The International Monetary Fund calls on Iraq to reduce dependence on oil

The International Monetary Fund called on Iraq, once again, to reduce dependence on oil as a main source of income, and to undertake comprehensive economic reforms.

Despite repeated calls from the International Financial Organization, successive governments for nearly two decades in Iraq have not succeeded in consolidating the foundations of a vibrant and diversified economy.

In its new report, the International Monetary Fund said on Sunday that Iraq needs to “increase non-oil exports and government revenues and reduce the economy’s exposure to oil price shocks.”

The Fund asked the Iraqi authorities for a number of reforms, including “enabling the private sector to develop and grow, modernizing the financial sector, restructuring state-owned banks, reforming the retirement and electricity sectors, and continuing to make the necessary efforts to improve governance and reduce corruption.”

The Iraqi government is counting on the “Development Road” project to bring about economic development in terms of infrastructure and make Iraq a connecting point for global trade linking “East to West.” However, some political factions do not share Baghdad’s vision for this project.

Iraq is a rich country, with oil representing 90 percent of its financial revenues. It is also the second largest oil producing country in the Organization of Petroleum Exporting Countries (OPEC), and exports about 4 million barrels daily, according to Agence France-Presse.

The state in Iraq spends a large portion of financial revenues on paying the wages of workers in the public sector.

In 2023 alone, salaries and wages consumed 47 trillion Iraqi dinars (about 33.5 billion dollars) without the Kurdistan region of Iraq. However, the state is moving towards a project to increase spending on public wages by about 6 billion dollars.

About 4 million employees work in the public sector, in addition to 3 million retirees, and one million people receive social welfare salaries, according to some estimates.

From 2004 to 2019, “the rate of increase in Iraqi state employees reached 400 percent,” according to statements by the former Iraqi Prime Minister, Mustafa Al-Kadhimi.

In a country where oil revenues exceeded $115 billion last year, a quarter of the population remains below the poverty line.

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