The Iraqi economy is facing severe and pressing challenges. The decline in oil prices and the financing needs associated with the ISIS insurgency have contributed to a sharp deterioration of economic activity, public finances and the balance of payments. Macroeconomic risks remain elevated due to Iraq’s continued exposure to a volatile oil market.  The government is facing the challenge of maintaining macroeconomic stability, undertaking structural reforms to improve the delivery of public services, and reconstructing core physical infrastructure amid ever-present risk of conflict relapse.

Iraq’s GDP per capita was estimated at US$6,147 in 2014, putting Iraq in the category of upper-middle-income countries. However, economic and security conditions in Iraq worsened since mid-2014, leading to increased poverty, vulnerability, and unemployment. The GDP per capita is estimated to contract to nearly US$5,000 in 2015. Economic growth is estimated to have contracted by 2.4% in 2014 and is projected to barely expand in 2015 (by 0.5%). Weak growth is mainly attributed to the non-oil economy which contracted by 7% in 2014 and is expected to decline by an additional 7% in 2015. The oil price and ISIS crises, combined with political instability in 2014, impacted private sector consumption and investment, and limited government spending, particularly on investment projects. The oil sector—critical to Iraq’s economy—has, however, continued to expand mostly thanks to the southern oil fields, which constitute 90% of production.

The severe decline in oil prices since the second half of 2014 caused oil export revenues to decline sharply. The fiscal deficit is estimated to increase from 5.3% of GDP in 2014 to 16% in 2015. The government introduced a fiscal adjustment plan in 2015 to address this situation, and the 2015 budget law contains a combination of revenue and expenditure measures. In the medium-term, fiscal performance will be driven by the structural fiscal reforms the government is undertaking.

Moreover, Iraq also faces severe security challenges. As a result of the ongoing conflict with ISIS, 17,168 civilians were killed in Iraq during 2014, according to Iraq Body Count. The number of civilian casualties continues to climb in reaching 7,899 civilians through the end of June 2015. It is estimated that 134,303 civilians were killed due to violence between 2003- 2014.

The population remains extremely vulnerable to the ongoing security problems and reduction in oil prices. Poverty levels have increased and now stand at 22.5% in 2014. The number of people living below the poverty line increased by an estimated 2.8 million by end-2014.

The 2014 crisis has led to an additional 800,000 people becoming unemployed. The displacement of more than three million Iraqis and some 250,000 Syrian refugees have further disrupted local economic conditions.  The public distribution system provides the only safety net for the vast majority of the poor, and is currently being stretched to its limits in much of the country, and is not available in some governorates. IDPs are receiving cash grants of US$842 per month, but the 2.8 million new poor are left largely uncovered by any public safety net.

Last Updated: Sep 16, 2015

The Country Partnership Strategy (CPS) Progress and Learning Review updated the Bank Group’s FY13-FY16 CPS for Iraq.  The Strategy is now focused on delivering basic public services, especially in areas where the security threat has diminished, to reduce poverty and enhance citizens’ trust in government institutions; and to address and help manage the country’s critical fiscal situation and increase opportunities for private sector investment.

As of August 2015, the World Bank’s portfolio for Iraq consisted of four operations for a total net commitment of US$812 million. The current portfolio focuses on transport, water and the delivery of basic infrastructure services in those areas most affected by the recent conflict. In July 2015, the Bank approved a US$350 million Emergency Operation for Development which supports reconstruction of the country’s conflict- wrecked infrastructure and restores public services in municipal areas under government control.

International Finance Corporation (IFC)

IFC's investments in Iraq have which steadily grown over the last several years support the private sector and leveraging regional investments.

IFC’s committed portfolio stands around US$229 million across 10 companies, mostly concentrated in the manufacturing, telecom, and agribusiness sector.  Between FY11-15, IFC annual investments have totaled around US$688 million (including mobilization of US$261 million). In FY15, IFC committed around US$8 million equity to Ecocem to build a greenfield sanitary landfill and facility to process municipal household waste to be used as fuel for cement plants; and a total of US$40 million in two agribusiness companies to support job creation in the non-oil sector as well as assure food security. IFC advisory activities have focused on capacity building (including SME banking, dairy farming), corporate governance, trainings, public private partnerships (PPPs), and investment climate reforms. As the security situation stabilizes, IFC anticipates strong demand in investments in the infrastructure, particularly power, telecom, manufacturing, and financial sectors. IFC is also keen to help mobilize South-South capital flows for investments in Iraq.  

Multilateral Investment Guarantee Agency (MIGA)

The Multilateral Investment Guarantee Agency’s first engagement in Iraq was in FY11 when it signed a water bottling plant in Baghdad. In FY 2014, MIGA has also provided a guarantee for a project in the telecom sector in the northern region of Iraq. In conjunction with IFC, MIGA is supporting the construction of a 1,260MW greenfield natural gas fired, independent power plant, located in Zakho, in the Kurdistan Republic of Iraq.  MIGA will issue guarantees (in respect of transfer restriction, expropriation, war and civil disturbance and breach of contract risks) of up to US$ 400 million to cover non-shareholder loans to a group of yet-to-be-identified lenders for up to 15 years.  IFC/MIGA submitted its joint Board Paper in late August 2015. MIGA’s total portfolio as of August 31 2015 is US$8.7 million.  

Last Updated: Sep 16, 2015

Investments in water resource management resulted in improved quality of the drinking water to over 1 million people in Ghammas, Al-Nasr and Wasit. Work is in progress to deliver water in the 7 municipal areas that have been liberated by the government forces.

Technical Assistance and Analytic Work:  

The Bank has provided policy advice to the Iraqi government on fiscal policy and management issues and has supported the newly established state pension fund. The deployment of the Social Safety Net (SSN) Information System in Baghdad and the rest of the governorates allowed for the processing of beneficiary payments using a central data base resulting in savings of over US$30 million to the SSN budget. Advice on the completion of the first Extractive Industries Transparency Initiative report for Iraq reconciled US$41.25 billion in oil revenues. Analytic work supporting the first and second household income and expenditure surveys fed into Iraq’s poverty reduction strategy and it’s Public Financial Management Action Plan. This increased momentum for state-owned enterprise reform, private sector regulatory reform, public-private dialogue, and public-private partnerships.

Last Updated: Sep 16, 2015


Iraq: Commitments by Fiscal Year (in millions of dollars)*

*Amounts include IBRD and IDA commitments