Tuesday 10 May 2022
While the political blocs are busy forming the government in the coming weeks, it will also be important to agree on the economic goals that the government will seek to achieve, as these goals are likely to determine the economic future of the country. Iraq suffers from multiple economic challenges known to all. Every year, thousands of Iraqi children are born in difficult socio-economic conditions. More than one-fifth of the population lives in poverty in the absence of a reliable and sustainable source of electricity, drinking water and other basic services. Universities are scarce of economic opportunities, which pushes them to take to the streets, demanding change.
The main lesson from Iraq’s recent history is the unsustainability of these policies and their inability to create sufficient job opportunities for the nearly eight hundred thousand young people who enter the labor market each year. The rest of the urgent priorities, which makes public finances vulnerable to the risks of fluctuating oil prices; Therefore, it is not surprising that Iraq finds itself on the brink of economic collapse after every sharp drop in world oil prices, and every time Iraq is exposed to such shocks, economic reform attempts are launched, but they are quickly abandoned as soon as conditions in the oil market improve.
This question is more central and important today than ever before. At a time when the world is struggling with climate change, every available opportunity like this may also be the last. In light of the raging global race to save the planet and the uncertainty it entails about the continued dependence on oil, Iraq is entering an existential battle for its economic future. At the same time, rising temperatures, frequent and intense heat waves, droughts and other natural disasters, as well as increased salinity and desertification, threaten to destroy the livelihoods of millions and make major parts of the country uninhabitable. Moreover, current demographic trends will increase pressures on already struggling urban water, sanitation and electricity systems. Without enacting urgent reforms that build resilience to the challenges of climate change and economic diversification, many sectors of the economy could disappear forever.
These reforms can only be achieved with broad political support, which was difficult to achieve in the past.
Global oil markets have presented Iraq with another opportunity to secure a brighter future for its citizens, and the response of the new government to that opportunity – before those opportunities disappear forever – may extend to future generations. Herein lies its historical significance.
* Head of the Iraq mission to the International Monetary Fund