Overview

  • - The macroeconomic outlook in Iraq is expected to improve thanks to a more favorable security environment, increase in oil prices and the gradual pick up of investment for reconstruction. Following the complete liberation from ISIS of all Iraqi territory in December 2017, the Government of Iraq (GOI) is putting in place a comprehensive reconstruction package linking immediate stabilization to a long-term vision and initiate a recovery and reconstruction process. The ISIS war and the protracted reduction in oil prices have resulted in a 21.6 percent contraction of the non-oil economy since 2014 and contributed to a sharp deterioration of fiscal and current accounts. Higher oil prices and better security in 2017 contributed to economic stability and a return to growth in the non-oil sector.

    - The ISIS war and widespread insecurity have also caused the destruction of infrastructure and assets in ISIS-controlled areas, diverted resources away from productive investment, severely impacted private sector consumption and investment confidence, and increased poverty, vulnerability and unemployment. The poverty rate increased from 19.8 percent in 2012 to an estimated 22.5 percent in 2014. The unemployment rate is about twice as high in the governorates most affected by ISIS compared to the rest of the country (21.6 percent versus 11.2 percent).

    - Because of increased oil production and exports, overall GDP growth remained positive in the 2015-2016 period but is estimated to have contracted by 0.8 percent in 2017 due to a 3.5 percent reduction in oil production to fulfill the OPEC+ agreement and further oil output reduction from areas that returned under the GOI’s control. At the end of 2017, the cumulative real losses due to the conflict stood at 72 percent of the 2013 GDP and 142 percent of the 2013 non-oil GDP. The improved security situation and initial reconstruction efforts have sustained non-oil growth at 4.4 percent in 2017. The pegged exchange rate and subdued demand have kept inflation low at around 0.1 percent in 2017. 

    - The fiscal deficit is estimated to have narrowed to 2.2 percent of GDP in 2017 due to higher oil prices and measures to contain current expenditures. GOI also tapped the sovereign bond market in August 2017, the first independent issuance since 2006, with a US$1 billion bond. Large borrowing and issuance of debt guarantees increased the public debt-to-GDP ratio from 32 percent in 2014 to 64.4 percent in 2016. Thanks to fiscal consolidation and higher oil prices, total public debt is estimated to have declined to 58 percent of GDP in 2017. In 2017, the government made progress to reduce a large stock of guarantees and improve their management. The GOI is also prioritizing investment expenditure for reconstruction in areas liberated from ISIS and for increasing electricity production.

    - In 2017, the current account deficit is estimated to have returned to a surplus equal to 0.7 percent of GDP. The strong reserve accumulation in 2010–2013 smoothed the impact of the fiscal policy adjustment required to maintain external sustainability. Foreign reserves financed most of the balance of payment deficit, declining from US$77.8 billion at end-2013 (or 10 months of imports) to US$48.1 billion at end-2017 (or 7 months of imports).

    Last Updated: Apr 18, 2018

  • Reinstating Trust between the State and Its Citizens through Inclusive Private Sector-led Growth and Sustainable Recovery.

    The World Bank has developed the Country Partnership Framework (CPF) which defines the Bank program for the period FY18-FY22. The CPF builds on the lessons and results of the previous World Bank/International Finance Corporation/Multilateral Investment Guarantee Agency (IBRD/IDA/IFC/MIGA) Country Partnership Strategy (CPS) for FY13–16, as well as on the recommendations of the Performance and Learning Review (PLR) conducted in July 2015. The CPF is also based on the findings and the priorities identified in the Systematic Country Diagnostic (SCD), and links directly to the Middle East and North Africa (MNA) Regional strategy. The CPF builds on the current needs of Iraq, especially within the context of the twin crises of decline in oil prices and the reconstruction needs resulted from the war against ISIS. Also, the CPF prepares the ground for the medium and long-term engagement as it aligns with and supports the government’s medium and long term strategic framework, as well as the National Development Plans.

    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$350 million 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. Also in December 2016, the World Bank provided US$41.5 million to support Public Financial Management (PFM) reforms through automating the budget process, implement procurement reform and Public Investment management at the Federal and Kurdistan Region governments. Four new IBRD (International Bank of Reconstruction And Development) operations have been approved by the Board; namely, EODP (additional financing US$400 million), Baghdad Water Supply and Sewerage Improvement Project (US$210 million), Iraq Social Fund for Development (US$300 million), and Iraq Emergency Social Stabilization and Resilience Project (US$200 million).

    The World Bank supported the GOI in developing the Reconstruction and Development Framework 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 World Bank is supporting the GOI in developing the Iraq future vision under Iraq Vision 2030, which will define the elements and the strategic reforms to establish a new social contract for peace and prosperity. It 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.

    Upon the request of the GOI, the Bank employed a new hybrid methodology to assess damages and needs in post-ISIS Iraq. The Damage and Needs Assessment (DNA) was unprecedented in both 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 DNA served as the base document for the Kuwait International Conference for Reconstruction of Iraq raising over US$30 billion of pledges. The findings of the DNA directly fed into the government's Recovery and Development Framework (RDF) that presented key challenges and recovery needs, a recovery and development plan, and necessary institutional and implementation arrangements. Together with the DNA, the RDF will serve as the primary analytical vehicle to support recovery and development efforts in Iraq in an integrated, prioritized and coherent manner.

    International Finance Corporation (IFC)

    IFC has played a strong counter-cyclical role in Iraq over the last several years. Between FY11-16, IFC annual investments have totaled a little over $1.1 billion (including mobilization of US$386 million from other lenders + MIGA). In FY16, as part of the WBG programmatic approach in the power sector, IFC committed US$375 million in MGES Power, the leading local private power investor, to help meet the critical infrastructure needs of the country. The pipeline in FY18 -19 consists of potential investments in retail, healthcare (hospital), ports, and telecom sectors. IFC's committed portfolio in Iraq has grown considerably over the last five years, and currently stands around US$260 million across the power, telecoms, manufacturing, agribusiness, logistics, and services sectors.
    IFC is closely collaborating with the World Bank teams on applying the Maximizing Finance for Development (MFD) principles across strategic areas. In infrastructure, energy (other than upstream oil and gas), transport and water have been identified. The World Bank will work on policy reforms in areas of renewables (solar including through scaling solar), gas capturing and transport (pipeline) and refineries, where IFC will engage with thermal IPPs.

    Multilateral Investment Guarantee Agency (MIGA)

    As of March 23, 2018, 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.

    Last Updated: Apr 18, 2018

  • Current IBRD portfolio size of US$1.65 Billion.

    • Seven Bridges and 320 Kms of roads in the liberated zones of Iraq have been rehabilitated and are open for traffic. More than 1.5 million citizens benefited by getting access to other parts of their city & reunite with loved ones, markets and services.  
    • 39 ambulances and 14 mobile clinics have been procured for the affected governorates.
    • 167 pieces of special machinery and equipment for the maintenance of water, sanitation and municipal services and 3,120 garbage containers for solid waste management system were procured, delivered and successfully distributed to the targeted cities. More than 0.5 million citizens benefited from this equipment.

    Moving ahead:

    Preparations have been made to improve education services to 65,000 students by repairing 35 schools and re-training of teachers; irrigation and agriculture practices are expected to be improved serving 35,000 people (especially in rural and poor areas); 7 public transport (PT) terminals in core cities will be rehabilitated to provide safer and organized PT services; cultural assets in parts of Old Mosul Core will be restored in collaboration with UNESCO in addition to the training of 1,000s of laborers in the restoration field. Working with the subnational government will also help build capacities to improve service delivery and response to peoples’ needs.

    • 1,200,000 beneficiaries of Social Safety Nets Programs (of whom 600,000 are females).
    • Person work days generated by cash for Work Schemes: 10,000,000 (out of which 3,000,000 for women).
    • Beneficiaries households receiving cash for work support: 150,000.
    • Beneficiaries households receiving cash for work support (female headed households): 75,000.
       

     

    Last Updated: Apr 18, 2018

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LENDING

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

*Amounts include IBRD and IDA commitments

MULTIMEDIA

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PHOTO GALLERY

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In Depth

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Apr 17, 2018

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Additional Resources

Country Office Contacts

Baghdad, +964 07801964557
British Embassy, International Zone
mziade@worldbank.org