Economy of Iraq

Economy - overview: Iraq's economy is dominated by the oil sector, which has traditionally provided about 95% of foreign exchange earnings. In the 1980s, financial problems caused by massive expenditures in the eight-year war with Iran and damage to oil export facilities by Iran led the government to implement austerity measures, borrow heavily, and later reschedule foreign debt payments; Iraq suffered economic losses of at least $100 billion from the war. After the end of hostilities in 1988, oil exports gradually increased with the construction of new pipelines and restoration of damaged facilities. Iraq's seizure of Kuwait in August 1990, subsequent international economic sanctions, and damage from military action by an international coalition beginning in January 1991 drastically reduced economic activity. The government's policies of supporting large military and internal security forces and of allocating resources to key supporters of the regime have exacerbated shortages. The implementation of the UN's oil-for-food program in December 1996 has helped improve economic conditions. For the first six six-month phases of the program, Iraq was allowed to export limited amounts of oil in exchange for food, medicine, and other humanitarian goods. In December 1999, the UN Security Council authorized Iraq to export under the oil-for-food program as much oil as required to meet humanitarian needs. Oil exports are now about three-quarters their prewar level. Per capita food imports have increased significantly, while medical supplies and health care services are steadily improving. Per capita output and living standards are still well below the prewar level, but any estimates have a wide range of error.

Iraq's economy is characterized by a heavy dependence on oil exports and an emphasis on development through central planning. Prior to the outbreak of the war with Iran in September 1980, Iraq's economic prospects were bright. Oil production had reached a level of 3.5 million barrels per day, and oil revenues were $21 billion in 1979 and $27 billion in 1980. At the outbreak of the war, Iraq had amassed an estimated $35 billion in foreign exchange reserves.

The Iran-Iraq War depleted Iraq's foreign exchange reserves, devastated its economy, and left the country saddled with a foreign debt of more than $40 billion. After hostilities ceased, oil exports gradually increased with the construction of new pipelines and the restoration of damaged facilities.

Iraq's invasion of Kuwait in August 1990, subsequent international sanctions, and damage from military action by an international coalition beginning in January 1991 drastically reduced economic activity. Government policies of diverting income to key supporters of the regime while sustaining a large military and internal security force further impaired finances, leaving the average Iraqi citizen facing desperate hardships. Implementation of a UN oil-for-food program in December 1996 has improved conditions for the average Iraqi citizen. Since 1999, Iraq was authorized to export unlimited quantities of oil to finance humanitarian needs including food, medicine, and infrastructure repair parts. Oil exports fluctuate as the regime alternately starts and stops exports, but, in general, oil exports have now reached three-quarters of their pre-Gulf War levels. Per capita output and living standards remain well below pre-Gulf War levels.

Agriculture
Despite its abundant land and water resources, Iraq is a net food importer. Under the UN oil-for-food program, Iraq imports large quantities of grains, meat, poultry, and dairy products. The government abolished its farm collectivization program in 1981, allowing a greater role for private enterprise in agriculture. The Agricultural Cooperative Bank, capitalized at nearly $1 billion by 1984, targets its low-interest, low-collateral loans to private farmers for mechanization, poultry projects, and orchard development. Large modern cattle, dairy, and poultry farms are under construction. Obstacles to agricultural development include labor shortages, inadequate management and maintenance, salinization, urban migration, and dislocations resulting from previous land reform and collectivization programs.

Importation of foreign workers and increased entry of women into traditionally male labor roles have helped compensate for agricultural and industrial labor shortages exacerbated by the way. A disastrous attempt to drain the southern marshes and introduce irrigated farming to this region merely destroyed a natural food producing area, while concentration of salts and minerals in the soil due to the draining left the land unsuitable for agriculture.

Trade
The United Nations imposed economic sanctions on Iraq after it invaded Kuwait in 1990. The Government of Iraq's refusal to allow weapons inspectors into the country to dismantle Iraq's weapons of mass destruction program has resulted in those sanctions remaining in place. Under the oil-for-food program, Iraq is allowed to export unlimited quantities of oil in exchange for humanitarian relief supplies, including food, medicine, and infrastructure spare parts. A robust illicit trade in oil with neighboring states and through the Persian Gulf earned almost $2 billion in illegal income for the regime in 2000.

GDP: purchasing power parity - $59.9 billion (1999 est.)

GDP - real growth rate: 13% (1999 est.)

GDP - per capita: purchasing power parity - $2,700 (1999 est.)

GDP - composition by sector:
agriculture: 6%
industry: 13%
services: 81% (1993 est.)

Population below poverty line: NA%

Household income or consumption by percentage share:
lowest 10%: NA%
highest 10%: NA%

Inflation rate (consumer prices): 135% (1999 est.)

Labor force: 4.4 million (1989)

Labor force - by occupation: agriculture NA%, industry NA%, services NA%

Unemployment rate: NA%

Budget:
revenues: $NA
expenditures: $NA, including capital expenditures of $NA

Industries: petroleum, chemicals, textiles, construction materials, food processing

Industrial production growth rate: NA%

Electricity - production: 28.4 billion kWh (1998)

Electricity - production by source:
fossil fuel: 97.89%
hydro: 2.11%
nuclear: 0%
other: 0% (1998)

Electricity - consumption: 26.412 billion kWh (1998)

Electricity - exports: 0 kWh (1998)

Electricity - imports: 0 kWh (1998)

Agriculture - products: wheat, barley, rice, vegetables, dates, cotton; cattle, sheep

Exports: $12.7 billion (1999 est.)

Exports - commodities: crude oil

Exports - partners: Russia, France, China (1999)

Imports: $8.9 billion (1999 est.)

Imports - commodities: food, medicine, manufactures

Imports - partners: Russia, France, Egypt, Vietnam (1999)

Debt - external: $130 billion (1999 est.)

Economic aid - recipient: $327.5 million (1995)

Currency: 1 Iraqi dinar (ID) = 1,000 fils

Exchange rates: Iraqi dinars (ID) per US$1 - 0.3109 (fixed official rate since 1982); black market rate - Iraqi dinars (ID) per US$1 - 1,900 (December 1999), 1,815 (December 1998), 1,530 (December 1997), 3,000 (December 1995); subject to wide fluctuations

Fiscal year: calendar year

See also : Iraq