DrDinar Blog

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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Nowadays, we have been aware that the Iraq Dinar holds a stake in the success of Iraq. As a matter of fact, there has not been an international exchange rate of this current generation that dictates the real value of the Iraqi Dinar. A lot of people have already invested on Iraq money and successfully generated additional income. But let us have a closer look on how the new Iraqi Government is preparing for the full withdrawal of coalition forces in Iraq.

Most of the significant things in this ever changing world have been achieved by those who have kept on trying at times when there seemed to be no hope at all. Such are the words that I would like you to picture in the following items that illustrate a tormented nation’s quest towards restoration and progress.

Deemed as the cradle of civilization, Iraq which is currently having its widely known Iraq Dinar is now on the threshold to recovery after suffering several setbacks, way back the 80s up to the aftermath of the fall of a tyrant regime. Aided by a coalition of goodwill nations, the Iraqi government has undertaken major changes in the political and economic conditions of the nation.

Before we proceed with the details of the rebuilding progress, let us first discuss some bits of history to better familiarize and be more appreciative of the gist of this piece.

The 70s saw Iraq made wide investment in the water sector and other infra projects utilizing the proceeds of its huge oil revenue. This slowed down during the Iran-Iraq War. Since then, the nation has been on its pathetic downward course as it became a war-torn nation marred by violence, economic meltdown, unemployment, devaluation of currency, and uprisings brought about by more than two decades of Saddam Hussein’s destructive and ruthless rule.

The country’s water supply, treatment plants, sewerage, generating stations and electrical supply systems were corrupted. Furthermore, Hussein’s wicked nuclear agenda has severely altered the regional and global stability prompting coalition forces, led by the United State of America, to formally launch an invasion in 2003.

The ouster of its impious leader did not instantly solve the problems of Iraq. As a matter of fact, molding the nation back to its deserved luster proved to be a very daunting task. Several years after the invasion, reconstruction has taken longer and costs more than what was initially estimated.

Iraq is still struggling from political and economic crises. It needed to hold plausible democratic elections at a time when its military was still battling al-Qaeda and other domestic insurrections. The victors had to establish a government despite gaps among various leaders and sects. All of these had to take place even as the US had reduced its forces from 150,000 to 50,000.

It seemed indicative of a bleak future for Iraq. But just as optimism is depicted at the opening words of this article, Iraq is rightfully deserving of the benefit to prove its worth in the pursuit for development, progress, and stability.

Iraq is not yet the peaceful Arab democracy and Middle East force that former President. Bush had envisioned when he decidedly pushed for an invasion almost a decade ago, but in the past 12 months it has taken some big steps towards that right direction. Some of the positive outcomes of the on-going reconstruction are manifested through the provision and enhancement of the country’s health care, security, potable water, sewer, electricity, and oil industry.

With a budget of $345 Million, some 133 clinics were established by the end of 2009. Iraq has now embraced health care as a constitutional right with more government-sponsored care becoming more accessible for the people.

Close to 400 thousand Iraqi security forces were organized and trained by the US military troops by 2007. On October of 2009, an added capacity to daily treat one million cubic meters of drinking water has served more than five million people. As to sewers, an added capacity to treat 1.2 million cubic meters per day has benefited 5.3 million people at a cost of $254 million.

Also by 2009, electricity supply had been increased to 6,000 megawatts. With respect to the oil industry, 2.4M barrels were produced and 1.9M barrels were exported daily. Oil production in early 2008 actually exceeded pre-war levels and is expected to continue to climb.

The Iraqi Ministry of Oil has awarded service contracts to international firms for some of Iraq’s rich oil fields. Foreign oil companies are fixing up the southern fields of the country that even the city of Basra, once a militia-ruled territory, is beginning to boom. Violence has remarkably dwindled to the lowest level that the country has known in decades despite the withdrawal of US troops.

With the strong backing of the US and other nations, not to mention the vast reserves of oil and natural gas, it wouldn’t be far too long before Iraq will fully recover from the pits. With the lifting of economic sanctions imposed by the UN, the Iraqi Dinar will soon revaluate to keep pace with other currencies of the world – just like Germany’s Deutsch mark did after being pinned worthless at the time of World War II… Just like Kuwait’s dinar did after hitting rock-bottom during the Desert Storm period.

While it still too early to draw conclusions about Iraq, it is nonetheless unwise not to be optimistic of its future. You can just draw examples from previous war-torn nations such as Japan, Germany, Kuwait, and Russia who, over the course of time, had steadily gained their way back to the top. It goes without saying that the rebuilding efforts of the Iraqi government and foreign interventions, focused on increasing security and stability throught legitimate political representation, infrastructure, and economic dynamism, will soon see its light.

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Written by Darren Chabluk for http://DrDinar.com
This article may be reproduced online or offline
as long as this box remains and is hyper-linked online
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