One of the untold stories of the fighting in Iraq is the
effect it is having upon the country’s economy. Almost two million internally
displaced people, the loss of agricultural land in northern Iraq, foreign
investors being scared off, the decline in trade, the collapse of several
internal markets, and depleted financial reserves have all been reported in the
press. This came on top of the fact that the 2014 budget was never passed due
to ex-Premier Nouri al-Maliki’s disputes with his political rivals, which is
crippling in a state run system like Iraq’s. All together this points to an
economy in crisis.
There are all kinds of stories about the problems Iraq’s
economy is suffering from. The Baghdad provincial council told
Al Mada that Turkish and Arab countries were pulling out when the insurgent
summer offensive began in June. It warned that this would affect services and
projects. The real estate and car markets were said to have collapsed
as well. Hundreds of acres of farmland have been lost to the insurgency. Al
Monitor reported
that 900,000 acres of wheat and barley crops were lost in Salahaddin alone
after insurgents seized the northern and eastern sections of the governorate.
Agriculture is a major employer in Iraq. The violence has disrupted trade. One
expert said that there was a 60-70%
decline in imports due to the on going fighting. Many of the routes to
Jordan, Syria and Turkey have been cut off. There has also been a disruption in
the distribution of goods within the country. These have both contributed to
raising prices for many goods. Finally, nearly two million people have been
displaced since the beginning of the year. These people have lost their jobs.
There are fears that unemployment and poverty have all sky rocketed
as a result. These all point to an economy coming apart as markets, goods, and
investment have all been disrupted.
Iraq is also facing a financial crisis. The 2014 budget was
never passed as former Premier Maliki used it as a weapon against his
opponents before the parliamentary elections. Experts and parliamentarians said
that was slowing the economy even before the summer offensive, and some even
warned of a recession
in May. The lack of a budget meant that projects have come to a halt, public
workers, the largest group in the economy have not been paid, which has trickled
down to increased unemployment and cash shortages. When Mosul fell the
situation got worse as Maliki used
up the general budget and money from the Development
Fund for Iraq to pay for the war, which was costing up to $50 million a
day. Parliament’s finance committee said that the Fund was down from $10
billion to $3 billion. The same committee claimed that the ex-prime minister spent
all the oil revenues over the last seven months as well. Iraq has a
state-run economy so passage of the budget is crucial to keeping the country
running. Things were bad already as development was coming to a halt due to a
lack of a budget, and now the fall of northern Iraq has made the situation
worse as much of the available funds have gone towards security.
The insurgency is not only costing Iraqis their lives, but
their livelihood as well. The economy is coming apart under the weight of the
violence. Foreign businesses are being scared away, trade has atrophied,
unemployment is up and more. On top of that there is still no budget and Iraq’s
reserves have been depleted. The country’s economy only started turning around
after the 2003 invasion when security was improved with the 2007 Surge. The
same will happen now as no development can happen without stability, which
looks to be years away.
SOURCES
Adel, Shaymaa, “Number of Iraqis
living in poverty at 30%,” Azzaman, 8/31/14
Azzaman, “Iraq edges closer to
Iran as fighting with Islamic State intensifies,” 9/4/14
Al-Jaffal, Omar, “Fighting robs
Iraqi farmers of harvest,” Al Monitor, 9/26/14
Al Mada, “Baghdad Council: Arab
and Turkish companies withdrew from the capital as a result of threats of
militias and gangs,” 6/29/14
- “Depression dominates real
estate market and merchandise..and record high unemployment indicators,”
5/18/14
- “Iraq war bill plagues the
economy and raises unemployment to 25%,” 9/7/14
- “Iraq’s oil
revenues are spent over last 7 months..and the salaries of Kurdistan subject to
the balance of cash,” 10/2/14
- “Only three billion in Iraqi oil
fund run by the government confirms Parliament, down 70% from its average,”
9/20/14
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