion at 1200 ID/USD) this year.  The Iraqi civil service 
pay scale comprises ten degrees, with the 10th degree the 
lowest and the 1st degree the highest.  The monthly base 
salary increases, for example, include a 6 percent raise for 
those with a primary school education from ID 144,000 (USD 
120) to ID 152,000 (USD 127), to a 35 percent raise for those 
with a master's degree or medical degree from ID 278,000 (USD 
232) to ID 374,000 (USD 311).  Also included within the law 
is an approximately ID 10,000 - 15,000 (USD 8 - 12) monthly 
supplement per child for up to four children per family of a 
government employee. 
 
¶2. (SBU) In an April 17 meeting with Ministry of Finance 
(MoF) advisor Dr. Aziz Hassan Jaffar, EconOff asked if the 
MoF had discussed the civil service pay raise proposal with 
the IMF.  Dr. Aziz said he explained to the IMF that this was 
the first civil service-wide pay raise since 2004, in spite 
of periods of high inflation; Dr. Aziz said when accounting 
for inflation, this pay raise restores to parity the 
purchasing power of civil service employees.  In fact, Dr. 
Aziz said, he had heard prices in Baghdad had already risen 
in anticipation pay raise approval.  He asserted that the 
raise would have no negative effect on Iraq's Standby 
Arrangement with the IMF because the substantial raise was 
necessary to offset the low wages characteristic of the 
Saddam Hussein regime, which were no longer sustainable 
because many of the previous subsidies (including fuel) had 
since been removed. 
 
¶3. (SBU) CoR Finance Committee members meeting with EconOffs 
on April 23 also were supportive of the civil service pay 
raise and viewed it as necessary to bring public sector wages 
in line with inflation.  Finance Committee (and Tawafuq/IIP) 
member Ala'a Alsadon told EconOffs that with oil export 
revenue based on a price of USD 57/barrel and world prices at 
USD 119/barrel, the government should be easily able to 
afford the pay increase.  Finance Committee Kurdish member 
Sami Atroshi told EconOffs he believed the Presidency Council 
would pass the new law because it benefits many Iraqis, and 
employees were already expecting the raise.  On April 16, CoR 
Economic Committee deputy head  Yonadam Kanna told EconOff 
while the pay raise was necessary to cover inflation for 
civil service workers, he was very concerned about the 
negative impact on Iraq's farmers who would not be eligible 
to receive any pay raise.  He believes rising prices will 
continue to dampen growth in the agriculture sector and make 
it more difficult for Iraqi farmers to earn a living wage. 
 
- - - - 
Comment 
- - - - 
 
¶4. (SBU) We will send a follow up report with a more detailed 
analysis of the civil service pay raise once the Presidency 
Council endorses the law.  At first glance, this pay raise is 
good step for the central government to illustrate it is 
looking out for the interests of the Iraqi people and is 
seeking to share growing oil revenue windfalls.  Because 
civil service wage increases have not kept pace with 
inflation, this raise is necessary, but assessing its 
inflationary impact will be difficult until we determine its 
exact cost, about which none of our interlocutors could 
proffer an estimate.  However, Yonadam Kanna raises a 
compelling point in that Iraq's fledgling private sector 
workers will receive no wage increase and are unlikely to 
benefit from increased prices in the marketplace.  Moreover, 
this civil service wage increase likely could come at the 
expense of funds being used for critical job creation needed 
to promote stability and growth. End Comment. 
CROCKER