The Iraqi Economy: Present State and Future Challenges

The Iraqi Economy: Present State and Future Challenges

  • 25 April 2004

For the purpose of Iraq’s economic development, the
successive Iraqi governments during 1950–1980 allocated
70 percent (later reduced to 50 percent) of the country’s
oil revenues for direct investment in the various sectors of
the economy. This developmental drive, albeit inefficiently
managed, led to an impressive real growth in GDP of
around 8 percent per annum during the period 1960–1980.
This healthy state of the Iraqi economy continued until
Saddam came to power, however. The 8-year war with Iran
cost the Iraqi economy dearly. Losses suffered included
US$62 billion in lost oil revenues, depletion of the foreign
reserves of about $35 billion, accumulation of foreign debts
of about $80 billion, additional military expenditures of
about $105 billion, destruction of domestic infrastructure
valued at $30 billion and, above all, cessation of economic
growth. The invasion of Kuwait, the subsequent Gulf War
and over 12 years of economic sanctions caused havoc
in Iraq and led to its economic collapse. In addition to
the country-wide destruction of the Iraqi infrastructure,
hyperinflation set in, the Iraqi Dinar collapsed, savings were
wiped out, the Iraqi middle class slid into poverty, leaving
the average Iraqi much poorer in 2002 than he was in 1960.
No doubt, oil is presently Iraq’s major asset and virtually
the sole source of foreign exchange, and will remain so for
the foreseeable future. It is paramount, at this stage, to get
the oil industry up and running and resume oil exports. To
create a successful and vibrant economy, privatization of the
inefficient public sector is a must, and full support should
be afforded to the private sector in leading the economic
development process.

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LECTURER

Sunday 25 April 2004

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Sunday 25 April 2004

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