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  • Iraq’s economy is gradually picking up following the deep economic strains of the last four years. Real GDP is estimated to have grown by 0.6 percent in 2018, thanks to a notable improvement in security conditions and higher oil prices, reversing the contraction of 1.7 percent seen in 2017. The non-oil economy is picking up speed and grew at 4 percent, while oil production was slightly less than 2017 in line with the OPEC+ agreement. Recently the Iraqi economy has received a boost of confidence with the signing of several trade agreements with its neighbors. Reconstruction efforts have been proceeding at a moderate pace. Inflation remained low at 0.4 percent in 2018, but slightly up from 2017, due to higher domestic demand in addition to rising food and transportation costs. 

    The overall fiscal balance swung from deficit (1.7 percent in 2017) to surplus (6.2 percent) in 2018 but the composition of spending worsened. Non-oil taxation has been well below budgetary projections due to weak compliance and reversal of some policy measures. The composition of spending deteriorated towards current spending—particularly public-sector wages and transfers. Investment spending proceeded at a moderate pace in 2018, but non-oil investment spending continues to be slow and its execution lower than the budgeted amount.    

    The recovery in oil prices has also been conducive to better outcomes on external balance. The current account surplus is estimated to have widened to 4.9 percent in 2018. Higher oil prices have also supported a steady increase in international reserves from US$49 billion in 2017 (or 6.9 months of imports), to US$64 billion (7.8 months) in 2018, rebuilding buffers to external shocks.  

    Growth and the positive overall fiscal balance in 2018 are estimated to reduce the public debt-to-GDP to 48.4 percent in 2018 from 66 percent in 2016. The government has also adopted a framework to control the issuance of guarantees, which peaked at US$33 billion (or 20 percent of GDP) in end-2016.  

    Monetary poverty rate is expected to decline from the 2014 level (22.5 percent) on the back of recent economic growth and improvement in the security situation but will remain unevenly distributed across the country. The standard of living in the conflict-affected areas is possibly still below the 2014 level because of disruptions in the labor market and general economic activity. IDPs have also likely experienced severe welfare loss through loss of jobs and livelihoods. These conditions have the potential to sustain a low-level but persistent insecurity focused in northern Iraq. There has recently been an improvement in several non-income dimensions of welfare. The multidimensional poverty headcount ratio dropped from 6.8 percent in 2014 to 3.3 percent in 2017/18. Increase in school enrollment, expansion of drinking water provision and sewage disposal services have contributed to the fall in multidimensional poverty.  

    However, labor market outcomes continue to be a concern, especially for women and youth. At 48.7 percent, the country has one of the lowest labor force participation rates in the world, and in the region especially for women (12 percent) and youth (26 percent). The unemployment rate, which was falling before the ISIS and oil crises hit, has increased beyond the 2012 level to 9.9 percent in 2017/18. Moreover, almost 17 percent of the economically active population is underemployed. Underutilization is particularly high among internally displaced persons, with almost 24 percent of internally displaced persons (IDPs) unemployed or underemployed. The crises have eroded the gradual progress in the women’s employment; female unemployment rate rose from 11.3 percent before the crises to 20.7 percent in 2017. Also, more than a fifth of the economically active youth (ages 15 – 24) do not have a job, and more than a fifth of the economically active youth is neither in employment nor in education or training (NEET).  


    The economic outlook has improved due to higher oil prices and the improving security situation, but constraints on capital spending will impede a recovery-driven growth acceleration. Growth is expected to spike to 8.1 percent in 2020 due mainly to higher oil output, with OPEC+ agreement coming to an end in mid-2019. Non-oil growth is expected to remain positive on the back of higher investment needed to rebuild the country's damaged infrastructure network, private consumption and investment. However, the recently approved 2019 budget presents a sizable increase in recurrent spending, and unless there is a significant reorientation in fiscal policy to a comprehensive recovery approach, there will be limited fiscal space to sustain post-war recovery and longer-term development. Higher spending together with easing oil prices will result in a high fiscal deficit projected at 5.4 percent of GDP in 2019 before narrowing down to about 3 percent throughout 2020-2021. Lower oil prices and increased imports will cause the current account balance to turn into deficit, financed partially by international reserves decumulation. 

    Last Updated: Apr 01, 2019

  • The World Bank Group is currently preparing a new Country Partnership Framework for Iraq which will focus on supporting the Government of Iraq in the implementation of critical economic reforms to support job creation and reconstruction. A consultation draft will be made available online in addition to the timeline for consultations across Iraq

    Since April of 2015, the World Bank has re-focused its strategy to help the GOI manage the twin fiscal and security shocks, while improving service delivery and increasing inclusion of vulnerable groups, particularly in the liberated areas. To that end, the World Bank approved i) in July 2015, a US$350m financial package, the Emergency Operation for Development (EODP), which supports the reconstruction of damaged infrastructure and restoration of public services in areas liberated by the government in two governorates; ii) in December 2015, a US$1.2 billion and in December 2016, a US$1.44 billion Development Policy Financing loan (DPF) to help Iraq weather the fiscal crisis and advance reforms in three areas: improving the management of public finances, securing a more stable and sustainable supply of energy, and supporting more efficient and transparent state-owned enterprises; iii) in December 2016, the World Bank provided US$41.5m to support Public Financial Management (PFM) reforms through automating the budget process with the development of the Iraqi Financial Management Information System (IFMIS), implementing Public Investment Management (PIM) and Public Procurement reforms  at the Federal and KRI governments’ level; and iv) in September 2018, the World Bank and the European Union have signed a US$18.1m Administration Agreement (AA) for the Bank to implement the new “Strengthening PFM Oversight and Accountability Institutions in Iraq”, funded by the EU which addresses some of the key vulnerabilities in Iraq’s PFM areas of intervention with a focus put on: strengthening payroll reporting and oversight, enhancing efficiency and accountability in public procurement, improving the supervision of non-financial state-owned enterprises, improving the regulatory framework, supporting fiscal transparency, strengthening legislative budget oversight, strengthening the external audit function, and confronting and combating corruption.            

    As an urgent response to the enormous reconstruction needs after liberating Mosul from ISIS, the World Bank Board of Directors approved in 2017 additional financing to the Emergency Operation for Development (EODP) of US$400m. The additional financing aims to include more cities to the emergency support with two additional sectors; agriculture and education. 

    In early FY18, the Board approved 3 operations totaling $710m, namely; Baghdad Water and Sewerage Improvement ($210m), the Iraq Social Fund for Development ($300m) and the Emergency Social Stabilization Project ($200m). All projects have been declared effective in July and August 2018.  

    Moreover, the World Bank has supported the GOI in developing the Reconstruction and Development Framework (RDF) that outlines the Government’s commitment and approach to moving from emergency to recovery and development for the population affected by the crisis. The framework addresses the distinct challenges in the liberated areas while at the same time recognizing the need for broader national reforms that benefit the entire country, including the governorates indirectly affected by the conflict. The framework covers the Challenges and Recovery Needs, Recovery and Development Plan, Institutional and Implementation Arrangements. The RDF builds on the findings of the Damage and Needs Assessment (DNA) that was carried out by the GOI with help from the WB. The DNA was unpresented in its sectoral and geographic scope, covering damages and needs for building back in a resilient manner across 19 sectors in all seven conflict-affected governorates in Iraq. The DNA revealed damages worth $ 45.7 billion and needs amounting to US$88.2 billion. 

    The World Bank has also supported the GOI through the preparation of the Iraq future vision under Iraq Vision 2030, which defines the elements and the strategic reforms to establish a new social contract for peace and prosperity. the vision focuses on (i) a new governance framework to ensure better service delivery; (ii) rebuilding the human capital; (iii) job creation; and (iv) macroeconomic framework to enable inclusive and sustainable growth. 

    International Finance Corporation (IFC) 

    The IFC has played a strong counter-cyclical role in Iraq over the last several years. IFC's committed portfolio in Iraq has grown considerably over the last five years and exceeded $1.5 billion diversified geographically and across sectors, in    power, telecoms, manufacturing, agribusiness, logistics, and services. In FY16, IFC committed US$375 million in MGES Power, the leading local private power investor in Iraq to help meet the critical infrastructure needs of the country.  In FY18, IFC committed $269 million with Zain Iraq, the leading mobile operator, to support the rehabilitation of their network in the liberated area. IFC current investment pipeline consists of potential investments in retail, healthcare (hospital), ports, digital financing, and power.  

    The IFC is closely collaborating with the World Bank teams on applying the Maximizing Finance for Development (MFD) principles across strategic areas. Besides infrastructure and energy (other than upstream oil and gas), transport and water have been identified as potential MFD sectors. The Financial sector has been selected as another critical sector that would require WBG support under MFD. 

    Multilateral Investment Guarantee Agency (MIGA) 

    MIGA’s outstanding gross exposure in Iraq stood at US$8 million. MIGA signed its first contract in Iraq in FY2011 for a project that supported a Turkish investment in a water bottling plant in Baghdad. In FY2014, MIGA provided a guarantee for a project in the telecom sector in Kurdistan region of Iraq and in FY2015 MIGA supported a port logistics project in Umm Qasr. As a Fragility, Conflict, and Violence–affected (FCV) country, Iraq is eligible for projects to be supported by MIGA’s Conflict-Affected and Fragile Economies Facility, a multi-donor trust fund aimed at enabling MIGA to assume higher risk and insure more investment projects in FCVs. Bank has supported development of a Maximizing for Finance Development MFD-enabled Reconstruction Strategy for liberated areas of Iraq and following the successful outcome of Kuwait conference, we expect MIGA and IFC to scale up its engagement during the reconstruction phase to crowd in private investments. Bank, IFC and MIGA teams are working very closely for implementation of the reconstruction strategy. 

    Last Updated: Apr 01, 2019

  • Current IBRD portfolio comprises 6 active projects, and stands at US$1.86 Billion with the following achievements: 

    • About 2 million Iraqis are benefiting from the 19 Bridges have been reconstructed and 320 KMs of roads in the liberated zones of Iraq have been rehabilitated toward reinstating access to essential health and education services, markets, etc. 
    • About 50,000 Iraqis are already benefiting from the first lot of the ambulances being supplied (overall 39 ambulances). About 4 times of the said beneficiaries are also expected to benefit from the 14 mobile clinics expected to be delivered in October 2018. 
    • About 500,000 Iraqis are also benefiting from reinstated electricity from the tens of newly supplied and installed generators, transformers and other electricity equipment. 
    • About 500,000 Iraqis are benefiting from the 275 pieces of special municipal machinery and equipment used for the repair of damaged water and sanitation infrastructure and municipal services, and the supplied 3,120 garbage containers for solid waste management system to the targeted cities. And 13 works contracts regarding rehabilitation of water supply and sanitation systems valued at US$16.8 m, have been recently completed and successfully operational and serving more than 400,000 Iraqis.  
    • Several thousands of Iraqi laborers are benefiting from the temporary employment opportunities created by the works contracts under EODP. Equally important, many workers are also gaining new skills that could be of benefit to them for future employment.  

    Moving ahead: 

    In addition to more support in the above-mentioned sectors in cities liberated from ISIS that will benefit an additional 2 million Iraqis, preparations are undergoing to launch key activities to improve:  

    • Education services to 65,000 students by reconstructing 35 schools (towards a more modern school set-up that could become prototype for the government to adopt in building new schools); and re-training of teachers;  
    • Irrigation and agriculture practices are expected to be improve the income of about 35,000 people (especially in rural and poor areas);  
    • Transport services with 7 public transport (PT) terminals in core cities will be rehabilitated to provide safer and organized PT services; 

    Beneficiary’s households access to Social Safety Nets Programs: 1,200,000 (of whom 50 percent are female-headed households). 

    generation of work days by cash for Work Schemes: 10,000,000 (out of which 3,000,000 for women). 

    Beneficiaries households receipt of cash for work support: 150,000. 

    Beneficiaries households receipt of cash for work support (female headed households): 75,000. 

    beneficiaries of livelihoods access to microfinance support for their projects: 12,000 

    beneficiaries access to psychosocial support services in the liberated areas150,000. 

    Basic services projects delivery serving over 600 local communities under the Social Fund for Development: 1,700.  

    Last Updated: Apr 01, 2019



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

*Amounts include IBRD and IDA commitments




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