Inflation Worries Return For Iraq

The latest statistics for Iraq show that core inflation is creeping back up in the country. Since early 2008 core inflation, that which excludes fuel, electricity, communication, and transport costs, has dropped in Iraq from 15.9% in April to 3.8% in April 2009. Since then however, it has crept back up to 10.8% in August. A United Nations report from that same month warned that food prices were rising sharply in Iraq, while other costs like medicine and rents have also increased.

Overall inflation has not followed the same pattern. In February 2008 it stood at 8.1%, only to drop to -6.3% in June, then rose at the end of the year to 7.6% by October. After that it dropped again to -5.7% in April 2009, and has since gone back up to -0.3% by August.

While of concern, these numbers are nowhere near what inflation was like before. In 2002 it was around 60%. The instability and sectarian violence after the U.S. invasion caused inflation to rise to 65% by 2006. After the Central Bank tightened the money supply, and linked the Iraqi dinar to the U.S. dollar inflation has largely been under control. By 2007 for example, it was down to 12%. Those policies have increased the buying power of the average Iraqi, and any increase in inflation will cut into that.

Iraq’s Inflation/Core Inflation Rate
2008
Jan. 1.3%/10.8%
Feb. 8.1%/13.8%
March 5.6%/12.1%
April 5.5%/15.9%
May 4.6%/14.7%
June -6.3%/12.4%
July -1.4%/13.6%
Aug. -5.2%/12.0%
Sep. 0.3%/12.9%
Oct. 7.6%/13.6%
Nov. 6.7%/12.7%
Dec. 6.8%/11.7%
2009
Jan. 0.6%/9.2%
Feb. 0.2%/7.1%
March -3.1%/8.3%
April -5.7%/3.8%
May-5.6%/4.7%
June 0.7%/8.8%
July -1.5%/7.9%
Aug. -0.3%/10.8%

SOURCES

Department of Defense, “Measuring Stability and Security in Iraq,” March 2008

Inter-Agency Information and Analysis Unit, “Iraq Food Prices Analysis,” August 2009

Reuters, “Iraq inflation rises to 8.11 pct in August,” 9/21/08

Special Inspector General for Iraq Reconstruction, “Quarterly Report and Semiannual Report to the United States Government,” 7/30/07
- “Quarterly Report and Semiannual Report to the United States Congress,” 7/30/09

U.S. Department of State, “Iraq Status Report,” 1/28/09
- “Iraq Status Report,” 6/10/09
- “Iraq Status Report,” 10/7/09

Whitelaw, Kevin, “After The Fall,” U.S. News & World Report, 12/2/02