Tag Archives: Economy

Iraq’s sickly economy

Iraq’s sickly economy

Iraq’s faltering economy is likely to take a further turn for the worse as oil prices plummet, writes Salah Nasrawi

When millions of Iraqi pensioners went to banks and cash points to receive their monthly pensions in December they were stunned to find that their regular payments had been drastically slashed.

Some had had their pensions cut by 10 per cent or more. While those who had been given huge pensions by the post-Saddam Hussein regime in Iraq were only slightly affected, the biggest losers were public-sector workers who had retired before Saddam’s ouster. Altogether more than 2.7 million retirees were affected.

The surprise raid on the retirement funds is the latest in a package of austerity measures introduced by the government of Prime Minister Haider Al-Abadi this year as the state budget is hit by lower oil prices and the increasing cost of the war against the Islamic State terror group (IS).

The government had earlier promised that pensions would not be axed after it had withheld the salaries of government officials as part of a package of austerity measures meant to close an enormous budget deficit.

Iraq has entered its worst economic crisis since 2003 after oil prices dropped sharply. The decline in revenues has raised fears of unrest as a wave of protests against government shortfalls are expected to add a new source of instability to the IS insurgency and the country’s fractious sectarian politics.

On 16 December the Iraqi parliament endorsed a tight 2016 government budget of 113.5 trillion Iraqi dinars ($99.65 billion) with a deficit of 29.4 trillion Iraqi dinars ($25.81 billion).

The government’s programme to reduce the budgetary deficit includes, among other financial restructuring measures, plans to cut spending and the resort to loans.

Under the legislation, the government will eliminate jobs, merge some ministries, halt spending on construction and other investment projects, and make cuts in civil servants’ salaries.

The budget also anticipates $13 billion in other income, some to be raised from new taxation on mobile phone SIM cards, cigarettes, alcohol, cars and Internet services.

But fiscal restructuring is what the government hopes will do most to reduce the worsening deficit.

Last week the Iraqi Central Bank (ICB) increased the sale price of US dollars to banks and currency exchange bureaus by 16 dinars, or 1.37 per cent. The government hopes the adjustment will ease pressure on the dinar, the local currency.

Yet, in order to meet the continued shortfalls in the 2016 budget, the government also decided to resort to substantial international borrowing and bond sales.

Iraq has already secured $1.7 billion in loans from the World Bank and a $833 million loan from the International Monetary Fund. It failed to issue international bonds after the rating agency Standard & Poor’s assigned Iraq a B-minus credit rating, six notches below investment grade, saying its security and institutional risks were among the highest in the world.

In addition to the loans, Iraq plans to borrow billions of dollars from the Saudi-based Islamic Development Bank, the Qatar National Bank and the Japanese International Cooperation Agency (JICA) in an attempt to raise an ambitious $6 billion on the international bond market.

A $4 billion loan from domestic commercial banks has also been planned, in addition to the sale of some $4 billion of state bonds on the local market.

But what is most worrying is the government’s intention to finance the budget deficit through indirect loans from the Iraqi Central Bank. The budget law envisages seven trillion dinars worth of ICB-guaranteed bonds that will be offered to the public.

Such a move would require the ICB to use its foreign reserves, crucial in backing the Iraqi dinar and avoiding risks of destabilisation.

Iraq’s escalating financial woes are largely a result of the abysmal performance of the post-Saddam governments. Instead of working to rebuild the economy and sustain growth in basic sectors, they have relied heavily on oil revenues to bankroll the budget.

Though Iraq is the second-largest producer of crude oil in the Organisation of Oil Producing and Exporting Countries (OPEC), the country’s economy is in a shambles due largely to inefficiency and mismanagement.

Some 70 per cent of the budget has been going to pay for food imports, energy subsidies, and funding an inflated bureaucracy and ramshackle armed forces. Government policies are mainly responsible for the decline in the two main productive sectors of the economy, agriculture and industry.

Despite receiving hundreds of billions of dollars in oil revenues and international aid since 2003, Iraq still suffers from poor public services. Households in most parts of the country receive only a few hours of electricity a day. Public health services are in tatters and environmental conditions are abysmal.

Rampant corruption, poor financial management and bad public spending are key factors in Iraq’s economic ills. Billions of dollars have been lost in graft, waste and inefficiency over the last ten years.

Though Al-Abadi has pledged to curb corruption, there has been no sign that his government has taken tangible steps to bring corrupt officials to account or recover stolen money.

With expectations that oil prices will remain low in 2016, the country’s budget deficit will continue to inch downward through next year.

Budget projections envision oil exports of 3.6 million barrels per day (bpd), including a total of 550,000 bpd from Iraqi Kurdistan and the Kirkuk Province at a price forecast of $45 a barrel. But even with oil production raised as planned, the government’s budget will continue to stay in the red.

The scale of the damage to Iraq’s economy by government financial policies could be enormous in both the short and the long terms and the micro and macro levels.

The austerity measures are likely to make a terrible situation worse. The cuts, which have already targeted salaries and pensions, could result in further reductions in employees’ and retirees’ benefits, adding frustration to the mix and causing tempers to veer out of control.

The surge in the dollar’s exchange rate with the dinar will raise prices and thus impact the cost of living, especially for low-income groups.

The Iraqi Society of Pensioners, a pressure group, has threatened that it will call for public protests if the government implements another 3 per cent slash in salaries, as has been widely rumoured. Government employees have made similar threats.

The slash in government spending is likely to impact education, health, and municipal and other social services.

The suspension of construction and other investment projects and the government’s decision to curtail or reduce new jobs in the civil service will most likely cause rising unemployment. It will also make more skilled Iraqis leave the country.

Excessive borrowing, as the government is planning in the 2016 budget, will have long-term consequences. While increasing the public debt, the new borrowing is not intended to generate growth but to cover the spendthrift policies of the government and its budget deficit.

A lot has happened since the 2015 austerity budget was adopted: the economy has stagnated, public spending has come to a halt and public services have worsened, putting more pressure on a population already plagued by violence and endemic corruption.

Street protests over shortages of electricity and other services, which started in August, have turned into calls for an end to the country’s political system which is based on power-sharing between the country’s ethnic and sectarian communities.

With another belt-tightening budget, the Iraqi people’s lives will be made increasingly insecure, raising the spectre of more turbulence as the country wages a costly war against IS which still controls large parts of the country.

The looming Iraq disaster

The looming Iraq disaster

As Iraq remains bogged down with the war against IS, another catastrophe could be on the horizon, writes Salah Nasrawi

The Iraqi government is considering a set of measures to deal with the crushing financial crisis, which many fear could lead to economic collapse and accelerate the breakup of the divided and war-torn country.

Under the plans to stave off default, the government of Haider Al-Abadi will seek foreign loans, issue bonds and sell parts of Iraq’s huge oil reserves. It also plans to overhaul the economy and get rid of the socialist-era sectors inherited from Saddam Hussein’s era.

But doubts abound that an emergency fund based on international credits or a government bond-selling programme would ease the burden on the Iraqi economy, hard hit by lower oil prices, government inefficiency and rampant corruption.

Selling the country’s national resources could also trigger popular resentment against the government’s oil policies and gives credence to claims that Iraq’s invasion in 2003 was to improve Western access to Iraqi oil.

Falling oil prices since last year has wrecked Iraq’s state finances. Iraq’s 2015 annual budget has projected a deficit of some $25 billion and forced the government to struggle to balance and fund its public spending and stabilize the national currency.

Under the budget law the government is to meet part of the deficit by introducing new taxes, levies and duties. Obligatory saving accounts are also to be opened for senior government officials to deposit part of their salaries. The government also decided to turn to the Central Bank reserves.

Iraq’s government, however, has not disclosed full details about its plans to deal with the financial crisis. Prime Minister Al-Abadi has even been insisting that Iraq is not facing a default but only financial difficulties due to plummeting oil prices.

While Al-Abadi appears to be either in a state of denial or lacking direct experience in financial affairs, his finance minister, Hoshyar Zebari, seems to be the one who is making most of the talking about Iraq’s plans to manage the financial crisis.

Last month Zebari disclosed that Iraq is in discussions with the International Monetary Fund (IMF), and is seeking millions of dollars both in an emergency loan programme and by using Iraq’s Special Drawing Rights at the IMF.

Zebari later said Iraqi is seeking an aid package from the IMF that could total as much as $700 million in emergency assistance, a relatively small amount that indicates the sharp deterioration in Iraq’s financial conditions.

According to Zebari, the Iraqi government has also agreed for the first time to issue $5 billion in international bonds as part of a package to restore fiscal suitability and address its budget deficit. He disclosed that Iraq is negotiating with Citibank and Deutsche Bank.

In addition to the international credits and bond issue and a local-currency bond issue, Iraq is planning other measures, including a drastic shift in its policies.

Zebari said Iraq is planning to change the way it operates exploration and production contracts with oil companies. The switch will move Iraq for the first time to production- sharing contracts, where revenues are divided in a percentage split, from service contracts where oil companies are paid a set fee.

Moreover, one of the steps under consideration is to get rid of hundreds of state-owned enterprises, which employ some half a million workers. In one dramatic statement last month, Zebari described these companies as an “absolute failure.”

In its efforts to lower the deficit and cut spending, Iraq’s parliament approved in January a belt-tightening budget that reduced the lavish spending, such as generous allowances, travel and office expenses.

It also resorted to withdrawals from the country’s reserves, estimated at the time at $75 billion. Reports this week suggested that the national reserve has hit a new low at $60 billion.

But the worst part of the financial crisis is its overall impact on the war against the Islamic State (IS) terror group which has occupied vast swathes of territories in Iraq since June last year.

The campaign against IS has been slammed by cuts in spending, including the government’s inability to buy necessary supplies and pay salaries to tens of thousands of recruits in the Popular Mobilization Force, the Shia paramilitary force set to join the fight.

In March, Al-Abadi made a visit to the White House to make an urgent request of billions of dollars in financial and military aid from President Barack Obama for the ongoing campaign against IS. Abadi argued that the budget shortfall has hampered his government’s ability to mount military challenges to IS strongholds in northern and western Iraq.

Still, Al-Abadi returned empty handed after the Obama administration turned down the request. To make a bad situation worse, the US House Armed Services Committee passed a law last week which imposed preconditions on funding for the Iraqi security forces over the next year.

Shortages of funding is also blocking the government from restoring basic services to those towns that have been reclaimed by Iraqi force from IS. Iraq is now turning to the World Bank for help in financing development projects in these areas that suffer from a lack of infrastructure, education and health services.

Many economists and many Iraqis blame much of the financial crisis on Al-Abadi’s government and that of his predecessor, Nuri Al-Maliki, whom they accuse of mismanagement and widespread corruption.

Even with increasing fear of financial crash, Iraq’s Central Bank is still holding daily auctions through which hard currency is sold to banks, companies and traders in exchange for evidence of import and transaction receipts.

Last week, Abdel Basit Turki, Iraq’s ex-chief auditor and former Central Bank governor, told Al-Baghdadiya Television that most of these banks are phonies set up by corrupt politicians to target the foreign currency sales.

He said during his tenure as Central Bank head from 2011 to 2015 some $12 billion were skimmed from the Iraqi reserve and transferred outside Iraq using false documents.

Writing on his Facebook account, Ahmed Chalabi, the head of the parliamentary Finance Committee, disclosed that one Iraqi trader alone had made such transactions of $1.2 billion to a company in the United Arab Emirates over a one-year period.

Now Zebari’s disclosures are sounding the alarm that the country may be facing a slow-death scenario. The question remains, however, if the intended measures could prevent Iraq going bankrupt and stop the violence-ravaged country from sliding into further instability.

It is also not clear if these plans were reviewed and sanctioned by the government and whether they will be put for debate and endorsement by the parliament.

Some of the measures such as selling Iraq’s oil reserves and introducing production-sharing contracts, seem to be controversial. Many Iraqis believe that they will be conceding sovereign wealth to foreign companies.

There are growing concerns that compliance with the IMF conditions unveiled by Zebari, further cuts in spending and foreign borrowing will result in worse scenarios. Iraqis are already hard hit by high prices, rising inflation and a high rate of currency depreciation.

In the meantime, Iraq’s oil production policy seems in disarray. While Iraq’s oil exports rose in April to a record 3.08 million barrels per day (bpd) from 2.98 million bpd in March, the country is not expected to raise much higher revenues as crude prices remain low.

At the same time, Iraq’s bill for paying foreign companies operating in Iraq under service contracts regime, created by the US occupation authority following the 2003 invasion, based on a fixed dollar fee per unit, has ballooned just as its oil revenues fall.

The Iraqi financial crisis is widely seen as largely the result of the massive corruption and economic mismanagement of its political elite and not the plunge in oil prices.

While Iraq remains mired in sectarian strife, an economic crash will be detrimental to the country’s future. There would likely be ramifications that would significantly impact the war against IS and the country’s unity.

Iraq tightens its belt

Iraq tightens its belt

The people of Iraq will face severe hardships under the country’s new austerity budget, writes Salah Nasrawi

With oil prices plummeting and the economy squeezed by inefficiency and corruption, Iraq’s parliament has approved a belt-tightening budget. The step is widely seen as having significant ramifications for the country’s volatile domestic politics and the war against the Islamic State (IS) terror group.

Iraq’s 328-member House of Representatives endorsed the country’s 2015 budget last week. The budget approval followed weeks of squabbles over cuts, allocations and what oil price the government should base the budget’s projected revenues on.

The lawmakers approved a cut of nearly three per cent in spending, bringing the total expenditure in the budget to $99.6 billion, down from the $102.5 billion the cabinet had initially proposed in the draft.

Before sending the bill to parliament for ratification, ministers warned that this would be an austerity budget, slashing the country’s bloated public sector and freeing up funds for military spending as Iraqi forces battle IS.

Iraq’s government had originally forecast a $125 billion budget for 2105, but faced with still-falling prices for its oil exports it was forced to slash this by some 20 per cent.

The new budget is based on a price of $56 for a barrel of crude, lowered from $70 and then $60 a barrel in earlier drafts. The expected budget deficit will still be around $19.1 to $21.1 billion, however.

One of the main hurdles that delayed the budget’s endorsement were objections from some Shia members to an oil-export deal struck in December between Baghdad and the Kurdistan Regional Government.The Shia MPs said the deal would unfairly benefit the Kurdistan Region at the expense of the Shia-populated oil-producing provinces in the south.

Sunni lawmakers also threatened to boycott the vote because the budget did not include funding provisions for a national guard, a new security force to be set up to fight IS and police Sunni-populated provinces.

Many lawmakers also objected to the oil price assumption in the budget, saying it was unrealistic as market prices had slipped below $50 a barrel with no concrete indications that they would rebound in the foreseeable future.

The reduction in oil prices is expected to strangle Iraq’s economy at a time when the country needs a boost in resources to cement its fractured national unity and sustain the war against terrorism.

While the government said it would not cut salaries or pensions, other reductions in the lavish spending of oil money, such as generous allowances, travel and office expenses, were announced.

But the bulk of the funds to cover the deficit will come from taxation, borrowing and withdrawals from the country’s reserves, estimated at $75 billion. While the Central Bank is expected to provide funds from its reserves, the government said it would also issue bonds in foreign currencies.

Under the provisions of the budget the government will be able to meet part of the deficit by introducing new taxes, levies and duties. Obligatory saving accounts are also to be opened for senior government officials to deposit part of their salaries.

Since the fall of the regime of former Iraqi president Saddam Hussein in the US-led invasion in 2003 Iraq’s parliament has had difficulty passing annual budgets in regular order. Wrangling over budgetary allotments are routine, and last-minute deals usually come at the expense of a solid fiscal plan.

Worse still, Iraqi governments throughout this period have failed to present their final revenue and expenditure accounts for review and endorsement before passing the next annual budget.

Last year, parliament was unable to approve the state budget because of a dispute between the central government and the autonomous Kurdistan Region over independent oil exports from the region.

The crisis allowed former prime ministerNuri Al-Maliki to use budget advances and emergency provisions, circumventing the checks and balances enshrined in the constitution to ensure limits imposed by parliament are respected.

As a result, billions of dollars in unchecked spending are now unaccounted for. Lawmakers have said that Iraq’s state coffers were nearly empty when the government of Prime Minister HaidarAl-Abadi took office in August. Iraq’s economy has been hard hit by decades of war, international sanctions and inefficiency.

But the country’s current economic ills are largely due to the abysmal economic policies of post-Saddam governments. Instead of working to rebuild the economy and sustain growth in basic sectors, they relied heavily on oil revenues to bankroll the budget.

Though Iraq is the second-largest producer of crude oil in OPEC, the oilproducers’ organisation, the country’s economy is in a shambles due largely to mismanagement, poor public spending and rampant corruption.Some 70 per cent of the budget has been going to pay for food imports, energy subsidies and funding an inflated bureaucracy and ramshackle armed forces.

Government policies are mainly responsible for the decline in productive sectors.Agriculture has been neglected, and less than 15 per cent of the country’s total area is now being cultivated. The agricultural sector, which used to employ one third of the work force, now accounts for less than four per cent of the country’s GDP.

The manufacturing, construction and electricity industries are in tatters and account for only eight per cent of national wealth. Thousands of state-owned industries andsubsidised factories have shut down because of a lack of electricity and poor maintenance.

Iraq’s banking system is largely dysfunctional, and without an overhaul, analysts say, the economy has little hope of competing with its oil-rich neighbours. Iraq has failed to invest in sovereign wealth funds, unlike oil-exporting countries in the Gulf, whose investments are now being used to cover budget deficits and public spending.

Corruption comes at the top of the reasons behind the depletion of Iraq’s coffers. According to some lawmakers, some $750 billion has been lost in corruption, waste and inefficiencies over the last ten years.Though Al-Abadi promised to combat corruption in his policy statement to parliament when he took office, there have been no signs that his government has taken concrete steps to bring corrupt officials to account or recover stolen money.

One day before the parliament passed the 2015 budget, a report by the World Bank warned that Iraq faces “a crisis which will have important implications for the welfare of its people.”The report said that about 20 per cent of Iraq’s population lived below the poverty line in 2012 and a significant portion of the Iraqi people was vulnerable to falling into poverty.

It said “poverty declined only modestly” since 2012 and “deep deprivations in non-monetary dimensions persisted.”The report painted a grim picture of Iraq before the current crisis. It said close to half the population had less than primary level education and almost a third of children aged up to five years old were stunted.

The report said over 90 per cent of households in Baghdad and the central and southern provinces received less than eight hours of electricity a day, a third of men and 90 per cent of women aged 15 to 64 were neither employed nor looking for work, and more than 60 per cent of the calories consumed by the poor came from a nationwide food subsidy programme.

“Addressing this crisis will take time and concerted effort,” the report said.

Looking forward, there are real concerns that the new belt-tightening budget will have serious impacts on the lives of most Iraqis. Moreover, there are concerns that the combination of falling oil prices and the austerity measures will have adverse implications for the country’s stability and hurt efforts to fight IS extremists.

This article appeared first in Al Ahram Weekly on Feb.5, 2015

Where does Iraq’s money go?

The failure to pass a state budget has unveiled the full extent of Iraq’s empty coffers, writesSalah Nasrawi

The annual budget debate is an important tradition in parliamentary systems, a time when lawmakers discuss the government’s draft financial blueprint and the public is told about the nation’s financial status.

A budgetary crisis can trigger a standoff and may develop into a government shutdown in which the government temporarily suspends non-essential services until a budget is passed. The failure of the parliament to pass a budget can also spark the fall of the government.

Yet, in Iraq nothing of this sort has happened. Even as 2014 is coming to an end, the country still does not have a state budget for this year, and the government is operating on 2013 budget predictions despite lower oil prices and cuts in production.

The government has also not unveiled plans for the 2015 budget.

The scandalous failure to introduce a budget means that Iraq is entering another year without having an annual financial chart for the country or even a scenario for proposed revenues and spending.

Last week, the new Minister of Finance Hoshyar Zebari surprised the parliament by telling members that the government would not submit a budget, instead making a statement in which he provided figures on government revenues and expenditures.

In summarising the country’s financial status, Zebari told the parliament that the government’s revenues in 2014 had amounted to ID105 trillion, ID96 trillion from oil exports and the rest from non-oil income (the Iraqi Dinar = 0.00086 $).

As for expenditures, Zebari explained that the government had spent ID185 trillion, divided between ID103 trillion on its operational budget and the rest on investment.

While parliaments usually debate the government’s proposals and take action in choosing to increase or decrease spending on any of its programmes, Iraqi MPs were asked to endorse the aggregate figures given by the government without discussion.

Since the collapse of the regime of former Iraqi president Saddam Hussein in the US-led invasion in 2003, Iraq’s parliament has had difficulty passing annual budget bills in any regular order.

Squabbles over appropriations are routine, and last-minute deals usually come at the expense of a solid budget. Worse still, the government usually fails to introduce its final revenue and expenditure accounts for endorsement before passing a new budget.

Last year, the parliament was unable to pass a budget because of a dispute between the central government and the autonomous Kurdistan Region over independent oil exports from the enclave. The row resulted in cutting Kurdistan’s budget, creating a new fissure in relations between the Shia-led government in Baghdad and the Kurds.

The crisis allowed former Iraqi prime minister Nuri Al-Maliki to use budgetary advances and emergency provisions, circumventing the checks and balances enshrined in the country’s constitution to ensure limits imposed by the legislative branch.

Al-Maliki argued that he wanted to avert a government deadlock as a result of the freezing of funds while the country faced political instability and soaring violence. Critics, however, say that Al-Maliki did not only overreach himself in spending but also gave himself a free rein in using the state’s coffers.

Despite its huge oil revenues, Iraq’s economy is in a shambles due largely to mismanagement, poor public spending and rampant corruption. Some 70 per cent of the state budget goes to food and energy subsidies, funding an inflated bureaucracy and ramshackle armed forces that collapsed in the face of an onslaught by Islamic State (IS) forces in June.

The budget has been hard hit by a displacement crisis triggered by the war against IS, and the government now spends some $500 million a month to feed and house some 1.75 million internal refugees. Additional amounts are being spent on constructing a new force in Sunni-dominated provinces to fight the IS terror group.

But Iraq’s budgetary problems are also more deep-rooted. For most of the past 12 years the government has been violating the budget rules by using loopholes in the constitution and the law.

Few data are available about how much money Iraq has been spending or earning. There are no accurate figures for oil exports, and it is widely believed that oil is being smuggled out in large quantities, sometimes under government officials’ noses.

In addition, the implementation rates of both the state’s operational and investment budgets are either lagging or low. Some departments have failed to spend even half of their annual budgets.

This dismal rate of implementation of the public budget, largely blamed on government inefficiency, reflects badly on development projects and economic growth.

With expectations that Iraq’s economy is likely to shrink by 2.7 per cent this year, the UN has warned of an economic downturn in the country influenced by pressure from rising security spending and the humanitarian crisis.

The government has promised to present a draft 2015 budget but has given no details so far. Estimates for government revenues have totalled ID139 trillion based on an oil price of $90 per barrel, and the head of the Iraqi parliament’s finance committee, Majda Al-Timimi, has predicted that the country’s budget deficit in the 2105 budget will be some $50 billion.

Zebari said the government hoped to cut this deficit by nearly half or more, suggesting drastic measures to cover the deficit and make up for lower oil prices and oil production.

Zebari, a Kurd who was a foreign minister in the former government and has no economic or financial background, has proposed that the government resort to loans and IMF special drawing rights, as well as to issuing bonds against the pension funds and assets of the two state-owned banks, the Rafidain Bank and the Al-Rashid Bank.

He has also suggested raising taxes, levies and customs. In addition, he has suggested that the Central Bank, which has $77 billion in foreign reserves, should lower its reserves to seven per cent instead of its current 15 per cent mark.

The aim, he said, was to raise ID21 trillion to help meet the country’s deficit. However, Zebari’s proposals have been largely dismissed by the government. While the Central Bank has ruled out any move to lower the reserves, an aide to Prime Minister Haidar Al-Abadi has categorically rejected the idea of foreign loans.

Experts have also warned that borrowing against the country’s reserves to cover the deficit will increase inflation and weaken the Iraqi Dinar.

As the budget bottleneck tightens, many experts believe that the government will have to impose austerity measures to cut spending and waste. While the government has said it will not cut salaries or pensions, other reductions in the lavish spending of oil money may increase unemployment and poverty, already sky-rocketing as a result of downbeat growth.

Iraq’s economy has been hard hit by decades of wars, international sanctions and inefficiency. Though the country has the fifth-largest proven crude oil reserves in the world, and is the second-largest producer of crude oil in OPEC, most of the oil revenues go to imports, mostly food and other basis commodities.

But Iraq’s current economic ills are largely due to the bad policies adopted by post-Saddam governments. Instead of rebuilding the economy and sustaining growth in basic sectors, these have relied heavily on oil revenues to bankroll the budget.

Though Iraq’s arable land is estimated at eight million hectares, or less than 15 per cent of the country’s total area, agriculture, which employs one third of the work force, accounts for less than four per cent of the country’s GDP.

The manufacturing, construction and water and electricity industries are in tatters and account for only eight per cent of the national wealth.

Government policies are mainly responsible for the decline in the country’s productive sectors. Corruption comes at the top of the reasons for the depletion of the country’s coffers. Last week debate in parliament revealed that large chunks of $500 million allocated to displaced people had gone into the pockets of corrupt officials.

Now Iraq’s economy is in disarray. While the fiscal crisis, lower oil prices, and violence caused by the war on IS will add more pressure to the government’s revenues, its overall economic performance will also remain detrimental to the country’s growth and progress.