The Iraqi economy is currently grappling with numerous challenges that threaten its stability and sustainable growth. Dominant factors contributing to this situation include political quota systems and managerial inefficiencies, both of which have exacerbated the country’s financial and economic crises. Economist Saleh Rashid highlighted that a significant issue is the lack of coordination among financial institutions in Iraq, leading to a liquidity crisis that may worsen due to ongoing international fluctuations in oil prices.
Impact of Political Quotas on the Iraqi Economy
The implementation of political quotas in Iraq has resulted in the allocation of government positions primarily based on partisan and sectarian affiliations, which has ultimately led to the exclusion of qualified individuals from key economic decision-making roles. This practice has weakened economic institutions and resulted in ineffective policies, adversely impacting economic development.
Rashid emphasized that “the political landscape has influenced the economy in multiple ways, particularly through the perpetuation of quotas and the sidelining of competent professionals,” adding that these issues disrupted economic mechanisms and planning. Reports indicate that such policies have significantly contributed to the deterioration of the national economy, disrupting productive sectors and undermining local industries, consequently leading to increased unemployment and aggravated poverty levels.
Data suggests that security ministries account for 54% of all government jobs, indicating that only 46% of positions are allocated across other sectors. With a total government workforce of approximately 3 million employees, this translates to around 1.62 million individuals employed in security positions, while only 1.38 million are engaged in other essential sectors. This imbalance raises concerns regarding the availability of skilled personnel in critical areas such as healthcare and education.
Mismanagement and Its Economic Repercussions
In addition to the issues presented by political quotas, Iraq’s economic landscape is marred by mismanagement within financial institutions, which has resulted in a lack of coherence between fiscal and monetary policies. According to Rashid, this disorganization has contributed to the country’s economic fragility, leading to significant liquidity challenges. He pointed out that both the Central Bank and the Ministry of Finance have exhibited mismanagement, resulting in discord between fiscal and monetary strategies.
He further stated, “Systematic coordination between expenditures and revenues is essential to mitigate such issues.” Mismanagement remains a critical factor influencing Iraq’s economic decision-making processes.
The projected budget for 2024 stands at 211 trillion Iraqi dinars (or approximately 161 billion dollars), with an anticipated deficit of 64 trillion dinars—representing about 30.3% of the total budget. As oil prices are forecasted to decline below $70 per barrel by 2025, this may further exacerbate the financial deficit unless stringent austerity measures or improvements in non-oil revenue streams are enacted.
Fluctuations in Oil Prices and Their Influence on the Iraqi Economy
The Iraqi economy is heavily reliant on oil revenues, which account for approximately 90% of state revenues. This over-dependence renders the economy susceptible to global fluctuations in oil prices. Recently, oil prices have experienced a notable decline, recently settling around $70 per barrel.
Rashid explained that international factors and their variability directly affect oil prices, leading to the current price decline. Consequently, this decline will have immediate repercussions on Iraq’s financial situation, necessitating increased domestic borrowing to compensate.
If the budget assumes an oil price of $70 per barrel, with expected exports of 3.5 million barrels per day, daily revenue would amount to $245 million. Annually, this translates to around $89.4 billion. Should the oil price dip an additional $10 to $60 per barrel, expected annual revenues would shrink to approximately $76.65 billion—a loss of about $12.75 billion annually. This reduction would exacerbate the financial deficit, applying additional pressure to Iraq’s economy.
