Chronicle of the Middle East and North Africa

Economy of Iraq

Iraq Economy - Fanack Chronicle
A drilling rig in the Miran block in the semi-autonomous Kurdistan region, Qazan, Iraq / Photo Corbis


Iraq is one of the most oil-dependent countries globally; Over the course of the years 2010-2020, oil revenues accounted for more than 99% of its exports, 85% of its government budget, and 42% of its GDP. This excessive dependence on oil exposed the country to macroeconomic volatility, while budget gridlock limited spending space in the public finances and limited any opportunity for counter-cyclical policies, according to a World Bank report in October 2021. 

By the beginning of 2021, the unemployment rate in Iraq – was at an estimated population of 40.2 million – this was more than ten percentage points higher than before the outbreak of the Covid-19 pandemic:12.7%. Unemployment remained high until late 2021 among displaced persons, returnees, women seeking employment, entrepreneurs, and workers in the informal economy before the pandemic.

Nevertheless, the Iraqi economy has gradually recovered from the shock of declining oil prices and the Covid-19 outbreak in 2020. In the first half of 2021, GDP grew by 0.9% (on an annual basis). The non-oil economy grew by more than 21% in the first half of 2021 (annually) thanks to solid performance in the service sectors, where the containment of the coronavirus was eased, thanks to the expansion of the vaccination campaign. This recovery exceeded the slowdown in the oil sector, with Iraq in line with its share of OPEC and overseas producers in early 2021.

While the economic situation in Iraq has gradually improved in parallel with the recovery of international oil markets, this recovery remains fraught with major risks posed by structural imbalances:
– The constraints in the management of public investments that have affected the level of public service delivery,
– the slow settlement of arrears (particularly those related to wages of public sector workers),
– and the limits of large credit facilities for the banking sector of state-owned banks and the Central Bank granted to the public sector

These vulnerabilities are exacerbated by the unstable political situation, weak healthcare system, and widespread corruption that continuously causes civil unrest.

Fluctuations in oil prices and the Covid-19 pandemic have amplified Iraq’s economic problems, reflecting two years of steady recovery. These double shocks deepened the existing economic and social fragility and added a new justification for the popular discontent that preceded the Corona pandemic.

Budget revenues in 2020 fell by more than 9% points to 32% of GDP. With a sharp contraction in oil revenues. To deal with this situation, the Iraqi Government reduced non-binding expenditures, including a reduction in public investment by 87% and rescheduling part of the local debt.

The authorities chose to devalue the Iraqi dinar by 18.5% against the US dollar in December 2020, increasing oil revenues. Despite these actions, the balance of public finances still accounts for 6.4% of the GDP deficit. Financing was secured primarily through the central bank and state-owned banks.

Acknowledging the gravity of the crisis, the Iraqi Government has devised a national reform plan (White Paper) that sets out a bold blueprint for structural reforms. It aims to achieve sustainable medium-term growth through economic diversification, enhanced private sector growth, and private sector employment creation. The Iraqi Government also developed a framework for the implementation and governance of the White Paper. A detailed reform matrix was proposed and a Higher Council for Reform under the Prime Minister to monitor the tasks of implementing reform was launched.

Measures were already implemented, starting with the reforms adopted in the 2021 Budget Act and other areas, including the business environment and the financial sector. However, the World Bank considered that the ultimate success of the reforms depended on political will and public support for implementing the proposed measures. The country’s long-standing vulnerability trap is expected to recover gradually against the backdrop of rising oil prices and increasing OPEC production shares. The recovery in oil prices provides an opportunity to advance reforms.

In terms of increasing economic opportunities for women in Iraq, the World Bank recommended that Iraq increase gender equality in the labor market. Women’s participation in the labor force is essential for achieving the economic transformation described in the Government of Iraq’s White Paper.

Gross Domestic Product

The absence of fiscal space has limited the ability of the Government of Iraq to provide incentives to the Iraqi economy, which relies heavily on oil revenues for its growth and financial profit. As a result, the country suffered the largest contraction since 2003, with GDP contracting by 10.4% in 2020, against the backdrop of the OPEC Oil Production Reduction Agreement and the grim shadows cast by the Covid-19 pandemic on non-oil sectors, including the decline of religious tourism services following border restrictions. Hence, the GDP per capita, a measure of individual well-being, is estimated to have shrunk by 15% in 2020. According to the World Bank, it is much higher than in the region’s other countries and similar to Iraq in its income levels.

The economic downturn also affected the well-being of Iraqi citizens, especially among workers in the informal sector and entrepreneurial sector. Unemployment continued to reach 10% points higher than before the pandemic. Limited financial space hampered the flow of financial support transfers, including ration, with the proportion of families receiving such support falling by more than 8% points. The loss of household income and social support has increased vulnerability to food insecurity.

The oil crisis affected the fiscal balance in Iraq, which forced the government to reduce non-binding expenditures and accumulate arrears.


Indicatorsmeasuring unit20192020Change ±
GDP (at constant 2015)Billion US$192.393172.425-19.968
GDP growth (annual)%4.45-10.4-19.85
GDP per capita (constant 2015)US$4,893.54,286.8-606.7
GDP (at current value)Billion US$222.434167.224-55.210

Source: World Bank.

Foreign Trade

The value of Iraq’s commodity exports in 2020 amounted to approximately IQD 4.6 trillion, equivalent to USD 3.8 billion, an increase of 19.9% compared to 2019. It reached 3.9 trillion dinars, equivalent to 3.3 billion dollars, a compound growth rate (155.7%) between 2016 and 2020.

According to the Central Bureau of Statistics, February witnessed the highest percentage of commodity exports (31.4%) for 2020, at 1,455.5 billion dinars, equivalent to $1,231.4 million, and June the lowest (0.1%). It amounted to 2.3 billion dinars, equivalent to 1.9 million dollars.

The first half accounted for the highest proportion of commodity exports (51.9%) for 2020, at 2,400.6 billion dinars, equivalent to US $2,031.0 million.

Asian countries accounted for the highest proportion (60.4%) of total commodity exports for 2020. India ranked highest (46.9%), followed by the United Arab Emirates (39.0%).

Automobile gasoline exports (94.5%) accounted for total commodity exports for 2020, followed by full NFTA light oil, light oil preparations, and 24.9% of base lipids (6.5%).

The value of oil derivatives exports was IQD 2.8 trillion for 2020, equivalent to $2.4 billion, an increase (82.4%) over 2019. Exports of oil derivatives amounted to IQD 1.5 trillion, or $1.3 billion, at a compound growth rate (150.3%) between 2016 and 2020.

The total export of crude oil, products, and other goods (IQD 57.1 trillion) for 2020 was approximately $47.9 billion, down from $98.2 trillion in 2019 ($83.1 billion) at a compound growth rate (2.5%) between 2016 and 2020.

The value of crude oil exports for 2020 amounted to KWD 49.7 trillion, down by 1 billion dinars (46.5%) from 2019, at a combined growth rate of $78.5 billion (-0.9%) between 2016 and 2020.

Total imports for 2020 of goods and petroleum products amounted to IQD 18.4 trillion, equivalent to USD 15.4 billion, a decrease of $20.9 billion (25.9%) from 2019, and a compound growth rate (-35.2%) from 2018.

Total imports of non-oil commodities amounted to IQD 16.5 trillion, equivalent to USD 13.8 billion. A decrease of 23.2% over 2019; It reached $18.1 billion, a compound growth rate (-36.1%) from 2018. Total imports of petroleum products amounted to IQD 1.9 trillion, equivalent to USD 1.6 billion, down 43.3% from 2019; it reached $2.8 billion, and a compound growth rate of -25.2% for 2018.

November was the highest percentage of total imports for 2020 (16.3%), at $2.5 billion; January was the highest percentage of imports of petroleum products (19.3%), at US $301.1 million. November was the highest percentage of non-oil commodity imports (17.2%) at US $2.4 billion.

Iraq is the 39th trading partner of the European Union, accounting for 0.3% of the European Union’s total merchandise trade with the world in 2020.

The European Union is Iraq’s fourth-largest trading partner, accounting for 12.1% of Iraq’s total merchandise trade with the world in 2020. 11.3% of Iraq’s imports came from the European Union, and 12.7% of Iraq’s exports came from the European Union. The total merchandise trade between the European Union and Iraq in 2020 was €10.8 billion.

The value of EU imports was 7.3 billion euros, mainly consisting of fuel and mining products (7.25 billion euros, 99.3%). The total export of the European Union was €3.5 billion, more diversified than imports and controlled by machinery and transport equipment (€1.4 billion, 40.0%), followed by agriculture and raw materials (€0.7 billion, 20.0%) and chemicals (€0.7 billion, 20.0%).

Foreign Trade Indicators20192020Change ±
Exports (billion dollars)83.1047.90-35.20
Imports (billion dollars)20.9015.40-5.5
Trade balance surplus (billion dollars)62.2032.50-29.70
The coverage ratio of merchandise exports to merchandise imports (%)397.61311.04-86.57

Source: Central Bureau of Statistics.


The final results indicate that, in 2020, 719 large industrial enterprises were operating in Iraq, broken down by main economic activity, into extractive (excluding oil) and manufacturing activities. The results showed that the industry of other non-fleshy metals products ranked first in the number of enterprises in manufacturing activities, which accounted for 50%, followed by the food industry with 30%.

The rest of the activities were 20% of all different industries. According to the Central Bureau of Statistics, by comparing the number of enterprises in operation for 2020 with 2019, there has been a 7.3% increase because of the private sector’s private sector growth.

The total number of industrial workers in 2020 was approximately 126,790, spread across various industries; Of these, 473 are unpaid workers who are business owners or their relatives in the private sector.

The activities of coke and refined petroleum products contributed 24% to the labor force, followed by that of the other avalanche metals industry at 20.1%. Although there has been an increase in the number of enterprises, there has been a decrease of 6.5% in the number of workers compared to 2019, which is 135,629, due to the new retirement law that reduced the number of workers in the public and government sectors, which took place at the beginning of 2020, as well as the negative impact of the repercussions of the Corona pandemic on the economy in general, and industrial activity in particular. This led to a decline in wages and benefits for 2020, which amounted to IQD 1.408 trillion, compared to KWD 1.554 trillion in 2019, a decrease of 9.4%.

Despite an increase in the number of enterprises in 2020, production fell to IQD 6.717 trillion, compared to IQD 7.316 trillion in 2019, a decrease of 8.2%, owing to the described harsh conditions caused by the Covid-19 virus and the resulting suspension of the facilities for some months, as well as the decline in production of raw materials, and other inputs. Production reached 3.476 trillion dinars, down 9.1% from 2019.

Industry Indicators20192020Change(%)
Number of industrial establishments6707197.3
Number of employees (thousand people)135.63126.79-6.5
The value of wages and benefits (trillion dinars)1.5541.408-9.4
The value of industrial production (trillion dinars)7.3166.717-8.2
The value of the supplies (trillion dinars)3.8253.476-9.1
Added value (trillion dinars)3.4903.241-7.1

Source: Central Statistical Organization.


A report issued by the United Nations in the spring of 2021 suggested that the poverty rate in Iraq would rise between 7% and 14% after the Iraqi government decided to reduce the dinar’s value and increase the food prices. The report, which was prepared jointly by the Food and Agriculture Organization “FAO,” the World Food Program, and the World Bank, said that the decision to devalue the local currency would lead to a short-term increase in the number of poor individuals in the country, estimated to be between 2.7 million and 5.5 million Iraqis. The report added that these numbers would be added to the approximately 6.9 million Iraqis already in poor economic situations present before the Covid-19 pandemic.

According to the report, the Iraqi government faces “difficult tasks in trying to contain the coronavirus (Covid-19), protect people’s health, and restart the ailing economy.” The report said that the most vulnerable conflict-affected population, including internally displaced persons, refugees, and returnees from camps. More than a third of Syrian refugees use passive coping strategies, such as relying on lower-cost food, borrowing food, or borrowing money to buy food. This is higher than 29% and 21% among displaced persons and returnees, respectively, or 8% nationally.

According to the World Bank, the poverty rate in Iraq doubled in 2020, with 40% of the population now considered poor.

In December 2020, the Central Bank set a new local currency exchange rate of 1,450 dinars against 1,190 dinars before the decision. As a result, agri-food and wholesalers increased their prices by 20% and sometimes more.

Poverty Indicators 20122012
Number of Poor (thousand)Rate


National Poverty Line6,194.818.9
International Poverty Line
2022.7 in Iraqi dinar (2012) or US$1.90 (2011 PPP) per day per capita
Lower Middle Income Class Poverty Line
3406.7 in Iraqi dinar (2012) or US$3.20 (2011 PPP) per day per capita
Upper Middle Income Class Poverty Line
5855.2 in Iraqi dinar (2012) or US$5.50 (2011 PPP) per day per capita

Source: The World Bank.


Iraq Economy - Fanack Chronicle
Iraq Land Use

The total arable land area in Iraq for 2020 was 18.14 million dunams, and the highest arable area of land was 30.5% in Nineveh Governorate. The total area under cultivation in Iraq was 15.14 million dunams; The Nineveh governate holds 42.7% of all the land currently under cultivation in Iraq.

The total number of workers working in Iraq’s agriculture for 2020 was 317.34 thousand. The highest proportion of agricultural workers in Salah al-Din province was 18% of the total agricultural workers in Iraq.

The total area of orchards in Iraq for 2020 was 1.444 million dunams. The highest area was 34.1% of the total area of orchards in the province of Anbar.

Plastic Houses

The total number of plastic houses in Iraq during 2020 was 63,413. The total number of holders (6,327) was the highest number of plastic dwellings (29,668) in the Babylon province, accounting for 46.8% of the total number of houses. The total number of homeowners in the Baghdad/karkh province accounted for 23.8% of all homeowners in the region. As for the irrigation methods used, 98.8% of houses are irrigated by drip.

According to World Bank data, the value-added in Iraq’s agriculture sector as a percentage of GDP was 6.07% in 2020, compared to 3.33% in 2019.

The arable area under cultivation in the provinces of Iraq for 2020

ProvinceCultivable area/acresvalid area percentageCultivated area/acrespercentage of cultivated area
5Al Anbar4176402.36648404.4
12Al Muthanna2885201.64580383
13Dhi Qar 10193205.66616204.4

Source: Ministry of Agriculture


Iraq possesses many kinds of cattle, such as sheep, goats, cows, and buffalo, often found in fertile pastures. Iraq is primarily an agricultural country.

According to the latest livestock survey, in 2008, there were 7.72 million sheep, 1.48 million goats, 2.56 million cows, 285.54 thousand buffalos, and 58.29 thousand camels in Iraq.

Animal ProductsQuantities
1Red meat (Ton)185.597
2White meat (Ton)235.316
3Milk (Ton)341.245
4Wool (Ton)8.489
5Fur (Ton)579
6Leather Count (1000)2.984
7Table eggs (million)1.118
8River fish (Ton)60.002
9Marine fish (Ton)18.855
10Total fish (Ton)78.857

Source: Ministry of Agriculture

The sharply rising oil incomes also provided a powerful stimulus for the service sector. Even under the Baath regime, internal commerce remained in private hands, though foreign trade was controlled by the state. Western Europe, Japan, and the United States were the most important customers for Iraqi oil in those years and, after the oil boom, also supplied most goods and services. The share of the Eastern Bloc rose in the 1960s but stagnated in the 1970s. The Soviet Union nevertheless remained Iraq’s largest weapons supplier during the war with Iran.

Investment in welfare and education was responsible for a large part of the growth in the service sector. From the mid-1970s on, Iraq had nearly free health care and free education up through the university level. In 1979 a large-scale and successful literacy program began. Older Iraqis remember how, thanks to the increase in oil revenues, their standard of living rose in the course of the 1970s.

Service Sector

The Iraqi economy has suffered from the devastating wars it waged. The turning point was the war with Iran, which began in 1980 and dragged on for eight years. As an extension of the war, a far-reaching militarization of the Iraqi economy took place. The budget was largely swallowed up in waging the war and in military purchases. Towards the end of the war, Iraq had almost a million men underarms.

During the early years of the conflict, Saddam Hussein’s regime did everything it could to protect the civilian population from the negative economic effects of the war, in a guns-and-butter policy. They were able to do so thanks to the monetary reserves Iraq held on the eve of war, estimated at about 35 billion dollars. As the war dragged on, and certainly after Syria shut down the pipeline across its territory in 1982, the regime began to feel the pressure economically. Wealthy neighbouring states, such as Saudi Arabia and Kuwait, which feared an Iranian victory, provided extensive financial support in those years, and the West, Japan, and the Eastern Bloc came to Baghdad’s aid, with credits. With the construction or expansion of capacity in oil pipelines via Saudi and Turkish territory, oil income again rose. All of this enabled Iraq to continue its war efforts.

Shock Therapy

After the fall of the Saddam Hussein regime, Washington undertook a fundamental restructuring of Iraq’s economy, in violation of international law, which denies an occupying power this authority. In imitation of the economic ‘shock therapy’ previously applied in Eastern Europe, the economy was completely opened up, the role of the state minimized, and the free market given unrestrained play.

Official rhetoric notwithstanding, Operation Iraqi Freedom was inspired primarily by economic motives and geopolitical considerations closely related to them. At stake was the conquest of a market that had until then been closed to the United States, in a country that possesses one of the largest oil reserves in the world. This became clear soon after the fall of the regime of Saddam Hussein.

On the basis of decrees issued by Paul Bremer, the head of the Coalition Provisional Authority (CPA), steps were taken to transform a government-guided economy into a free-market economy. unprecedented favourable conditions were created for foreign (i.e., primarily US) capital. For instance, with the exception of the energy sector, the entire economy was opened up for foreign investment; foreign investors can set up businesses without a permit and without a local partner, and there is no requirement to reinvest even a portion of the profits in Iraq; import tariffs were eliminated and replaced by a tax of 5 percent for financing reconstruction; the maximum income tax rate was reduced to 15 percent.

This policy, which led to considerable social polarization, ran into resistance from Washington’s Iraqi partners, whereupon the plans were modified though not abandoned. Although the Oil-for-Food Program formally ended in late 2003, the distribution of basic food packets has continued, anxious as Washington and the new Iraqi government is about the political backlash that stopping the program would provoke.


As a result of UN Security Council Resolution 1483 (22 May 2003), the UN trade embargo, which had been in force since August 1990, was ended. All of Iraq’s frozen funds in foreign banks, together with proceeds from the Oil-for-Food Program which had not yet been spent, plus all oil revenues generated after 22 May 2003, were deposited in the Development Fund for Iraq (DFI). This fund was managed by the Coalition Provisional Authority (CPA) until 28 June 2004; a twelve-member Program Review Board controlled the expenditures. Although this was Iraqi money, Iraqis formed a minority on the Board. On the eve of the installation of the Interim Government on 28 June 2004, nearly the entire DFI reserve had been spent. Large US corporations such as Halliburton and Bechtel received enormous orders, without competitive bidding. The absence of adequate audit control led to a waste of financial resources and fraud.

After 28 June 2004, the role of the CPA was taken over by the US embassy; with about 3,000 staff, it is the largest US embassy in the world. It had at its disposal the vast majority of the 18 billion dollars that the US Congress appropriated in October 2003 for reconstruction. Even after the formal transfer of power to the Interim Government on 28 June 2004, the United States was able, from its position of power and influence, to push through the further restructuring of the Iraqi economy and acquire a strong if the not dominant position in a potentially rich market.


Economic recovery was only conceivable if Iraq found relief for its huge debt. It was thus one of Washington’s priorities, working through the Paris Club (an organization of wealthy nations), to gain remission of 90 percent of the debt, arguing that the Iraqi people should not be paying for generations for the irresponsible policies of a dictator (the so-called ‘odious debt’ principle). This remission has not yet been granted.

A second condition for economic restoration was that there be a large-scale investment in reconstruction and development, particularly in infrastructure, which had been destroyed or badly damaged. The World Bank had already calculated that 55 billion dollars would be necessary. Priority should go to the oil sector so that Iraq could begin to finance further reconstruction from its own resources as quickly as possible. Until that point is reached, Iraq will be dependent on financial support from the international community. A large donor conference in Madrid in October 2003 produced pledges of 33 billion dollars,18 billion of it from the United States. The donors have made good on only small portions of their pledges since then, because of the undiminished dominance of the United States in Iraq. Washington soon had to pour in large sums of its own to keep the reconstruction on track.

The third condition for economic restoration was that peace, as well as law and order, should be restored.


Although economic recovery would have been difficult in any case, things became even worse after 2003, due mainly to the insurgency, which targeted not only foreign forces and Iraqi government officials and facilities but also economic facilities such as oil pipelines. In addition, after the bombing of the Golden Mosque in Samarra in February 2006 sectarian violence soon escalated to unprecedented levels, and many thousands of civilians were killed. About four million others were displaced within Iraq or ended up as refugees in neighboring Arab countries. Among them were many well-trained people who could have made a valuable contribution to the recovery of the economy. Kurdish authorities (Kurdistan Regional Government, KRG) allowed Arab businessmen and highly skilled technicians to transfer their economic activities to the Kurdish provinces, but their number was limited. From the end of 2008 on, due to a combination of factors (see Chaos subsides), the level of violence did gradually decrease, except for a spike from August 2009 until 2011, when it leveled off again. American troops left Iraq at the end of that year.


The number of hotels and tourist accommodation complexes reached 1,666 tourist facilities in 2018, an increase of 3% compared to 2017 (1,618 facilities). The province of Karbala was the highest at 44.9%, followed by the province of Najaf with 23.2%, Baghdad with 23.1%, and Basra with 3.2% of the total number of hotels in the country. The private sector accounted for 99.6% of the total number of hotels.

According to the CSSR, five-star high-grade hotels constituted 0.7% of the total number of hotels, primarily concentrated in the Baghdad province, 7 hotels, Basra (3 hotels, 1 hotel), and Karbala. At the same time, first-class hotels (four stars) existed at a rate of 2.4%, second-class hotels (three stars) 19.9%, and third-class hotels (two stars) 21.5%. Fourth-class hotels (one star) accounted for 20.6%. Popular hotels accounted for 35% of the total number of hotels.

There were 6.097 million guests in 2018, a 0.5% decrease from 2017 of 6.125 million. Baghdad saw the highest number of visitors, at a rate of 42.6%, followed by Karbala with 31.7%, Najaf with 20.2%, and Basra with 2.7% of the total number of guests/tourists.

The total overnight stays amounted to 10.7 million (beds/day) for 2018, a decrease of 10.3% compared to 2017, when it was 10.9 million (beds/day). The Karbala governorate accounted for 46.6%, the Baghdad governorate by 29%, the Najaf governorate by 15.4%, and the Basra governorate by 3.5% of the total overnight stays.

The number of workers was 8,920 for 2018, a decrease of 12.3% from 2017. Karbala Province was the highest at 37.9%, followed by Baghdad Province with 35.9%, Najaf Province with 14.7%, Basra Province with 7.1% of the total number of employees.

Basic Indicators: 

Indicators20192020Change ±
Total budget revenues (billion dollars)9341.6-51.4
Total expenditure (billion dollars)112100.4-11.6
Budget deficit (billion dollars)1958.8 -39.8
Public debt (% of GDP)121.5133.311.8
Fiscal year GregorianGregorian
Inflation (%)4.410.46
Reserves of foreign exchange (billion US$)65.7557-8.75
Exchange rates (Iraqi dinars (IQD) per US $ ) 1,1901,450260

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