Washington - Al-Forat
The International Monetary Fund expects Iraq’s economy to grow by 3.6% next year, driven by higher oil exports and improved global prices, while urging the government to speed up the diversification of revenue sources and reduce its reliance on oil, which funds most of the budget.
The forecast came in the IMF’s Regional Economic Outlook for the Middle East and Central Asia, published in Washington, which estimated that Iraq’s non-oil sector would grow by about 4%, supported by investment spending and activity in construction, trade and services.
The wage bill under scrutiny
The report warned that the steadily rising bill for salaries, subsidies and social transfers consumes most of the revenue and narrows the room for investment in infrastructure, noting that the budget remains vulnerable to any fall in oil prices unless adequate fiscal reserves are built up.
The Fund recommended broadening the tax base, modernising and automating the customs system and reforming the electricity sector by improving bill collection and reducing losses, as well as encouraging the private sector to create jobs instead of relying on public-sector hiring, which absorbs the largest share of the workforce.
The report praised the steps taken by the Central Bank of Iraq to regulate external transfers and promote financial inclusion, noting that a stable exchange rate and inflation falling to around 3% had helped improve household purchasing power.
Across the region, the Fund expects oil exporters to post moderate growth because of production commitments within the OPEC+ alliance, while conditions in oil-importing countries improve as food and energy prices fall and tourism and investment flows pick up.
An Iraqi reading
Commenting to Al-Forat, economist Dr Mahdi Al-Haidari said the IMF’s forecasts were “positive in the numbers but carry a clear warning”, explaining that growth driven by oil alone does not create enough jobs for the roughly 800,000 young people who enter the labour market every year.
An Iraqi delegation is expected to discuss the report’s recommendations with IMF officials during the Article IV consultations scheduled for early next year, in which the Fund conducts a regular, comprehensive review of the economy and of fiscal and monetary policy.
