World Economy

Iraq Sinks Further Into Debt

Iraq depends almost exclusively on oil export revenues.Iraq depends almost exclusively on oil export revenues.

Noura al-Bajari, a member of the Iraqi Parliament’s Economy and Investment Committee, expressed fear in a press statement that Iraq will be unable to pay off its debts. She cited dropping oil prices upon which the country relies and the costs of the war against the Islamic State, with which the government has fought for control of Iraqi cities since June 2014.

In an interview with the local Iraqi Al-Mada Press, Bajari predicted a very bad scenario for the Iraqi economy should debts remain outstanding. “Iraq would have to face dire economic conditions akin to the period before 2003, when the accumulated debt had reached $125 billion,” she said, Al-Monitor reported.

Bajari’s apprehension seems justified, especially since the Iraqi government has resorted to domestic and foreign borrowing to be able to bridge the spending deficit as oil prices started to plummet in the summer of 2014. Of note, Iraq depends almost exclusively on oil revenues to finance state spending, and there are no official statistics available on the current size of the debt.

Iraq’s Central Bank has been trying to employ a policy of financial transparency by publishing data on spending, debt and the country’s financial status online. However, the website only displays basic information from 2010 that is not sufficient to gauge the actual size of outstanding debt since the fall in oil prices in 2014.

Mazhar Mohammad Saleh, a prominent Iraqi economist and the economic adviser to Prime Minister Haider al-Abadi, acknowledged that there are no official statistics but discussed Iraq’s estimated internal and foreign debt in a phone interview with Al-Monitor.

Saleh carefully traced the history of Iraq’s debt under the previous regime and the successive Iraqi governments following the invasion in April 2003. “Iraq is indebted to 51 countries, including 10 creditors outside the Paris Club,” he said. “Iraq has borrowed around $9 billion from the Paris Club countries, while it owes about $6 billion to creditors outside the club.”

There is also “$2.7 billion owed to international private sector companies with about 5% interest annually,” Saleh said.

According to Saleh, the former regime saddled Iraq with “odious debt” of nearly $10 billion that the government is not bound to pay off entirely.

Saleh further said that following Iraq’s 2003 invasion, the country’s debts were “not very significant,” explaining, “Foreign debts amounted to $7 billion, while the domestic debt was standing at around $34 billion, including the debts amassed by the former regime.”


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