Each prime minister of Iraq talks about diversifying the economy and promoting the private sector. In reality every government is increasing state control funded by oil to maintain its political power.
Premier Sudani is currently running for re-election on his economic record. He has talked about how much money has been invested in Iraq and the services and development this has provided. In May his financial advisor Mazhar Mohammed Salih told the press that there was $88-$90 billion invested in Iraq which was almost double the amount before 2017. A closer look shows this is all an illusion.
In July Shafaq News reported that Iraq lost $7.6 billion in foreign investment in 2024. Another $1 billion left in the first quarter of 2025. Iraqi companies are also sending their money abroad with $400 million invested overseas.
This is happening for two reasons. First, Iraq has a horrible business environment. There is too much red tape, contradictory regulations, not enough qualified personnel within the government bureaucracy, high levels of corruption, and a lack of infrastructure and basic services like electricity. Even in the country’s largest industry oil major energy companies have started to leave because they simply can’t make enough money. Second, the elite who habitually pilfer from the state send their money out of the country to make a profit.
Baghdad always talks about diversifying away from oil but these are mere gestures. In July the International Monetary Fund said that the country’s non-oil sector’s growth went from 13.8% in 2023 to just 2.5% in 2024. That’s expected to drop to 1% this year. The World Bank said that private business is in poor condition to begin with and 2/3 of it is informal. More importantly, according to the IMF the nation has actually increased its oil dependency in recent years the exact opposite of official announcements on developing the country.
The result is that Iraqis are the most state dependent population in the world. The Iraqi parliament’s finance committee said that more than 10.5 million Iraqis, roughly ¼ of the population relies upon money from the government. 4.2 million dinars go to government workers each month, more than 3 million dinars to retirees, and over 3 million dinars to beneficiaries.
Those figures grow each year as the ruling parties rely upon state expenditures in their patronage networks to stay in power. They create new government positions to hand out to their followers. The Federal Public Service Council was to issue 8000 jobs this year, the Healthy Ministry 28,000 positions, and more than 63,000 other jobs in various government offices. The only way the state can fund all these new employees is by maximizing its oil revenue which provides over 90% of Baghdad’s funds. That means doubling down on the country’s petroleum dependency despite all the talk about investment and diversification.
SOURCES
Gunter, Frank, “How can Iraq boost job growth?” The National, 12/9/24
Al Mada, “The International Monetary Fund calls on Iraq to cut spending, increase taxes, and reform the pension system,” 7/10/25
- “The public sector is expanding and production is declining! … an inverted equation in the Iraqi economy,” 5/12/25
Nair, Deepthi, “Falling oil prices have taken toll on Iraqi economic activity, IMF says,” The National, 5/15/25
Al-Samarraie, Jawad, “Iraq sees surge in investment spending, eyes economic diversification,” Iraqi News, 5/12/25
- “Public sector salaries a massive fiscal burden as 10.5 million Iraqis depend on state," Iraqi News, 8/19/25
Shafaq News, “Foreign investment deficit persists in Iraq despite multibillion-dollar deals,” 7/2/25
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