Iraq enjoyed its share of fame and fortune over thousands of years. Known as Mesopotamia in the history books, the country has a colored background of culture and knowledge spanning thousands of years.
Some scholars even say that the mankind’s first recorded story came from there: the Epic of Gilgamesh. Sumerian, one of the first languages known to man, also existed in ancient Iraq.
In recent decades, however, the country has fallen on tough times. Suffering from political and civil unrest, the country’s recent struggles with insurgent activity have put a halt to most of the country’s efforts to develop their economy and infrastructure.
Following high levels of unemployment, heavily reported vote-rigging allegations, high prices, power cuts and a lack of usable water, civil unrest erupted in the country this year, leading to intense clashes between groups of the populace and security forces.
These bouts of conflict are testament to the ongoing difficulties the government has had in recent years in successfully bringing back Iraq from the brink of collapse following the 2004 war, coupled with the mismanagement of public funds.
In fact, Iraq has raised more than $700 billion from oil since 2005, but almost the entire amount has been spent, the central bank announced last month.
“Between 2005 and 2017, the finance ministry has taken in $706.23 billion dollars in foreign exchange” from oil, it said in a statement.
“A total of $703.11 billion, or 99.5 percent of the amount, has been spent,” it said.
To make matters worse, the Iraqi parliament revealed that the equivalent of $227 billion in public funds in Iraq had gone missing through shell companies.
Acts such as these have landed Iraq at 169 out of 180 on Transparency International’s Corruption Index of 2017, citing a severe concentration of corrupt practices in the country.
Is oil Iraq’s failed savior?
Oil accounts for 85%-90% of fiscal revenue and almost all export revenue, Reuters reports. This severe lack of economic diversity puts the country in constant threat of the volatility of oil prices.
Iraq’s oil production rose by over 100,000 barrels per day (bpd) in July, following an OPEC meeting in which members paved the way for production increases, according to the Iraq Oil Report news site.
They explained that this sudden boom in production has helped compensate for the disruption that has resulted due to civil protests in the southern part of the country.
Yet, as mentioned earlier, the country squandered some $700 million in oil revenue in the last 12 years, proving that no amount of cash will be able to set the country’s affairs straight.
Reforms take precedence
For the country to get its business in check, it needs to implement reforms on the macro and micro scale.
Iraq’s first order of business should be abolishing corrupt practices. No matter the sum of money that the country secures whether from oil or FDIs, as long as corrupt officials are occupying government seats, any potential investments will likely go up in smoke.
Also, the government will need to address its rising national debt, reported by Statista to be at 109.7 billion in 2016, and forecast to hit $141 billion by 2022, a 22.2% increase over 6 years.
Trading Economics data shows that the country’s unemployment rate in 2017 was 14.8%, a slight improvement from the year before.
Some hope for the ancient nation?
Rising oil prices have benefited Iraq’s economy. For each $1 higher oil price, the government receives approximately an extra $1.2 billion in revenue, assuming stable export volume, according to Reuters.
GDP was reported to be 197.72 billion in 2017, exhibiting a $26.23 billion increase from the previous year, when the region was still suffering from an oil price slump.
Reuters reports that higher oil prices helped narrow the budget deficit significantly in 2017, with the IMF estimating that the deficit shrank to 2.3% of GDP from 13.9% in 2016.
Iraq might be looking to recapture its iconic status after it announced plans to build the world’s tallest tower, dubbed The Bride Tower, which will rise 1.52km into the sky, boasting 230 floors.