Oil windfall yet to benefit Iraq's economy

06 March 2014

Sectarian politics and prolonged violence are inhibiting foreign investment in Iraq’s industries

Looking at figures from the Washington-based IMF, Iraq looks like it is progressing in leaps and bounds. Oil production rose to more than 3 million barrels a day in 2013, pushing GDP growth up to 9 per cent. Few other countries can claim such a buoyant oil economy.

As oil output rises, so too will government spending, reaching $150bn in 2018 from $110bn currently. However, these figures mask the reality for most ordinary Iraqis who have so far benefited little from the oil windfall in the three years since deals were signed with international oil firms to develop Iraq’s oil fields.

The public sector employs 32 per cent of all working adults and the job-creating capacity of the energy sector is limited. Unemployment is on the rise and women face particular challenges in terms of economic opportunities.

Few in the government will admit it but Iraq is suffering from the resource curse: excessive dependence on oil export revenues, along with structural misuse of the income to subsidise the state sector. Lack of diversity makes the state’s economic growth vulnerable to oil shocks. Transparency is limited and corruption is rampant. Once considered an economic centre for the region, comparisons with nations such as Nigeria do not go down well with Iraqi officials.

The task of rebuilding the country after years of sanctions and the 2003 US invasion remains immense and is made harder by sectarian politics and prolonged violence inhibiting foreign investment in any sector.

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