Iraq Economic Monitor - Toward Reconstruction, Economic Recovery and Fostering Social Cohesion - World Bank Document

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Iraq Economic Monitor - Toward Reconstruction, Economic Recovery and Fostering Social Cohesion - World Bank Document
Public Disclosure Authorized

                                           Iraq Economic Monitor
                                      Toward Reconstruction, Economic
                                    Recovery and Fostering Social Cohesion
Public Disclosure Authorized
Public Disclosure Authorized
Public Disclosure Authorized

                                           With a Special Focus on Transition to Poverty
                                                  Targeted Cash Transfer System

                               Fall 2018
                               Middle East and North Africa Region              Macroeconomics, Trade   Investment
Iraq Economic Monitor
  Toward Reconstruction, Economic
Recovery and Fostering Social Cohesion
   With a Special Focus on Transition to Poverty
          Targeted Cash Transfer System

                                        Fall 2018

   Macroeconomics, Trade   Investment
Cover photo of the Mosul Dam, Iraq courtesy of Anmar Qusay.
TABLE OF CONTENTS
Abbreviations  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . vi

Acknowledgments  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . vii

Executive Summary  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . ix

‫ملخص تنفيذي‬                            . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xiii

Chapter 1 Recent Economic and Policy Developments  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 1
   Political and Social Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
   Output and Demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
      Economic Growth .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 2
      Oil Sector  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 4
   Access to Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
   Poverty, Equity and Vulnerabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
   Labor Markets and Employment  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
   Business Environment and Private Sector Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
   Public Finance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
   Inflation, Money and Banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
   External Position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Chapter 2 Economic Outlook and Risks  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 23
   Economic Outlook  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
   Risks and Challenges  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
   References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26

Chapter 3 Special Focus: Transition to Poverty Targeted Cash Transfer System in Iraq  .  .  .  .  .  .  . 27
   Pre-reform Scenario . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
   The Reform Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
   Looking Forward . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31

Appendix: Selected Data on Iraq . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33

Selected Recent World Bank Publications on Iraq . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37

                                                                                                                                                                                                                                                            iii
List of Figures
        Figure 1: Casualty Figures Have Been Decreasing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
        Figure 2: Overall GDP Growth Is Estimated to Rebound in 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
        Figure 3: After a Marked Contraction, GDP Per Capita Is Estimated to Have Improved Since 2017  . . . . 3
        Figure 4: A More Stable Security Environment Is Expected to Increase the Share of
                    Non-Oil Industry to Growth, Especially Services in 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
        Figure 5: Non-Oil GDP Growth Has Exceeded that in MENA Oil Exporters since 2017 . . . . . . . . . . . . . . .4
        Figure 6: Non-Oil Investment Is Estimated to Increase in 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
        Figure 7: Foreign Direct Investment Declined since 2014 due to Insecurity and
                    Poor Business Environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
        Figure 8: Oil Production Remains the Primary Driver of the Growth Despite Declining by
                    3.5 Percent in 2017 and Expected to Remain Flat in 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
        Figure 9: Oil Prices Are Estimated to Further Increase in 2018  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
        Figure 10: Oil Revenues Are Estimated to Increase Around US$82 Billion in 2018 Sustained by
                    Higher Oil Prices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
        Figure 11: Only about 50% of Energy Billed Is Collected . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
        Figure 12: Electricity Tariffs Remain Low and Heavy Burden on the Budget . . . . . . . . . . . . . . . . . . . . . . . . . 8
        Figure 13: The Wage Bill Is the Largest and Fastest Growing Expense in the Government Budget . . . . . 11
        Figure 14: Iraq Is an Outlier in Terms of the Wage Bill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
        Figure 15: Large Ratio of Public Sector to Population Compared to Comparators  . . . . . . . . . . . . . . . . . . 12
        Figure 16: The Public Sector Dominates in Iraq . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
        Figure 17: Unemployment Has Significantly Increased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
        Figure 18: Unemployment Among Women Is Very High, Especially for Youth . . . . . . . . . . . . . . . . . . . . . . .14
        Figure B1: Labor Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
        Figure B2: Youth Population . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
        Figure 19: An Unfavorable Business Environment Remains a Significant Deterrent to
                    Foreign Investment, but Reforms on the Way . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
        Figure 20: Ease of Doing Business Slightly Improved, but Remains Below the Average of MENA  . . . . . 16
        Figure 21: The Quality of Governance Remains Critical  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
        Figure 22: The Fiscal Position Is Estimated to Improve Due Mostly to Higher Oil Prices . . . . . . . . . . . . . . 18
        Figure 23: The Share of Non-Oil Investment to GDP Is also Expected to Increase . . . . . . . . . . . . . . . . . . . 18
        Figure 24: Public Debt-to-GDP Ratio Is Estimated to Decline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
        Figure 25: Total Debt Service Will Remain Large  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
        Figure 26: Inflation Remains Low but Will Likely Increase at 2 Percent in 2018 . . . . . . . . . . . . . . . . . . . . . .19
        Figure 27: Rising Food Prices and Transportation Costs Led to Some Pick-Up in Inflation in
                    June and July 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
        Figure 28: Broad Money Is Estimated to Stabilize in 2018  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
        Figure 29: Higher Oil Prices Are Estimated to Consolidate the Current Account Surplus in 2018 . . . . . . 21
        Figure 30: International Reserves Are Estimated to Increase as Well  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
        Figure B3:	Global Growth has Eased but Remains Robust at an Estimated 3 Percent in 2018 . . . . . . . . . 25
        Figure B4:	Growth in MENA Region is Estimated to Pick Up to 3 Percent in 2018 . . . . . . . . . . . . . . . . . . .25
        Figure 31: Incidence of Public Transfers in 2012  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

iv   IRAQ ECONOMIC MONITOR: TOWARD RECONSTRUCTION, ECONOMIC RECOVERY AND FOSTERING SOCIAL COHESION
List of Tables
   Table 1:   Iraq: Selected Economic and Financial Indicators, 2014–2020 . . . . . . . . . . . . . . . . . . . . . . . . . .33

List of Boxes
   Box 1:    Job Creation in the Short-Run in Iraq1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
   Box 2:    Global and Regional Economic Outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
   Box 3:    Proxy Means Test for Poverty Targeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29

                                                                                                                               Table of Contents      v
ABBREVIATIONS
     AML/CFT Anti-Money Laundering and Combating         IDPs   Internal Displaced Persons
             of Terrorism Financing                      ILO    International Labor Organization
     Bpd     Barrel per day                              IHSES  Integrated Household Socioeconomic
     BOP     Balance of Payments                                Survey
     CWG     Cash Working Group                          IMF    International Monetary Fund
     CBI     Central Bank of Iraq                        INUR   Iraq National Unified Registry
     CCT     Conditional Cash Transfer                   INOC   Iraqi National Oil Company
     CGE     Computable General Equilibrium              IPP    Independent Power Producers
     CoMs    Council of Ministers                        ISIS   Islamic State of Iraq and Syria
     CoRs    Council of Representatives                  KRG    Kurdistan Regional Government
     CPI     Consumer Price Index                        MDTF   Multi Donor Trust Fund
     CSO     Central Statistical Organization            MOLSA  Ministry of Labor and Social Affairs
     DB      Doing Business                              MENA   Middle East North Africa Region
     DfID    UK Department for International             OPEC   Organization of Petroleum Exporting
             Development.                                       Countries
     DNA     Damage and Needs Assessment                 PDS    Public Distribution System
     DPF     Development Policy Financing                PFM    Public Financial Management
     EMDEs   Emerging Market Developing Economies        PMT    Proxy-Means Testing
     EODP    Emergency Operation for Development         PPP    Public Private Partnerships
             Project                                     RDF    Reconstruction and Development
     ESSRP   Emergency Social Stabilization and                 Framework
             Resilience Project                          SBA    Stand-By Arrangement
     FATF    Financial Action Task Force                 SFD    Social Fund for Development
     FDI     Foreign Direct Investment                   SOEs   State Own Enterprises
     GCC     Gulf Council Countries                      SPC    Social Protection Commission
     GoI     Government of Iraq                          TBI    Trade Bank of Iraq
     GDP     Gross Domestic Product                      TSP    Transmission Service Provider
     GW      Giga Watt                                   UNDP   United Nations Development Program
     ICA     Investment Climate Assessment               UNOCHA United Nation Office for the Coordination
     ICPI    International Corruption Perception Index          of Humanitarian Affairs
     ICRG    International Co-operation Review Group     WB     World Bank
     ID      Iraqi Dinar                                 WDI    World Development Indicators
     IEA     International Energy Agency                 WGI    World Wide Governance Indicators

vi
ACKNOWLEDGMENTS

T
         he Iraq Economic Monitor provides an                   The report was prepared under the direction
         update on key economic developments and         of Kevin Carey (Practice Manager, MENA MTI) and
         policies over the previous six months and       Saroj Kumar Jha (Country Director, MNC02). Several
presents findings from recent World Bank work on         reviewers offered helpful comments and advice.
Iraq, placing them in a longer-term and global context   These included Benu Bidani, Ghassan Alkhoja, Hana
and assessing the implications of these developments     Brixi, Lili Mottaghi, Matthew Wai-Poi, Rene Antonio
and other changes in policy regarding the outlook for    Leon Solano and Yara Salem.
Iraq. Its coverage ranges from the macro-economy                The findings, interpretations, and conclusions
to financial markets to indicators of human welfare      expressed in this Monitor are those of World Bank
and development. It is intended for a wide audience,     staff and do not necessarily reflect the views of the
including policy makers, business leaders, financial     Executive Board of the World Bank or the governments
market participants, and the community of analysts       they represent. For information about the World Bank
and professionals engaged in Iraq.                       and its activities in Iraq, please visit www.worldbank.
        The Iraq Economic Monitor is a product of        org/en/country/iraq (English) or www.worldbank.
the Middle East and North Africa (MENA) unit in the      org/ar/country/iraq (Arabic). For questions and
Macroeconomics, Trade & Investment (MTI) Global          comments on the content of this publication, please
Practice in the World Bank Group. The report was led     contact Ashwaq Maseeh (amaseeh@worldbank.org),
by Bledi Celiku (Economist). The report is authored by   Bledi Celiku (bceliku@worldbank.org), or Kevin Carey
Ashwaq Maseeh (Economist). The Special Focus is          (kcarey@worldbank.org).
authored by Dhiraj Sharma (Economist). Muna Abeid
Salim (Senior Program Assistant) provided outstanding
administrative support.

                                                                                                                   vii
EXECUTIVE SUMMARY

I
    raq’s overall security situation has notably             recent report by U.N. Office for the Coordination of
    improved after the defeat of ISIS, but                   Humanitarian Affairs (UNOCHA) estimates that of
    significant challenges lie ahead. Iraq has               the almost 6 million people displaced since the rise
witnessed major political and security transitions           of ISIS in 2014, some 2.0 million remain displaced
in 2017 when Prime Minister Al-Abadi announced               at the end of June of 2018, and about 8.7 million
in December the victory over ISIS after a war that           need humanitarian assistance. Stabilization and
lasted three years. The defeat of ISIS in Iraq left the      reconstruction needs in areas liberated from ISIS are
government with the daunting tasks of rebuilding             extensive. Dire living conditions, including economic
the country’s infrastructure, reconstruction of              hardship, insufficient basic services such as health,
liberated areas, establishing security and stability,        water, and sanitation, are faced by the 3.9 million
and providing services for the return of the displaced       returnees, and are behind the reluctance of many
persons. On May 12, 2018 Iraq voted in parliamentary         displaced to return home. Agricultural production
elections that delivered a win for a political bloc led by   has declined by 40 percent leaving nearly 1.9 million
Moqtada al-Sadr, while PM Al-Abadi’s bloc, once seen         Iraqis food insecure; 7.3 million people require health
as front runner, came in third. The ballots have been        care; 5.4 million need water and sanitation assistance
recounted after allegations of fraud and completed           and 4.1 million people need shelter (UNOCHA 2018).
on August 8th without major change. On September                     Following the successful liberation from
15th, Iraq’s parliament elected lawmaker Mohammed            ISIS of all Iraq territory, the Government is
al-Halbousi as speaker, marking a major step towards         putting in place a comprehensive reconstruction
establishing a new government. On October 2nd,               package. The recent damage and needs assessment
Iraq’s parliament elected as president Barham Salih,         conducted by the Iraqi Ministry of Planning jointly
who immediately named Adel Abdul Mahdi Prime                 with the World Bank estimated the overall damage at
Minister-designate, ending months of deadlock after          US$45.7 billion, and more than US$88 billion in short
the national election in May.                                and medium-term reconstruction needs, spanning
        Humanitarian conditions remain difficult in          various sectors and different areas of the country.
many conflict-affected areas. The toll of four years         US$30 billion worth of commitments were made mostly
of intensive combat on Iraq’s civilian population has        in the form of loans and guarantees at the International
been enormous. The conflict claimed the lives of over        Conference for the Reconstruction of Iraq, which
67,000 Iraqi civilians since 2014, before the casualty       took place in February 2018 in Kuwait. At the same
figures started to decrease at the end of 2017. A            time, the government endorsed the Reconstruction

                                                                                                                        ix
and Development Framework (RDF) to reconstruct              identify the poor. The GoI committed to adopt a unified
    the liberated areas, forging a renewed social               database of eligible households based on the PMT
    contract based on citizen-state trust and sustainable       system across all different social protection schemes.
    developments and reforms. At the Kuwait conference,                 Despite military success, Iraq continues to
    the World Bank pledged a total of US$6 billion to           face political tensions and social unrest. Large
    support the GoI’s reconstruction and development            protests against increasing unemployment, corruption
    agenda making it the biggest development financing          and poor public services erupted in July this year,
    partner of Iraq. Furthermore, in April 2018, Iraq’s         particularly in Iraq’s second largest and oil-rich city,
    Council of Ministers approved a 5 years National            Basra, and spread to other cities including the capital
    Development Plan (2018–2022) which focuses on               Baghdad. The government responded with pledges
    key issues including provincial construction, poverty       to increase spending on electricity and water projects
    reduction, and social and private sector development.       (ID3.5 trillion) and create 10,000 jobs. A new commission
    However, reconstruction has been slow due to political      was created to investigate corruption and other factors
    uncertainty following elections but more needs to be        inhibiting service delivery. More sustained actions to
    done urgently to restore basic services and rebuild         meet protesters’ demands will be possible when a
    critical infrastructure.                                    new government is in place. The new government is
            Poverty has risen sharply. The national             expected to focus on prioritizing inclusion, economic
    poverty rate increased from 18.9 percent in 2012 to an      reforms, justice, and accountability, while ensuring the
    estimated 22.5 percent in 2014. Recent labor market         timely delivery of basic services.
    statistics suggest further deterioration of welfare.                Relations with KRG are improving after the
    The unemployment rate, which was falling before the         rupture related to the independence referendum
    crises, has climbed back to the 2012 level. Almost a        in 2017. The relations between Baghdad and Erbil
    quarter of the working-age population is underutilized,     have been strained since last year’s referendum on
    i.e., they are either unemployed or underemployed.          regional independence on September 25th, which was
    Many households are prone to adverse shocks; more           considered illegitimate by the Federal Government,
    than a third of the households has experienced an           and on budget transfer issue in early 2018. However,
    adverse event since the beginning of the crises and         tensions between the federal government and the
    one in six households has experienced some form             KRG eased when the federal government agreed
    of food insecurity. The universal food ration (Public       to temporarily resume transfers that seem to have
    Distribution System, PDS) remains the most extensive        largely addressed the region’s immediate needs, and
    social assistance program, but people have also             KRG total revenue is sufficient to pay salaries and
    turned to friends and relatives and humanitarian            pensions.
    agencies for assistance. Internally displaced persons               Economic conditions are gradually improving
    (IDPs) have been buffeted by multiple adverse               following the deep economic strains of the last
    shocks: they have lost much of their wealth through         three years. The 2017 rebound of economic growth
    destruction of assets; they have seen family members        was constrained by oil production in line with OPEC+
    die, get sick, or become injured at a higher rate; and      agreement. In 2018, overall GDP growth is estimated
    they have faced loss of jobs or businesses. Fewer IDP       to return positive at 1.9 percent thanks to a notable
    adults have a job, so each employed adult in an IDP         improvement in security conditions, higher oil prices,
    household supports more than six other household            and expected higher public and private investment.
    members. Some IDPs have lost access to the PDS. The         Non-oil growth is estimated to show a strong rebound
    cumulative impact of these developments on IDPs is          at 5.2 percent this year, underpinned by broad-based
    visible in several dimensions, including a higher risk of   growth in agriculture, industry, and services. Inflation
    hunger. The GoI is implementing an ambitious reform         was low in 2017 at just 0.1 percent, but increased
    to improve targeting of social spending, following the      demand pushed inflation at 1.7 percent in July 2018.
    introduction of a Proxy Means Testing (PMT) system to       Higher domestic demand and increased credit to the

x   IRAQ ECONOMIC MONITOR: TOWARD RECONSTRUCTION, ECONOMIC RECOVERY AND FOSTERING SOCIAL COHESION
economy (albeit from a low level) will likely further       governance, national reconciliation and peacebuilding,
increase inflation to average 2.0 percent in 2018.          social and human development, infrastructure, and
       Iraq’s fiscal position is estimated to               economic development. Since July 2015, the World
continue to benefit from higher oil prices. In 2018,        Bank is supporting the reconstruction efforts with
the overall fiscal balance is estimated to post a surplus   the Emergency Operation for Development Project
of 1.2 percent of GDP due mostly to higher oil prices.      (EODP). In October 2017, the World Bank approved
The plunge in world oil prices in 2015–16, increased        a US$400 million additional financing to the original
security and humanitarian outlays and weak controls         project (US$350 million) to focus not only on the basic
led to sharply lower oil revenues and rapidly widened       infrastructure but also on health and education, with
the budget deficit. It narrowed in 2017 due to the pick-    a special attention to the needs of the marginalized
up in oil prices and measures adopted to contain            youth and women in those areas affected by ISIS. In
current expenditures within the framework of IMF            February 2018, the World Bank approved the Iraq’s
program and World Bank DPF series. With oil prices          Social Fund for Development (SFD) project financed
expected to rise, the government will have ample            with US$300 million, to improve the living conditions of
fiscal space to finance reconstruction, provided that       over 1.5 million poor households in Iraq by increasing
the process of fiscal consolidation continues. Official     access to basic services and creating employment
financing for the budget has been less urgent with          opportunities. This was followed in April 2018 by the
the improvement in the fiscal position. KRG’s fiscal        approval of the Emergency Social Stabilization and
position is also estimated to relatively improve in 2018,   Resilience Project (ESSRP), financed with US$200
with the federal government agreeing to reinstate           million to increase livelihood opportunities, access
transfers to pay salaries and pensions.                     to psychosocial services, and expand the provision
       Iraq public debt is estimated to further             of social safety nets. In addition, efforts are under
decline and to remain sustainable. Growth and the           way to establish a Multi Donor Trust Fund (MDTF)
positive overall fiscal balance are estimated to further    for coordinated dialogue and donor financing of
reduce public debt-to-GDP ratio from 67.3 percent in        socioeconomic recovery and reconstruction and
2016 to almost 55 percent in 2018. The government           deepening critical government reforms.
also adopted a framework to control the issuance                    The outlook is expected to improve
of guarantees, which reached US$33 billion (or 20           considerably due to higher oil prices and the
percent of GDP) in end-2016 and these guarantees,           improving security situation. Overall GDP growth
most related to the electricity sector, are now believed    is projected to accelerate to 6.2 percent in 2019
to be under control. In previous years large fiscal         sustained by higher oil production. In the following
deficits have been mainly financed through bilateral        years, oil production is expected to increase only
and multilateral support, occasional sovereign bond         marginally, reducing overall growth to an average of
issuance and indirect monetary financing by the CBI.        2.5 percent until 2023, due to the limited capacity of
       Higher oil prices since mid-2017 have also           the GoI to mobilize investment in the oil sector. Non-
been conducive to better outcomes on external               oil growth is expected to remain positive on the back
balance. Higher oil prices turned the current account       of higher investment needed to rebuild the country’s
balance from a deficit of 9 percent in 2016, into a         damaged infrastructure network, private consumption
surplus of 1.2 percent of GDP in 2017 and 2.1 percent       and investment. But sustained non-oil recovery will
of GDP in 2018. International reserves are estimated to     depend on the transition from an immediate rebound
increase from US$49 billion in 2017 (or 6.8 months of       as security improves to implementation of a high-
imports), to US$58.3 billion (or 7.7 months of imports)     quality investment pipeline with sound financing. A
in 2018, rebuilding buffers to external shocks.             more stable security situation will allow for private
       The World Bank is supporting the GoI                 consumption and investment to pick up, increasing
in this critical moment to address recovery                 import needs for consumer and capital goods. Inflation
needs. Supported projects prioritize five key pillars:      is projected to remain low at 2 percent in 2019.

                                                                                                EXECUTIVE SUMMARY      xi
Fiscal and external balances are likely             recovery in the conflict-affected governorates.
      to continue improving as higher oil prices feed             Setbacks in security and/or a crisis over formation of
      through to higher revenues. Largely driven by               the government could weaken growth. While the policy
      expected higher oil prices and fiscal consolidation,        priorities of the new government remain unknown,
      the fiscal position will remain positive in 2019 but will   there is a risk of weak policy implementation and
      turn into small deficits by 2020. The current account       pressure to spend the expected budget surpluses,
      deficit is expected to remain limited as long as Iraq’s     which would erode the fiscal and external positions.
      oil exports prices continue to rise. Thanks to fiscal       Absence of a clear commitment in the budget on
      restraint, public debt is expected to continue to           wage bill management and subsidy reduction could
      decline and to remain sustainable over the medium           weaken the fiscal consolidation and absorb the
      term. The outlook includes making space for post-           fiscal space otherwise available for reconstruction. A
      conflict reconstruction and infrastructure spending.        decline in oil revenue or a shortfall in projected donors
      The short-term outlook also includes reviving               financing would result in lower gross reserves and/
      capital spending and responding to demands for              or higher public debt. Moreover, the outlook provides
      improvements in basic services in 2019 and beyond.          limited fiscal space to absorb shocks and further
      Carefully managing spending pressures over the              expand capital spending. Iraq’s capacity to expand oil
      remainder of this year and taking measures in 2019          production and exports remains constrained, further
      budget would create space for capital/reconstruction        exacerbating risks from a reduction of oil prices. The
      spending while also using some of the oil windfall to       imposition of sanctions on Iran could curb non-oil
      build buffers.                                              trade as Iran is the largest non-oil trade partner of
              Challenges remain due to political risk,            Iraq and result in higher prices of key commodities,
      dependency on oil revenue and the regional                  while the economic crisis in Turkey is likely to operate
      situation. Although higher oil prices are associated        mainly through trade channels. Implementing the new
      with reduced near-term vulnerabilities, the outlook         enacted law of Iraqi National Oil Company (INOC)
      remains subject to considerable uncertainties due to        may also have adverse impacts on the governance of
      political developments that could also delay economic       the oil sector and macroeconomic stability.

xii   IRAQ ECONOMIC MONITOR: TOWARD RECONSTRUCTION, ECONOMIC RECOVERY AND FOSTERING SOCIAL COHESION
‫ملخص تنفيذي‬
‫الذي أجرته مؤخرا ً وزارة التخطيط العراقية سوي ًة مع البنك الدويل حجم‬                         ‫ٍ‬
                                                                               ‫ملحوظ بعد هزمية‬        ‫تحسن الوضع األمني العام يف العراق بشكلٍ‬    ‫لقد ّ‬
‫األرضار الكلية مببلغ ‪ 45.7‬مليار دوالر أمرييك‪ ،‬وما يزيد عىل ‪ 88‬مليار‬             ‫ٍ‬
                                                                               ‫تحوالت‬    ‫داعش‪ ،‬إال أنّ العراق ال يزال يواجه تحديات كبرية‪ .‬شهد العراق‬
‫دوالر أمرييك الحتياجات إعادة اإلعامر عىل املدى القصري واملتوسط‪ ،‬والتي‬          ‫سياسي ٍة وأمني ٍة رئيسي ٍة يف عام ‪ 2017‬عندما أعلن رئيس الوزراء العبادي يف‬
‫قطاعات متنوع ٍة ومناطق مختلف ٍة من البالد‪ .‬وقد أسهم املجتمع‬ ‫ٍ‬        ‫تغطي‬      ‫حرب دامت ثالث سنوات‪ .‬لقد تركت‬      ‫كانون األول النرص عىل داعش بعد ٍ‬
‫امات ت ُق ّدر قيمتها بـ ‪ 30‬مليار دوالر أمرييك جاء معظمها‬   ‫الدويل بالتز ٍ‬      ‫هزمية داعش يف العراق الحكومة أمام مهام عسري ٍة تتمثل بإعادة بناء البنية‬
                                                  ‫ٍ‬
‫وضامنات يف املؤمتر الدويل إلعادة إعامر العراق‪ ،‬الذي ُعقد‬       ‫بشكل ٍ‬
                                                              ‫قروض‬             ‫التحتية للبالد وإعادة إعامر املناطق املحررة وتوطيد األمن واالستقرار وتوفري‬
‫يف شباط ‪ 2018‬يف الكويت‪ .‬ويف الوقت نفسه‪ ،‬صادقت الحكومة عىل‬                      ‫الخدمات الالزمة لعودة النازحني‪ .‬ويف ‪ 12‬أيار ‪ ،2018‬أدىل العراق بصوته‬
‫إطار عمل إعادة اإلعامر والتنمية (‪ )RDF‬إلعادة إعامر املناطق امل ُحررة‪،‬‬          ‫يف االنتخابات الربملانية التي نتج عنها فو ٌز لكتل ٍة سياسي ٍة يتزعمها مقتدى‬
‫وهي بهذا توطّد عقدا ً اجتامعياً متجددا ً يقوم عىل الثقة بني املواطن‬           ‫الصدر‪ ،‬بينام حلّت كتلة رئيس الوزراء العبادي‪ ،‬والذي كان يُنظَر إليه سابقاً‬
‫والدولة والتنمية املستدامة واإلصالحات‪ .‬ويف مؤمتر الكويت‪ ،‬تع ّهد البنك‬          ‫عىل أنه األوفر حظاً بالفوز‪ ،‬يف الرتتيب الثالث‪ .‬ومتت إعادة العد والفرز‬
‫يل وصل اىل ‪ 6‬مليار دوالر لدعم أجندة الحكومة العراقية‬      ‫الدويل مببلغٍ ك ٍ‬    ‫لصنادق االقرتاع بعد ظهور مزاعم بحصول تزوي ٍر وانتهت العملية يف الثامن‬
‫رشيك لتمويل التنمية يف‬‫ٍ‬      ‫إلعادة اإلعامر والتنمية وهو ما يجعله أكرب‬         ‫من آب دون حصول تغيريٍ كبري‪ .‬ويف الخامس عرش من أيلول‪ ،‬انتخب الربملان‬
‫العراق‪ .‬عالو ًة عىل هذا‪ ،‬يف نيسان ‪ ،2018‬صادق مجلس الوزراء العراقي‬              ‫العراقي محمد الحلبويس رئيساً له‪ ،‬يف خطو ٍة مهم ٍة صوب تشكيل الحكومة‬
‫عىل خطة التنمية الوطنية الخمسية (‪ )2022–2018‬التي تركز عىل قضايا‬                ‫الجديدة‪ .‬كام انتخب يف الثاين من ترشين األول برهم صالح رئيسا للبالد‪،‬‬
‫رئيسية بصمنها إعادة اإلعامر يف املحافظات والتخفيف من الفقر والتنمية‬            ‫والذي كلّف بدوره عىل الفور عادل عبد املهدي بتشكيل الحكومة الجديدة‬
‫االجتامعية وتنمية القطاع الخاص‪ .‬ومع ذلك‪ ،‬كان سري عملية إعادة‬                   ‫وأنهى بذلك شهورا ً من الجمود السيايس نتج عن االنتخابات الوطنية يف أيار‪.‬‬
‫اإلعامر بطيئاً بسبب عدم اليقني السيايس يف أعقاب االنتخابات‪ ،‬وتبقى‬
‫هنالك حاجة اىل فعل املزيد وبشكلٍ عاجلٍ من أجل استعادة الخدمات‬                 ‫ال تزال الظروف اإلنسانية صعب ًة يف العديد من املناطق التي تأثرت‬
                            ‫األساسية وإعادة بناء البنية التحتية الرضورية‪.‬‬     ‫سنوات أربع من القتال املحتدم هائل ًة عىل‬‫ٍ‬        ‫بالنزاع‪ .‬لقد كانت حصيلة‬
                                                                              ‫املدنيني يف العراق‪ .‬لقد أودى النزاع بحياة ما يزيد عىل ‪ 67,000‬مدين‬
 ‫ارتفع الفقر بشكلٍ حاد‪ .‬ارتفع املعدل الوطني للفقر من ‪ 18.9‬يف عام‬              ‫عراقي منذ عام ‪ ،2014‬قبل أن تبدأ أعداد القتىل بالتناقص مع نهاية عام‬
 ‫‪ 2012‬اىل ما يُقدر بـ ‪ 22.5‬يف عام ‪ .2014‬وتشري آخر إحصائيات سوق العمل‬          ‫‪ .2017‬ويُق ّدر تقري ٌر صدر مؤخرا ً عن مكتب األمم املتحدة لتنسيق الجهود‬
 ‫اىل حدوث املزيد من التدهور يف الرفاهية‪ .‬لقد ارتفع معدل البطالة‪ ،‬الذي‬         ‫اإلنسانية (‪ )UNOCHA‬بأنّه من بني الستة ماليني ُمه ّجر تقريباً منذ ظهور‬
 ‫كان يرتاجع قبل األزمة‪ ،‬مجددا ً ليصل اىل مستواه الذي كان عليه يف عام‬          ‫داعش يف ‪ ،2014‬ما يزال حوايل ‪ 2.0‬مليون منهم مهجرا ً يف نهاية حزيران‬
 ‫‪ .2012‬إ ّن حوايل ربع السكان ممن هم يف سن العمل غري ُمستخ َدمني‪ ،‬أي‬           ‫‪ ،2018‬وهناك ‪ 8.7‬مليون منهم تقريباً بحاجة للمساعدة اإلنسانية‪ .‬إ ّن‬
 ‫أنهم إما عاطلني عن العمل أو يبحثون عن عمل إضايف‪ .‬كام شهد العديد‬              ‫حاجات االستقرار وإعادة اإلعامر يف مناطق تم تحريرها من داعش هائلة‪.‬‬
 ‫بحدث مؤ ٍذ منذ‬
             ‫ٍ‬      ‫من األرس صدمات عنيفة؛ فأكرث من ثلث األرس م ّرت‬            ‫كام يواجه العائدون اىل منازلهم البالغ عددهم ‪ 3.9‬مليون ظروفاً معيشي ًة‬
 ‫رس قد م ّر بشكلٍ من أشكال انعدام‬ ‫بداية األزمة وواح ٌد من بني كل ستة أ ٍ‬      ‫وخدمات أساسي ٍة غري كافي ٍة مثل الصحة‬
                                                                                                               ‫ٍ‬        ‫صعوبات اقتصادي ٍة‬
                                                                                                                                   ‫ٍ‬      ‫مرتدي ًة تشمل‬
 ‫األمن الغذايئ‪ .‬ويظل نظام البطاقة التموينة (نظام التوزيع العام‪)PDS ،‬‬          ‫واملاء والنظافة‪ ،‬وهذه كلها تقف وراء تردد العديد من النازحني للعودة اىل‬
‫الربنامج األوسع من بني برامج املساعدة اإلجتامعية‪ ،‬لك ّن الناس لجؤوا أيضاً‬     ‫منازلهم‪ .‬كام أ ّن اإلنتاج الزراعي تراجع بنسبة ‪ 40‬باملائة ما ترك ‪ 1.9‬مليون‬
 ‫اىل األصدقاء واألقارب واملنظامت اإلنسانية طلباً للمساعدة‪ .‬ولقد تع ّرض‬        ‫عراقي تقريباً يعاين من انعدام األمن الغذايئ؛ و‪ 7.3‬مليون فرد بحاجة‬
 ‫لصدمات عنيف ٍة متعددة‪ :‬حيث فقدوا الكثري من ثروتهم‬
                                                 ‫ٍ‬      ‫امله ّجرون (‪)IDPs‬‬     ‫للرعاية الصحية؛ و‪ 5.4‬مليون فرد بحاجة اىل مساعد ٍة يف مجال املياه‬
 ‫بسبب تدمري املمتلكات؛ أو موت فرد أو أفراد من العائلة‪ ،‬أو أصبحوا‬                 ‫والرصف الصحي و‪ 4.1‬مليون فرد بحاج ٍة للأموى (‪.)UNOCHA 2018‬‬
 ‫جرحى مبعد ٍل يعيقهم عن العمل؛ كام واجهوا فقدان الوظائف أو األعامل‬
 ‫التجارية‪ .‬وقل ٌة من البالغني بني هؤالء امله ّجرين من ميلك عمالً‪ ،‬بحيث أ ّن‬   ‫بعد التحرير الناجح لجميع األرايض العراقية من داعش‪ ،‬تُعد‬
 ‫بيت من البيوت امله ّجرة يُعيل أكرث من ستة أفرا ٍد آخرين‬
                                                     ‫كل بالغٍ عاملٍ يف ٍ‬      ‫الحكومة حزم ًة شامل ًة إلعادة اإلعامر‪ .‬لقد ق ّدر تقييم األرضار واالحتياجات‬

                                                                                                                                                             ‫‪xiii‬‬
‫فسح املجال لإلنفاق يف مجال إعادة اإلعامر والبنية التحتية املرتبط مبا‬       ‫املم ّول بـ ‪ 300‬مليون دوالر أمرييك‪ ،‬لتحسني ظروف املعيشة ملا يزيد‬
      ‫بعد النزاع‪ .‬كام تشمل التوقعات عىل املدى القصري إعادة إحياء اإلنفاق‬         ‫عىل ‪ 1.5‬مليون من األرس الفقرية يف العراق بزيادة الوصول اىل الخدمات‬
      ‫الرأساميل واالستجابة ملطالب إدخال التحسينات يف الخدمات األساسية‬            ‫األساسية وتوفري فرص العمل‪ .‬وتَبِع هذا يف نيسان ‪ 2018‬املوافقة عىل‬
      ‫يف عام ‪ 2019‬وما بعده‪ .‬ومن شأن عملية اإلدارة املتأنية لضغوط اإلنفاق‬         ‫املرشوع الطارئ لدعم االستقرار االجتامعي والصمود (‪ ،)ESSRP‬املمول‬
      ‫اءات يف موازنة ‪ 2019‬أن يوفر‬‫خالل ما تبقى من هذا العام واتخاذ إجر ٍ‬          ‫بـ ‪ 200‬مليون دوالر أمرييك لزيادة فرص املعيشة‪ ،‬والوصول اىل الخدمات‬
      ‫فضاءا ً لإلنفاق الرأساميل‪/‬إعادة اإلعامر مع استخدام بعض مكاسب أسعار‬         ‫النفسية االجتامعية‪ ،‬وتوسيع نطاق توفري شبكات الحامية االجتامعية‪.‬‬
                                          ‫النفط لبناء مخزون يف الوقت نفسه‪.‬‬       ‫إضافة لهذا‪ ،‬هناك جهو ٌد جاري ٌة إلنشاء صندوقٍ ائتام ٍين متعدد املانحني‬
                                                                                 ‫ُنسق ومتويل املانحني للتعايف االجتامعي االقتصادي‬   ‫(‪ )MDTF‬للحوار امل ّ‬
       ‫ما تزال التحديات قامئة بسبب املخاطر السياسية‪ ،‬واالعتامد عىل‬                                   ‫وإعادة اإلعامر وتوطيد إصالحات الحكومة الحاسمة‪.‬‬
       ‫عائدات النفط والوضع اإلقليمي‪ .‬عىل الرغم من أ ّن ارتفاع أسعار النفط‬
       ‫قد تخفف من املخاطر عىل املدى القريب‪ ،‬إال أ ّن التوقعات تظل خاضع ًة‬        ‫من املتوقع أن تتحسن آفاق االقتصاد بشكلٍ كبريٍ بسبب أسعار‬
      ‫لعدم يق ٍني كبريٍ بسبب التطورات السياسية التي من شأنها أن تؤخر أيضاً‬       ‫النفط املرتفعة والوضع األمني اآلخذ بالتحسن‪ .‬من املتوقع أن تزداد‬
       ‫التعايف االقتصادي يف املحافظات املتأثرة بالنزاع‪ .‬فمن شأن النكسات التي‬     ‫وترية منو الناتج اإلجاميل املحيل الكيل وصوالً اىل ‪ 6.2‬باملائة يف عام ‪2019‬‬
       ‫تحدث يف الوضع األمني و‪/‬أو األزمة التي قد ترافق تشكيل الحكومة أن‬           ‫والذي يستند يف استدامته اىل اإلنتاج املرتفع للنفط‪ .‬ويُتوقع أن يرتفع‬
       ‫تؤدي اىل إضعاف النمو‪ .‬ففي الوقت الذي تظل فيه أولويات سياسة‬                ‫إنتاج النفط يف األعوام القادمة بصور ٍة هامشي ٍة فقط‪ ،‬ما قد يؤدي اىل‬
       ‫الحكومة الجديدة غري معروفة‪ ،‬مثة خطور ٌة ترتبط بضعف تنفيذ السياسة‬          ‫تخفيض النمو الكيل مبعدل ‪ 2.5‬باملائة حتى عام ‪ ،2023‬بسبب القدرة‬
       ‫والضغط الذي قد يرافق إنفاق الفائض املتوقع يف املوازنة‪ ،‬وهو من شأنه‬        ‫املحدودة للحكومة العراقية عىل زيادة االستثامر يف قطاع النفط‪ .‬ومن‬
       ‫أن يُرض بالوضعني املايل والخارجي‪ .‬ومن شأن غياب االلتزام الواضح يف‬         ‫املتوقع أن يبقى النمو غري النفطي إيجابياً عىل خلفية ارتفاع االستثامرات‬
       ‫املوازنة بخصوص خفض الرواتب واإلعانات أن يُضعف التامسك املايل‬              ‫الالزمة إلعادة بناء البنية التحتية امل ُد ّمرة‪ ،‬ويف استهالك واستثامر القطاع‬
       ‫وميتص الوفرة املالية التي يُفرتض أن تخصص إلعادة اإلعامر‪ .‬كام أ ّن‬         ‫تحسن الوضع‬‫الخاص‪ .‬لك ّن التعايف املستدام غري النفطي سيعتمد عىل ّ‬
                                                        ‫ٍ‬
       ‫انخفاض يف عائدات النفط أو عو ٍز يف التمويل املتوقع‬       ‫من شأن حدوث‬      ‫األمني وتنفيذ مشاريع استثامر عالية الجودة بتمويلٍ سليم‪ .‬وسيسمح‬
       ‫للامنحني أن ينتج عنه احتياطياتٌ إجاملي ٌة أوطأ و‪/‬أو دين عام أعىل‪.‬‬         ‫الوضع األمني األكرث استقرارا ً الستهالك واستثامر القطاع الخاص أن يرتفع‪،‬‬
       ‫عالوة عىل ذلك‪ ،‬توفر التوقعات فضاءا ً مالياً محدودا ً المتصاص الصدمات‬      ‫ما يزيد من احتياجات االسترياد للبضائع االستهالكية والرأساملية‪ .‬ومن‬
       ‫وتوسيع اإلنفاق الرأساميل بشكل إضايف‪ .‬كام تظل قدرة العراق عىل توسيع‬                   ‫املتوقع أن يظل التضخم منخفضاً عند ‪ 2‬باملائة يف عام ‪.2019‬‬
       ‫انتاج النفط وزيادة صادراته ُمق ّيدة‪ ،‬وهو ما يُفاقم املخاطر التي ترافق‬
       ‫عقوبات عىل إيران أن يكبح‬‫ٍ‬        ‫انخفاض أسعار النفط‪ .‬ومن شأن فرض‬          ‫من املحتمل أن يستمر امليزانني املايل والخارجي يف التحسن مع‬
       ‫التجارة غري النفطية حيث أ ّن إيران هي الرشيك التجاري غري النفطي‬                        ‫ٍ‬
                                                                                 ‫عائدات أعىل‪ .‬سيظل‬      ‫استمرار ما تعود به أسعار النفط املرتفعة من‬
       ‫األكرب للعراق وينتج عن هذا ارتفاع أسعار السلع الرئيسية‪ ،‬بينام نجد‬         ‫الوضع املايل إيجابياً يف عام ‪ ،2019‬مدعوماً بتوقعات أسعار نفط أعىل‬
       ‫بأ ّن األزمة االقتصادية يف تركيا من املحتمل أن تظهر بصور ٍة رئيسي ٍة من‬   ‫والتعزيز املايل‪ ،‬لكنه سيتحول اىل حاالت عج ٍز صغري ٍة بحلول عام ‪.2020‬‬
       ‫خالل القنوات التجارية‪ .‬كام أ ّن تنفيذ قانون رشكة النفط الوطنية العراقية‬   ‫ومن املتوقع أن يبقى عجز الحساب الجاري محدودا ً طاملا استمرت أسعار‬
       ‫شع حديثاً قد يكون له أيضاً آثارا ً سلبي ًة عىل حوكمة‬ ‫(‪ )INOC‬الذي ُ ّ‬      ‫تصدير النفط باإلرتفاع‪ .‬وبفضل الضبط املايل‪ ،‬من املتوقع أن يستمر الدين‬
                                            ‫قطاع النفط وعىل استقرار االقتصاد‪.‬‬    ‫العام باالنخفاض ويبقى مستداماً عىل املدى املتوسط‪ .‬وتشمل التوقعات‬

‫‪xiv‬‬   ‫‪IRAQ ECONOMIC MONITOR: TOWARD RECONSTRUCTION, ECONOMIC RECOVERY AND FOSTERING SOCIAL COHESION‬‬
‫فائضاً بنسبة ‪ 1.2‬باملائة من الناتج اإلجاميل املحيل غالباً بسبب أسعار‬         ‫يف البيت‪ .‬كام فقد بعض امله ّجرين الوصول اىل نظام البطاقة التموينية‪.‬‬
‫النفط األعىل‪ .‬لقد أدى تدهور أسعار النفط عاملياً يف الفرتة–‪2016–2015‬‬          ‫فاألثر املرتاكم لهذه التطورات عىل امله ّجرين ميكن رؤيته بأبعا ٍد متعدد ٍة‪،‬‬
‫واإلنفاق املتزايد يف املجالني األمني واإلنساين وضعف الضوابط اىل‬              ‫بضمنها وجود مخاطر ٍة أعىل بالتعرض للجوع‪ .‬وهنا تقوم الحكومة العراقية‬
‫وسع رسيعاً من فجوة عجز املوازنة‪،‬‬
                              ‫انخفاض حاد يف إيرادات النفط‪ ،‬كام ّ‬             ‫بتنفيذ إصال ٍح طمو ٍح لتحسني عملية استهداف اإلنفاق االجتامعي‪ ،‬بعد‬
‫لتعود وتضيق يف عام ‪ 2017‬بسبب ارتفاع أسعار النفط واإلجراءات التي‬              ‫إدخال نظام اختبار الدخل البديل (‪ )PMT‬للتعرف عىل الفقراء‪ .‬فالحكومة‬
‫تم اعتامدها الحتواء النفقات الجارية يف إطار برنامج صندوق النقد‬               ‫بيانات موحد ٍة لألرس املؤهلة عىل أساس هذا‬‫ٍ‬     ‫العراقية ملتزم ٌة بتب ّني قاعدة‬
‫الدويل وسلسلة مشاريع متويل سياسة التنمية (‪ )DPF‬التابعة للبنك‬                                        ‫النظام بني جميع برامج الحامية االجتامعية املختلفة‪.‬‬
‫الدويل‪ .‬ومع توقع ارتفاع أسعار النفط‪ ،‬يُتوقع أن يكون للحكومة وفرة‬
‫مالية أكرب لتمويل جهود إعادة اإلعامر‪ ،‬رشيطة استمرار عملية التعزيز‬            ‫ات سياسي ٍة‬‫بالرغم من النجاح العسكري‪ ،‬ال يزال العراق يواجه توتر ٍ‬
‫تحسن الوضع‬ ‫املايل‪ .‬فالتمويل الرسمي للموازنة أصبح أقل إلحاحاً مع ُّ‬           ‫وعدم استقرا ٍر اجتامعي‪ .‬اندلعت مظاهراتٌ كبري ٌة ضد البطالة املتزايدة‬
‫املايل‪ .‬وتشري التقديرات أيضاً اىل أ ّن الوضع املايل لحكومة إقليم كردستان‬     ‫والفساد وسوء الخدمات العامة يف متوز من هذا العام‪ ،‬خاص ًة يف ثاين‬
‫سيتحسن نسبياً يف عام ‪ ،2018‬مع موافقة الحكومة الفدرالية عىل‬      ‫ّ‬            ‫أكرب مدن العراق‪ ،‬البرصة الغنية بالنفط‪ ،‬وانترشت اىل مدنٍ أخرى مبا فيها‬
             ‫استئناف تحويالت املوازنة لدفع الرواتب ومعاشات التقاعد‪.‬‬                                ‫ٍ‬
                                                                             ‫بتعهدات بزيادة اإلنفاق عىل‬      ‫العاصمة بغداد‪ .‬واستجابت الحكومة لها‬
                                                                             ‫مشاريع الكهرباء واملاء (‪ 3.5‬ترليون دينار عراقي) وتوفري ‪ 10,000‬وظيفة‪.‬‬
‫تشري التقديرات اىل أنّ الدَّ ين العام للعراق سينخفض مزيداً‬                   ‫كام تم تأسيس هيئ ٍة جديد ٍة للتحقيق يف الفساد والعوامل األخرى التي‬
 ‫وسيبقى مستداما‪ .‬من املتوقع أن يعمل النمو وامليزان املايل الكيل اإليجايب‬     ‫اءات مستدام ٍة أكرث‬
                                                                                              ‫تعيق تقديم الخدمات‪ .‬وسيكون باإلمكان القيام بإجر ٍ‬
 ‫عىل إحداث املزيد من االنخفاض يف معدل ال ّدين العام اىل إجاميل الناتج‬        ‫لإليفاء مبطالب املتظاهرين عند تنصيب حكوم ٍة جديدة‪ .‬فمن املتوقع أن‬
 ‫املحيل من ‪ 67.3‬باملائة يف عام ‪ 2016‬اىل ‪ 55‬باملائة تقريباً‪ .‬كام قامت‬         ‫تُركز الحكومة الجديدة هذه عىل جعل الشمولية واإلصالحات االقتصادية‬
 ‫الحكومة أيضاً بتب ّني إطا ٍر للسيطرة عىل إصدار الضامنات‪ ،‬التي وصلت اىل‬      ‫والعدالة واملحاسبة يف أعىل ُسلم أولوياتها‪ ،‬مع العمل يف الوقت نفسه عىل‬
 ‫‪ 33‬مليار دوالر أمرييك (أو ‪ 20‬باملائة من الناتج اإلجاميل املحيل) يف نهاية‬                                     ‫ضامن تقديم الخدمات األساسية بانتظام‪.‬‬
 ‫عام ‪ 2016‬وهذه الضامنات‪ ،‬التي يرتبط معظمها بقطاع الكهرباء‪ ،‬يُعتقد‬
 ‫بأنها اآلن تحت السيطرة‪ .‬ويف السنوات املاضية‪ ،‬تم متويل العجز املايل‬          ‫بالتحسن بعد الرشخ‬
                                                                                             ‫ّ‬       ‫العالقات مع حكومة إقليم كردستان آخذ ٌة‬
 ‫الكبري بصور ٍة رئيسي ٍة من خالل الدعم الثنايئ واملتعدد األطراف‪ ،‬وإصدار‬      ‫الذي نتج عن استفتاء االستقالل الذي جرى يف عام ‪ .2017‬شهدت العالقات‬
 ‫السندات السيادية بني الحني واآلخر‪ ،‬والتمويل النقدي غري املبارش من‬           ‫بني بغداد وأربيل توترا ً منذ استفتاء العام املايض حول استفتاء اإلقليم يف‬
                                                ‫قبل البنك املركزي العراقي‪.‬‬   ‫رشعي‪،‬‬
                                                                              ‫الخامس والعرشين من أيلول‪ ،‬والذي اعتربته الحكومة الفدرالية غري ٍ‬
                                                                             ‫وكذلك بسبب تحويالت املوازنة اىل اإلقليم يف مطلع عام ‪ .2018‬ومع ذلك‪،‬‬
‫ساعدت أسعار النفط املرتفعة منذ أواسط عام ‪ 2017‬اىل تحقيق‬                      ‫خفّت ِح ّدة التوترات بني الحكومة الفدرالية وحكومة إقليم كردستان عندما‬
‫نتائج أفضل عىل صعيد امليزان الخارجي‪ .‬فقد ح ّولت أسعار النفط‬                  ‫وافقت الحكومة الفدرالية عىل استئناف تحويالت املوازنة التي بدا بأنها قد‬
‫املرتفعة ميزان الحساب الجاري من عج ٍز نسبته ‪ 9‬باملائة يف عام ‪2016‬‬            ‫غطّت بشكلٍ كبريٍ احتياجات اإلقليم املبارشة‪ ،‬كام يُعتقد أ ّن عائدات حكومة‬
                                                              ‫اىل ٍ‬
‫فائض بنسبة ‪ 1.2‬باملائة من الناتج اإلجاميل املحيل يف عام ‪ 2017‬و‪2.1‬‬                           ‫اإلقليم اإلجاملية كافية لدفع الرواتب ومعاشات املتقاعدين‪.‬‬
‫باملائة من الناتج اإلجاميل املحيل يف عام ‪ .2018‬وتشري التقديرات اىل أ ّن‬
‫االحتياطيات الدولية سرتتفع من ‪ 49‬مليار دوالر أمرييك يف عام ‪2017‬‬              ‫بالتحسن تدريجياً بعد الصعوبات‬   ‫ّ‬       ‫الظروف االقتصادية آخذ ٌة‬
‫(أو ما يعادل ‪ 6.8‬شهر من الواردات)‪ ،‬اىل ‪ 58.3‬مليار دوالر أمرييك (أو‬           ‫االقتصادية العميقة التي رافقت األعوام الثالث املاضية‪ .‬فانتعاش النمو‬
‫‪ 7.7‬شهر من الواردات) يف عام ‪ ،2018‬وهذا ما يعيد بناء مخزونٍ أمام‬              ‫االقتصادي يف عام ‪ 2017‬قيّده إنتاج النفط وفق اتفاقية الدول األعضاء يف‬
                                                   ‫الصدمات الخارجية‪.‬‬                                                               ‫منظمة أوبك ٌ‬
                                                                             ‫ودول أخرى من غري األعضاء‪ .‬ويف عام ‪ ،2018‬يُق ّدر أ ّن منو‬
                                                                             ‫الناتج اإلجاميل املحيل سيعود إيجابياً عند ‪ 1.9‬باملائة والفضل يف ذلك يعود‬
‫يدعم البنك الدويل الحكومة العراقية يف هذه الفرتة الحساسة‬                     ‫التحسن امللحوظ يف الظروف األمنية وارتفاع أسعار النفط واملستوى‬  ‫ّ‬      ‫اىل‬
‫للتعامل مع احتياجات التعايف‪ .‬متنح املشاريع املدعومة األولوية لخمس‬            ‫األعىل لالستثامر املتوقع حدوثه يف القطاعني العام والخاص‪ .‬ومن املتوقع‬
‫ركائز أساسية‪ :‬الحوكمة‪ ،‬واملصالحة الوطنية وبناء السالم‪ ،‬والتنمية‬              ‫أيضاً أن يُظهر النمو غري النفطي انتعاشاً قوياً عند ‪ 5.2‬باملائة هذا العام‪،‬‬
‫االجتامعية والبرشية‪ ،‬والبنية التحتية‪ ،‬والتنمية االقتصادية‪ .‬فمنذ متوز‬         ‫مدعوماً بنم ٍو واسع النطاق يف الزراعة والصناعة والخدمات‪ .‬وكان معدل‬
‫‪ ،2015‬يدعم البنك الدويل جهود إعادة اإلعامر من خالل املرشوع الطارئ‬            ‫التضخم منخفضاً يف عام ‪ 2017‬عند ‪ 0.1‬باملائة فقط‪ ،‬لك ّن الطلب املحيل‬
‫لدعم التنمية (‪ .)EODP‬ويف ترشين األول ‪ ،2017‬وافق البنك الدويل‬                 ‫املتزايد دفع التضخم اىل ‪ 1.7‬باملائة يف متوز ‪ .2018‬ومن املر ّجح أن يعمل‬
‫عىل متويلٍ إضا ٍيف بقيمة ‪ 400‬مليون دوالر أمرييك للمرشوع األصيل (‪350‬‬          ‫الطلب املحيل املتزايد وزيادة اإلئتامن اىل القطاع الخاص (وإن كان من‬
‫مليون دوالر أمرييك) للرتكيز ليس فقط عىل البنية التحتية األساسية بل‬                  ‫مستوى واطئ) عىل زيادة التضخم مبع ّدل ‪ 2.0‬باملائة يف عام ‪.2018‬‬
‫خاص باحتياجات الشباب والنساء‬‫وأيضاً عىل الصحة والتعليم‪ ،‬مع اهتاممٍ ٍ‬
‫املهمشني يف تلك املناطق التي تأثرت بداعش‪ .‬ويف شباط ‪ ،2018‬وافق‬                ‫تشري التقديرات اىل استمرار انتفاع الوضع املايل للعراق من أسعار‬
‫البنك الدويل عىل مرشوع الصندوق االجتامعي للتنمية للعراق (‪)SFD‬‬                ‫النفط املرتفعة‪ .‬من املتوقع أن تحقق املوازنة املالية الكلية يف عام ‪2018‬‬

                                                                                                                                                              ‫‪xv‬‬
IRAQ ECONOMIC MONITOR: TOWARD RECONSTRUCTION, ECONOMIC RECOVERY AND FOSTERING SOCIAL COHESION
1
 RECENT ECONOMIC AND
 POLICY DEVELOPMENTS

Political and Social Context                                        Iraq’s overall security situation has notably
                                                             improved after the defeat of ISIS, but significant
Following the declaration of military victory against ISIS   challenges lie ahead. On December 9, 2017, Prime
in December 2017, security conditions have improved,         Minister Al-Abadi announced victory over ISIS after a
and Iraqis are shifting their attention toward recovery      war that lasted three years. The defeat of ISIS in Iraq left
and the country’s political future. Parliamentary            the government with the daunting tasks of rebuilding
elections that were held on May 12th, 2018, resulted in      the country’s infrastructure, reconstruction of liberated
a win for al-Sadr bloc. The winning blocs would have to      areas, establishing security and stability, and providing
agree on the nomination of a new prime minister. On          services for the return of the displaced persons. On
September 15th, Iraq’s parliament elected lawmaker           May 12th, 2018 Iraq voted in parliamentary elections
Mohammed al-Halbousi as speaker, marking a major             that delivered a win for al-Sadr bloc, while prime
step towards establishing a new government. On               minister Al-Abadi’s bloc, once seen as front runner,
October 2nd, Iraq’s parliament elected as president          came in third. The winning blocs would have to agree
Barham Salih, who immediately named Adel Abdul               on the nomination of a new prime minister. The ballots
Mahdi as Prime Minister-designate. The political             have been recounted after allegations of fraud and
environment remains difficult, despite an improving          completed on August 8th without major change. On
security situation, with popular protests regarding          September 15th, Iraq’s parliament elected lawmaker
weak public services and increasing unemployment.            Mohammed al-Halbousi as speaker, marking a major
IDPs are returning home in greater numbers, but              step towards establishing a new government. On
stabilization and reconstruction needs in areas              October 2nd, Iraq’s parliament elected as president
liberated from ISIS are extensive. Relations between         Barham Salih, who immediately named Adel Abdul
Baghdad and KRG are improving. The Government                Mahdi as Prime Minister-designate, ending months of
is putting in place a comprehensive reconstruction           deadlock after the national election in May.
package, but the reconstruction has been slow due to                Humanitarian conditions remain difficult in
political uncertainty after the elections.                   many conflict-affected areas. The toll of four years

                                                                                                                            1
FIGURE 1 • Casualty Figures Have Been Decreasing            inhibiting service delivery. More sustained actions to
                                                                 meet protesters’ demands will be possible when a
                       35,000
                                                                 new government is in place. The new government is
                       30,000
                                                                 expected to focus on prioritizing inclusion, economic
                       25,000
     Number of death

                       20,000
                                                                 reforms, justice, and accountability, while ensuring the
                       15,000                                    timely delivery of basic services.
                       10,000                                            Relations with KRG are improving after the
                        5,000                                    rupture related to the independence referendum
                            0                                    in 2017. The relations between Baghdad and Erbil
                                2003
                                2004
                                2005
                                2006
                                2007
                                2008
                                2009
                                2010
                                2011
                                2012
                                2013
                                2014
                                2015
                                2016
                                2017
                                                                 have been strained since last year’s referendum on
    Source: Iraq Body Count, 2017.                               regional independence on September 25th, which was
                                                                 considered illegitimate by the federal government,
                                                                 and on budget transfer issue in early 2018. However,
    of intensive combat on Iraq’s civilian population has        tensions between the federal government and the
    been enormous. The conflict claimed the lives of over        KRG eased when the federal government agreed to
    67,000 Iraqi civilians since 2014, before the casualty       temporarily resume transfers that seem to have largely
    figures started to decrease at the end of 2017 (Figure 1).   addressed the region’s immediate needs, and KRG
    Some 2.0 million people remain displaced at the end of       total revenue is sufficient to pay salaries and pensions.
    June of 20181 of the almost 6 million people displaced
    since the rise of ISIS in 2014, and about 8.7 million
                                                                 Output and Demand
    need humanitarian assistance (22 percent of the
    population). Stabilization and reconstruction needs
                                                                 Iraq’s economic conditions are gradually improving
    in areas liberated from ISIS are extensive.2 Dire living
                                                                 from the deep economic strains of the last three years,
    conditions, including economic hardship, insufficient
                                                                 thanks to a more favorable security environment,
    basic services such as health, water, and sanitation,
                                                                 higher oil prices and the pick-up in public and private
    are faced by 3.9 million returnees, and are behind
                                                                 investment. Overall GDP growth is estimated to return
    the reluctance of many displaced people to return
                                                                 positive at 1.9 percent in 2018 and non-oil GDP to
    home. Agricultural production has declined by 40
                                                                 rebound at 5.2 percent supported by the broad-
    percent leaving nearly 1.9 million Iraqis food insecure;
                                                                 based growth in the key economic sectors.
    7.3 million people require health care; 5.4 million
    need water and sanitation assistance and 4.1 million
                                                                 Economic Growth
    people need shelter (UNOCHA 2018). Hundreds of
    thousands of people, especially among women and
                                                                 Economic conditions are gradually improving
    youth, have been brutalized by violence and remain
                                                                 following the deep economic strains of the
    vulnerable and at increased risk to gender-based
                                                                 last three years. Economic growth in 2017 was
    harassment and exploitation.
                                                                 constrained by oil production in line with OPEC+
            Despite military success, Iraq continues to
                                                                 agreement, and investment were lower than expected,
    face political tensions and social unrest. Large
                                                                 especially in construction. In 2018, overall GDP growth
    protests against increasing unemployment, corruption
                                                                 is estimated to return positive at 1.9 percent thanks to
    and poor public services erupted in July this year,
                                                                 a notable improvement in security conditions, higher
    particularly in Iraq’s second largest and oil-rich city,
                                                                 oil prices, and expected higher public and private
    Basra and spread to other cities including the capital
    Baghdad. The government responded with pledges
    to increase spending on electricity and water projects       1
                                                                     U.N. Office for the Coordination of Humanitarian Affairs
    (ID3.5 trillion) and create 10,000 jobs. A new commission        (UNOCHA).
    was created to investigate corruption and other factors      2
                                                                     OCHA Iraq Humanitarian Bulletin, July 2018.

2   IRAQ ECONOMIC MONITOR: TOWARD RECONSTRUCTION, ECONOMIC RECOVERY AND FOSTERING SOCIAL COHESION
FIGURE 2 • Overall GDP Growth Is Estimated to                                        FIGURE 3 • After a Marked Contraction, GDP Per
            Rebound in 2018                                                                       Capita Is Estimated to Have Improved
                                                                                                  Since 2017
                                 20
 Year-on-year growth, percent

                                 15                                                          9,000
                                 10
                                  5
                                                                                             7,000
                                  0

                                                                                       US$
                                 –5
                                –10                                                          5,000
                                –15
                                –20                                                          3,000
                                      2010 2011 2012 2013 2014 2015 2016 2017 2018e                   2012     2013       2014      2015   2016   2017 2018e

                                                    GDP       Non-oil GDP                                                    Iraq          MENA

Sources: IMF; and World Bank estimates.                                               Sources: IMF; and World Bank WDI.

investment. Non-oil growth is estimated to show a                                     sector development. However, reconstruction effort
strong rebound at 5.2 percent this year, underpinned                                  has been slow due to political uncertainty following
by broad-based growth in agriculture, industries, and                                 elections but more needs to be done urgently to restore
services (Figure 2). The economic rebound in 2018                                     basic services and rebuild critical infrastructure.
is also estimated to improve GDP per capita from                                             A more favorable security environment will
US$4,952 in 2017 to an estimated US$5,597 in 2018,                                    improve the performance of non-oil industry and
albeit still a lower level compared to 2013 (Figure 3).                               services in 2018. The impact of the conflict and
        Following the ISIS defeat, the GoI is putting                                 contained government spending has had a profound
in place a comprehensive reconstruction package.                                      impact on the already weak and under-developed
The recent Damage and Needs Assessment (DNA)                                          non-oil economy. Non-oil industry was the hardest-hit
conducted by the Iraqi Ministry of Planning jointly                                   sector; it contracted by an average of 22 percent in the
with the World Bank estimated the overall damage at                                   period 2014–2017 and contributed –2.0 percentage
US$45.7 billion, and more than US$88 billion in short                                 points to overall growth. However, a more favorable
and medium-term reconstruction needs, spanning                                        security environment and the initial reconstruction
various sectors and different areas of the country.                                   effort are estimated to increase the growth rate of
US$30 billion worth of commitments were made mostly                                   non-oil industry to over 6 percent in 2018, and its
in the form of loans and guarantees at the International                              contribution to GDP growth to 0.3 percentage points.
Conference for the Reconstruction of Iraq, which took                                 Also, easing of disruptions to supply chains and trade
place in February 2018 in Kuwait. At the same time,                                   routes by a more stable security situation is estimated
the government endorsed the Reconstruction and                                        to enhance the growth in the services sector in 2018
Development Framework (RDF) to reconstructing the                                     by almost 5 percent, with its contribution to overall
liberated areas, forging a renewed social contract based                              growth being 1.4 percentage points (Figure 4). Non-oil
on citizen-state trust and sustainable developments                                   growth in 2018 is estimated to exceed that in MENA oil
and reforms. At the Kuwait conference, the World Bank                                 exporters group for the first time since 2014 (Figure 5).
pledged a total of US$6 billion to support the GoI’s                                         On the demand side, private consumption
reconstruction and development agenda making it                                       and investment are expected to pick up. With
the biggest development financing partner of Iraq.                                    millions of Iraqis displaced because of the fighting,
Furthermore, in April 2018, Iraq’s Council of Ministers                               revenue streams for many households have
approved the 5 years National Development Plan (2018–                                 disappeared. However, a more stable security situation
2022) which focuses on key issues including provincial                                and higher oil prices allowed for private consumption
construction, poverty reduction, and social and private                               and investment to pick up, increasing imports’ needs

                                                                                                       RECENT ECONOMIC AND POLICY DEVELOPMENTS                 3
FIGURE 4 • A More Stable Security Environment                                                                                          FIGURE 5 • Non-Oil GDP Growth Has Exceeded
                Is Expected to Increase the Share                                                                                                       that in MENA Oil Exporters since 2017
                of Non-Oil Industry to Growth,
                Especially Services in 2018                                                                                                                 15

                                                                                                                                                            10
                                       18
     Sectoral contribution to GDP, %

                                       14                                                                                                                    5
                                       10
                                                                                                                                                             0

                                                                                                                                             Percent
                                        6
                                        2                                                                                                                   –5
                                       –2                                                                                                                   –10
                                       –6
                                                                                                                                                            –15
                                       –10
                                              2006
                                                     2007
                                                            2008
                                                                    2009
                                                                           2010
                                                                                  2011
                                                                                         2012
                                                                                                2013
                                                                                                        2014
                                                                                                               2015
                                                                                                                      2016
                                                                                                                             2017
                                                                                                                                    2018e
                                                                                                                                                            –20
                                                                                                                                                                   2013    2014      2015         2016   2017     2018e
                                                                   Agriculture      Oil                 Services
                                                                                                                                                                              Iraq           MENA oil exporters
                                                                   Non-oil industry                    Total GDP

    Sources: Iraqi authorities; WB; and IMF staff estimates                                                                                 Sources: Iraqi authorities; world Bank; and IMF REO, 2018.

    for consumer and capital goods. The GoI is also taking                                                                                  percent of GDP) in 2014 to US$1.8 billion (0.8 percent
    steps to prioritize investment in areas liberated from                                                                                  of GDP) in 2018, but foreign investment will become
    ISIS and to repair the damaged infrastructure network.                                                                                  increasingly important in the coming years, as the
    Thus, expenditure on non-oil investment is estimated                                                                                    country attempts to move away from its reliance on oil
    to increase to 53 percent of total investment in 2018,                                                                                  and finances reconstruction needs (Figure 7).
    up from an average of 38 percent of total investment
    expenditure in the 2015–17 period, while oil investment                                                                                 Oil Sector
    expenditure is estimated to decline to 47 percent, from
    62 percent of total investment expenditure in the same                                                                                  Iraq remains highly dependent on the oil sector.
    period (Figure 6). Due to insecurity and poor business                                                                                  It accounts for over 65 percent of GDP, 92 percent of
    environment, FDI declined from US$4.1 billion (2                                                                                        central government revenue, and almost 100 percent

    FIGURE 6 • Non-Oil Investment Is Estimated to                                                                                          FIGURE 7 • Foreign Direct Investment Declined
                Increase in 2018                                                                                                                        since 2014 due to Insecurity and Poor
                                                                                                                                                        Business Environment
                                             80
                                                                                                                                                             6
     Percent of total investment

                                             60
          expenditure, (%)

                                                                                                                                                             5
                                             40                                                                                                              4
                                                                                                                                             US$, billion

                                             20                                                                                                              3

                                                                                                                                                             2
                                              0
                                                     2013          2014           2015          2016            2017         2018e
                                                                                                                                                             1
                                                                       Non-oil investment expenditures
                                                                                                                                                             0
                                                                       Oil investment expenditures                                                                2010 2011 2012 2013 2014 2015 2016 2017 2018e

    Sources: IMF; and World Bank estimates.                                                                                                 Sources: Iraqi authorities; and IMF staff estimate.

4   IRAQ ECONOMIC MONITOR: TOWARD RECONSTRUCTION, ECONOMIC RECOVERY AND FOSTERING SOCIAL COHESION
FIGURE 8 • Oil Production Remains the Primary                                                                        FIGURE 9 • Oil Prices Are Estimated to Further
            Driver of Growth Despite Declining                                                                                    Increase in 2018
            by 3.5 Percent in 2017 and Expected
            to Remain Flat in 2018
                                                                                                                                           120                                                             5

                           5.0                                                                                                             100                                                             4

                                                                                                                                                                                                               Million barrel per day
                           4.5
                                                                                                                                            80

                                                                                                                          US$ per barrel
                           4.0
 Barrel per day, million

                                                                                                                                                                                                           3
                           3.5
                           3.0                                                                                                              60
                           2.5                                                                                                                                                                             2
                                                                                                                                            40
                           2.0
                           1.5                                                                                                              20                                                             1
                           1.0
                           0.5                                                                                                               0                                                             0
                           0.0                                                                                                                   2013    2014      2015        2016    2017 2018e
                                 2007
                                        2008
                                               2009
                                                      2010
                                                             2011
                                                                    2012
                                                                           2013
                                                                                  2014
                                                                                         2015
                                                                                                2016
                                                                                                       2017
                                                                                                              2018e
                                                                                                                                                  Iraq oil exports price-LHS          Oil production-RHS

Sources: CSO; and IMF.                                                                                                Source: Iraq Ministry of Oil.

of the country’s exports. Despite the volatile security                                                               in Iraqi Kurdistan. (Figure 8). Gross oil production
situation, oil production has tripled since 2003. With                                                                from KRG amounts to 300,000 bpd, of which 40,000
153 billion barrels Iraq has the fifth largest proven                                                                 destined to local refineries. Major obstacles to further
crude oil reserves in the world and the rapid increase                                                                expansion of oil production plans include insufficient
in production in 2015 and 2016 makes it the world’s                                                                   water supply and gas injection, and cumbersome
third largest and OPEC’s second largest oil exporter.                                                                 bureaucratic procedures.
With 130.5 trillion cubic feet of proven reserves, Iraq’s                                                                     The recent global increase in the oil price is
largely untapped natural gas reserves are the twelfth                                                                 expected to have a positive impact on government
largest in the world. Iraq is also the fourth largest                                                                 revenues. Higher oil revenues have been driven by the
gas flaring country in the world, with more than 50                                                                   increase in oil prices since mid-2017. Iraq’s average
percent of gas produced flared in-field. The amount of                                                                crude oil export price decreased from US$96.5 per
gas currently flared represents an annual economic                                                                    barrel in 2014 to US$35.6 in 2016, before increasing to
loss approximately equivalent to US$2.5 billion and                                                                   an average of US$48.7 in 2017 (Figure 9). As a result,
would be sufficient to meet most of Iraq’s unmet                                                                      the government hydrocarbon revenue decreased
needs for gas-based power generation. In 2013, the                                                                    to US$40 billion in 2016, a 53 percent reduction
Council of Ministers committed to eliminate routine                                                                   compared to 2014 and increased to over US$56 billion
natural gas flaring by 2030 and in November 2016,                                                                     in 2017. In 2018, oil revenues are estimated to increase
Iraq endorsed the World Bank’s “Zero Routine Flaring                                                                  to about US$82 billion, due to higher oil prices,5 a 45
by 2030” initiative. However, limited progress has                                                                    percent increase compared to 2017 (Figure 10).
been achieved to date in terms of flaring reduction                                                                           In March 2018, the Iraqi parliament enacted
as volumes of associated gas have continued to rise                                                                   a law establishing the Iraqi National Oil Company
since 2014 in tandem with increasing oil production.3                                                                 (INOC). The INOC is expected to take over the Ministry
         Oil production remains strong despite its
decline since 2017 to implement the OPEC+                                                                             3
                                                                                                                                      Iraq vision 2030, hydrocarbon sector policy note, Dec.
agreement.4 Oil production declined by 3.5 percent                                                                                    2017.
in 2017 and estimated to remain flat at 4.5 million                                                                   4
                                                                                                                                      Iraqi oil production takes place in the heavily protected
barrels per day (mbpd) in 2018 in compliance with its                                                                                 south and ISIS was unable to decisively damage oil
output target under a global pact to cut supplies as                                                                                  exports.
well as the stoppage of oil exports through the pipeline                                                              5
                                                                                                                                      Around US$68 per barrel.

                                                                                                                                                    RECENT ECONOMIC AND POLICY DEVELOPMENTS                                             5
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