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Shafaq News
6 days ago
- Business
- Shafaq News
Iraq's golden opportunity: A new dawn for regional influence
Shafaq News In the wake of the 12-day confrontation between Israel and Iran, which ended in a regional ceasefire, Iraq stands at a delicate yet promising juncture. The temporary calm has sparked cautious optimism among Iraqi experts and officials, who view the current environment as a "golden opportunity" for Baghdad to assert its central role in the Middle East, revitalize its economy, and recalibrate its national security vision. But this potential, while real, is far from guaranteed. Translating regional de-escalation into tangible national gains will require Iraq to confront long-standing domestic obstacles—from institutional corruption to armed group interference— proving it can anchor its own recovery on a foundation of internal reform. According to Mudhhir Mohammed Saleh, the financial advisor to the Prime Minister, the relative détente among key regional actors could exert a direct and positive influence on Iraq's economy. 'The regional de-escalation in the Middle East—particularly among Iraq's neighbors—can have direct and profound effects on Iraq's economy,' he stated to Shafaq News. Saleh pointed out that countries such as the Gulf States, Turkiye, and Iran might now be more willing to invest in Iraq, particularly in sectors like infrastructure, energy, transport, and agriculture. He also highlighted the ambitious "Development Road" project as a potential flagship for this investment influx, offering Iraq a chance to enhance both its economic connectivity and geopolitical weight. Saleh further noted that improved regional security could attract Arab and foreign capital to Iraq's industrial and economic zones tied to the Development Road, mitigating investment risks and offering higher degrees of stability. 'The more attractive and stable the environment is for foreign investors, the more costs decline while profit opportunities grow,' he explained. Among the more promising areas for external investment, aside from hydrocarbons, are Iraq's underdeveloped natural resource sites—an arena he described as both vital and untapped. 'One of the best external investment opportunities in addition to the Development Road is joint investment in underground natural resource sites—excluding oil and gas—as they represent a vital and promising field for investors.' Additionally, over the past year, Iraq's non-oil GDP has shown signs of recovery, growing by 4.3% in 2023, driven in part by higher consumer demand and modest public investment. The World Bank projects Iraq's overall GDP to expand by 5.2% in 2025, assuming a stable oil market and modest progress in structural reform. Powerhouse in the Pause Hussein Al-Saabri, Deputy Chairman of the Parliamentary Investment Committee, told our agency that the end of hostilities between Iran and Israel has contributed to a calmer regional atmosphere. 'The Iraqi government must use this environment to become a central link between all sides to support regional development,' he added. Al-Saabri viewed the present as a strategic moment for Iraq to act as a diplomatic and economic bridge, facilitating broader developmental cooperation across the Middle East. He further stressed that the opportunity should not be squandered. 'This is a time for Iraq to take up its essential role in the region and capitalize on this golden opportunity.' A similar view was expressed by economist Ahmed Eid, who framed the regional calm as a potential relief for Iraq's strained economy. 'The truce can lower insurance and transport costs, improve market sentiment, stabilize the dinar's exchange rate, reduce pressure on the federal budget, and temporarily boost investor confidence,' he remarked. However, these are preliminary benefits that could quickly evaporate if the government fails to enact reforms. Eid emphasized that entrenched corruption across state institutions continues to sabotage investment prospects, stall critical projects, and paralyze the business environment. 'Translating this calm into real economic rewards requires meaningful internal reform. External stability is important, but it does not compensate for the entrenched corruption across Iraqi state institutions. Corruption consumes investment opportunities, paralyzes projects, and weakens the business environment,' he cautioned. Further illustrating the depth of the challenge, Iraq consistently ranks among the most corrupt countries in Transparency International's Corruption Perceptions Index, placing 154 out of 180 countries in 2023. The country reportedly loses an estimated $10–15 billion annually to corruption-related leakages, according to government audits and parliamentary oversight reports. These losses have not only undermined basic service delivery but also severely discouraged foreign direct investment, which remains one of the lowest in the region as a percentage of GDP. Eid also warned that increased foreign investment and lower financial risk in Iraq will depend on two critical variables. First, the longevity and credibility of the regional calm whether investors believe it is more than a transient pause. Second, the Iraqi government's ability to introduce credible reforms that improve business conditions and reduce the interference of armed groups. 'Yes, to a certain extent—but two conditions must be met,' he explained. 'First, investors need to be convinced that this is not a temporary calm. Second, the government must follow through with domestic reforms to improve the business climate and curb interference by security forces and armed groups.' If these conditions are met, Iraq could see improvements in its credit ratings and attract Gulf, Turkish, and Iranian capital previously deterred by instability. Rethinking Security Beyond the economic realm, the current lull presents an opening for Iraq to reimagine its national security framework. Military expert Alaa Al-Nashou, speaking to Shafaq News, emphasized the importance of responding to the shifting regional landscape with a comprehensive security doctrine. 'The region remains vulnerable to rapid developments amid regional and international polarization,' he said. 'Iraq must build a new national security vision.' This includes enhancing intelligence capabilities, improving information security, and refining command and control systems. 'States rely on security capabilities such as intelligence, accurate data, leadership, cybersecurity, and the protection of infrastructure and personnel. All of these enhance national security,' he observed. He further added that Iraq's security strategy should be rooted in balanced foreign relations, the rejection of external interference, and alignment with shared regional interests. 'Iraq needs a security vision tied to a balanced foreign policy based on shared interests, while rejecting interference or submission to any external power.' Finally, Al-Nashou urged Iraq to strengthen cooperation with Arab, regional, and global partners as a safeguard against future instability. 'Iraq must chart a path forward based on genuine security principles that protect Iraqi society and deepen cooperation with Arab, regional, and international security frameworks.'
Shafaq News
26-06-2025
- Business
- Shafaq News
Iraq balanced gains and losses from the Iran-Israel conflict
Shafaq News – Baghdad The recent 12-day conflict between Iran and Israel had a dual economic impact on Iraq, leaving the country at a neutral point between gains and losses, Mudhhir Mohammed Saleh, the financial and economic adviser to the Iraqi government, stated on Thursday. Describing the war's impact as a 'double-edged shock' to the national economy, Saledh noted that on the positive side, oil prices saw a short-term premium of 6 to 7 percent per barrel, benefiting Iraq's revenues without disrupting exports. 'This price premium generated an estimated $150 to $160 million in additional revenues over a short period,' Saleh told Shafaq News, assuming a daily export volume of 3.3 million barrels. 'Exports continued uninterrupted despite threats of Gulf closures.' However, Saleh pointed out that Iraq also faced significant negative economic effects. These included higher import costs due to disruptions in maritime insurance markets, global price fluctuations, increased shipping expenses, losses in air transport, supply chain delays, forgone airspace transit fees, and a sharp decline in religious tourism during the conflict. 'The indirect losses roughly equaled the additional oil revenue,' he said, 'leaving the Iraqi economy in a state of neutral uncertainty — neither a clear profit nor a net financial loss.' He cautioned against relying on such temporary windfalls when shaping long-term policy. 'This kind of wartime profit cannot support sustainable economic planning,' Saleh said, urging the government to establish a sovereign emergency fund to absorb future shocks and reduce pressure on public spending.
Shafaq News
23-04-2025
- Business
- Shafaq News
Iraq's Oil Gamble: Budget on the brink amid global price collapse
Shafaq News/ Iraq stands at a perilous fiscal crossroads. The dramatic decline in global oil prices is not just a fluctuation in commodity markets—it is a seismic shift threatening to undermine Iraq's economic foundation, disrupt state operations, and jeopardize long-term national stability. As one of the world's most oil-dependent economies, Iraq is finding itself once again exposed to the raw volatility of energy markets, just as it hoped to implement its first three-year federal budget under Law No. 13 of 2023. This budget, hailed at its passage as a pragmatic framework for medium-term fiscal planning, now appears increasingly outdated. Its projections and assumptions were anchored in oil optimism—a $70-per-barrel benchmark and an export rate of 3.4 million barrels per day. But Brent crude has since dipped below that target, trading around $60–$65 amid a mix of global economic slowdown, geopolitical tensions, and trade disputes. The implications for Iraq are severe. Budget Built on Shaky Foundations Government financial adviser Mudhhir Mohammed Saleh has consistently defended the 2023–2025 budget's 'flexibility,' noting that it set upper and lower expenditure thresholds: a maximum of 200 trillion Iraqi dinars (approximately $153 billion) and a lower limit of 156 trillion dinars (about $122 billion). The built-in deficit—estimated at 64 trillion dinars (about $49 billion)—was supposed to provide a cushion against external shocks. However, the cushion is wearing thin. With prices dipping below the planned benchmark, Iraq is now operating near the lower threshold of the spending envelope. Borrowing has been limited to about 20% of the projected deficit, a move intended to preserve fiscal discipline. Yet even this careful calibration cannot mask the deeper issues embedded in Iraq's financial model. Former Central Bank Director Mahmoud Dagher pointed to a dual source of pressure: "Falling oil prices and rising expenditures in the budget.' While salaries remain secure, operational costs tied to production, maintenance, and investment are becoming increasingly difficult to sustain. The government recently approved the issuance of 5 trillion dinars (approximately $3.4 billion) in domestic bonds to finance essential capital projects—a clear signal that liquidity stress is mounting. Structural Flaws Exposed Beyond the temporary measures, economists warn of more entrenched problems. International economics professor Nawwar Al-Saadi criticized the budget's foundational assumptions as 'detached from reality.' He stressed that Iraq's persistent reliance on oil—accounting for over 90% of government income and virtually all export revenues—leaves the country at the mercy of global fluctuations. 'Every fluctuation in oil prices translates immediately into instability in financial planning,' Al-Saadi said, likening Iraq's economic posture to 'walking a tightrope amid global economic storms.' Oil expert Hamza Al-Jawahiri has also sounded the alarm over deep-seated inefficiencies and corruption, criticizing the proliferation of "phantom projects" that serve as vehicles for embezzlement. Without immediate audits and accountability measures, he warned, the fiscal deficit—now estimated to exceed 84 trillion dinars (around $64 billion)—could spiral further out of control, draining state liquidity and crowding out private sector credit. If unaddressed, this dynamic could trigger a rise in borrowing costs, a drop in investor confidence, and the kind of austerity measures Iraq has long tried to avoid: cuts to infrastructure spending, education, and healthcare. Public Sector Burden Another layer of fragility stems from Iraq's bloated public sector. Around 8 million Iraqis are on government payrolls, and when dependents are factored in, government support touches over 40 million people. This massive base of beneficiaries consumes more than 60% of the federal budget. While this system provides a social safety net, it also restricts fiscal maneuverability and entrenches a politically driven patronage economy. Public employment has often been used to buy political loyalty rather than improve governance outcomes. In the current climate, such spending patterns are unsustainable. 'Budget allocations are increasingly consumed by salaries, pensions, and subsidies,' Saleh acknowledged. This leaves little room for productive investments or development projects, further perpetuating Iraq's economic stagnation. Revenue System in Disrepair Compounding the problem is Iraq's chronically underperforming non-oil revenue system. Economist Karim Al-Hilu estimated the country could raise over $20 billion annually from taxes and customs alone. But entrenched corruption, political interference, smuggling, and weak enforcement cripple these efforts. 'Customs revenues are dominated by politically connected networks,' Al-Hilu said. Attempts to modernize and digitize the system have stalled, with bureaucratic inertia proving to be a formidable barrier. As a result, Iraq's tax-to-GDP ratio remains among the lowest in the region, even as the private sector remains constrained by outdated regulations, arbitrary licensing, and a lack of legal protections. Many businesses operate informally or exit the market entirely. The absence of consistent regulatory frameworks and reliable government payments discourages entrepreneurship and investment. Instead of fostering a diversified economy, Iraq is reinforcing its dependence on state jobs and oil income. A Troubled Past and a Cautious Present Iraq has weathered financial storms before. Between 2014 and 2017, during the military campaign against ISIS, the country experienced a 60% drop in oil revenue. A second shock came in 2020–2021 amid the COVID-19 pandemic. In both cases, the government managed to maintain core spending despite extraordinary pressure. Now, however, the challenges are different. While Iraq holds a foreign reserve of $104 billion and nearly 160 tonnes of gold, economists argue that these buffers cannot substitute for meaningful reform. 'Reserves are not a solution—they are a lifeline,' said economist Hilal Al-Taan. 'Iraq needs a full restructuring of its financial priorities to withstand prolonged oil volatility.' The current downturn has been exacerbated by two recent developments: OPEC+'s decision to raise oil production by over 400,000 barrels per day, and a series of new import tariffs imposed by US President Donald Trump. The latter has triggered retaliatory trade measures from China and renewed fears of a global recession. Saleh confirmed that the government's economic team is closely monitoring global trends, but acknowledged that Iraq's fiscal room is narrowing. 'If oil prices dip to $60 or below, we face real risks to liquidity,' he warned. Time for Reform—or More Turmoil Ahead? Despite these alarms, meaningful structural reform remains elusive. Al-Saadi and Al-Jawahiri both advocate for urgent steps, including enforcing tax laws, eliminating fraudulent spending, reassessing leases of state-owned assets, and investing in productive sectors like agriculture, tourism, and industry. They agree that cutting politically driven expenditures is essential, as is creating a modern and equitable revenue collection system. 'If we do not reform, we will face a recurring and worsening cycle of economic crisis,' Al-Saadi warned. Analysts further stress the need to curb corruption, reassess infrastructure projects, and improve fiscal oversight to restore credibility. Otherwise, austerity could become inevitable—and politically destabilizing. A Global Energy Shift, and Iraq Left Behind As Iraq grapples with these internal crises, the global energy landscape is shifting away from hydrocarbons. The International Energy Agency's April 2025 report noted an acceleration in the transition to renewables, with major economies investing heavily in solar, wind, and hydrogen technologies. The appetite for heavy crude, while still present, is in gradual decline. This trend places Iraq in an even more vulnerable position. The country has been slow to diversify its energy sector and has made minimal investments in renewables. Current policies, focused on short-term stabilization, do little to prepare the economy for a post-oil future. To date, the government has launched only piecemeal efforts: trimming spending, reviewing OPEC+ commitments, and attempting to improve efficiency across ministries. But without a comprehensive roadmap, these steps are insufficient. A Tipping Point Iraq is approaching a tipping point. The country's deep reliance on oil is no longer merely a structural weakness—it is becoming a systemic threat. Falling prices, rising deficits, inefficient spending, and institutional inertia have converged to create a perfect storm. The 2023–2025 budget was intended to offer a buffer against volatility and a blueprint for sustainable growth. Instead, it has exposed just how ill-prepared Iraq is to face a world in transition. Unless bold reforms are initiated now, the country risks deeper economic malaise, social discontent, and a dangerous erosion of its fiscal sovereignty. In the words of Al-Taan, 'This is no longer a question of balancing numbers. It is a question of national survival.'
Shafaq News
16-04-2025
- Business
- Shafaq News
PM al-Sudani's advisor: Iraq's budget submission stalled by KRG oil
Shafaq News/ Iraq has delayed the submission of its 2025 federal budget to parliament, citing technical adjustments linked to oil-related expenditures in the Kurdistan Region, a senior government advisor confirmed Wednesday. Mudhhir Mohammed Saleh, Financial and Economic Adviser to the Prime Minister, told Shafaq News that the postponement stems from amendments to the Federal Budget Law No. 13 of 2023—particularly Article 12, which was revised in February. The changes, he noted, have complicated the finalization process due to their impact on the financial arrangements with the Kurdistan Region. 'Signs of a global oil market downturn are becoming evident due to geopolitical volatility, the Russia-Ukraine conflict, instability in the Middle East, and recent OPEC+ decisions.' On Tuesday, the Parliament's Finance Committee expressed concern over the delay. Member Saad Al-Noubi remarked that Planning Minister Mohammed Tamim and Finance Minister Taif Sami had previously assured lawmakers that the tables were ready for Cabinet review.
