Iraq’s Economy in 2011 and Beyond
The aftermath of Saddam Hussein’s ouster in 2003 saw viable changes undertaken by the new Iraqi government that are geared towards full economic and political recovery. From a tormenting past characterized by violence, terror and injustice Iraq is now on the verge of re-emerging as a major player in the oil-rich Middle East. Major policy reforms and resolute efforts to redevelop the country’s massive natural reserves pave way to a sustained increase in the populace’s standard of living.
Iraq is gaining modest improvement in reviving and establishing institutions that are pivotal in implementing a sound economic policy. Last year alone, the country signed a new agreement with the International Monetary Fund (IMF) and World Bank for conditional aid programs that will boost its economic institutions. This is buttressed by the passing and enactment of laws that are feasible and advantageous to the Iraqi government and its people in general.
In a recent report, Iraq’s Parliament Speaker divulged the country’s state budget for 2011 to have reached 96 Trillion Iraqi Dinars or approximately 85.7 Billion US dollars. The current policy is concentrated on the reduction of commissioning costs, increase in investment allocations and financial support for the government’s “Rationing Card” which will be distributed fully on all Iraqi citizens. One remarkable change in the appropriations is the cancellation of all social benefits for the government’s top three posts namely: the President, Prime Minister and Parliament Speaker.
In an attempt to further attract foreign investments, the government has also amended its national investment law, giving enough leeway for potential investors to consider. It now ventures in international trade and investment caucuses and is seriously eyeing joint endeavors with government and non-government owned enterprises. At the local level, provincial councils have appropriated a budget for investment promotions.
Some of the perceived and approved legislations include a set of regulations that establishes a legal framework for its biggest economic player -the oil sector -that is conducive to the modern times and modern demands. Iraq’s economy is dominated by the petroleum sector, which has traditionally accorded for 95% of foreign exchange earnings. The country’s ongoing contracts with major oil companies have the potential to expand its oil revenues to a great extent. Of course, this entails an upgrade in infrastructure, pipelining, and oil processing to enable these deals to materialize in its full potential.
In essence, Iraq is floating on a sea of natural oil and is considered to have the third largest reserves in the planet. Through a series of rounds, the Iraqi Oil Ministry said that Iraq is exploring more oil fields where it can intensify oil drilling operations. With this, the government seeks to develop the country’s infrastructure, train cadres, and form exploratory committees. Major oil companies have signed agreements to extract these oil reserves prompting a boost in production capacity to about 12 million barrels for the next six years.
In addition to the agenda on oil production and development, Iraq is now stepping up its efforts on agriculture. An eight-year irrigation program, which amounts to 700 Million USD, is already put in place and will commence on the last quarter of 2011. This move is projected to increase wheat production by more than 60% or 3 million tons by the year 2019. What sparked this program is the observed anger, civilian grievances, unrests and rising food prices in neighboring regions such as Egypt, Libya and Tunisia.
Iraqi people annually consume at least 4.5 tons of wheat, with a great portion of imported wheat and rice going to massive public food rationing. The eight-year program aims to alleviate concerns on food supply wherein 1.86 million tons of wheat was produced last year. The project is also geared towards enhancing the water irrigation systems of the country.
The Deputy Minister of Agriculture recently disclosed that the government had set aside 34 Million USD to purchase three thousand sprinklers for the project and had recently approved a tender to procure around five hundred irrigation systems from Western firms. Investment in agricultural infrastructure such as water pumps is essential in both agriculture and oil sectors and industry.
Further, to entice investors in agriculture the Iraqi government had set up an annual fund of 500 Million USD from the federal government budget to be provided as soft loans to farmers and investors, interest free. This initiative is focused on all crops. The government however emphasized on the production of strategic crops – wheat and rice. Another 85 Billion Iraqi Dinars had also been allocated to provide other interest-free soft loans to livestock farmers and investors.
It is noted that farming is the largest employment generator of Iraq. However, it trails way behind the oil sector in terms of revenues. With agricultural initiatives, the Iraqi government hopes to fine tune its agricultural sector and boost production or output.
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