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Thursday, February 15, 2024

Reconstructing Iraq: Role of IMF and World Bank

ISIS and the pandemic destroyed Iraq and its economy. Due to this, the Iraqi population suffered a lot. However, to help Iraq, the IMF and World Bank are effectively working to improve the condition of the country.

|Ameer Usama

Iraq currently stands on a delicate pedestal globally, with aggravated local and international issues. After the destruction caused by ISIS, the pandemic and the drop in oil prices have caused more complications for the already troubled state.

After the Second World War, in July of 1944, an international conference was held in Breton Woods, New Hampshire in the United States of America. The International Monetary Fund (IMF) and the World Bank came into being during this conference which was mainly held with the aim of achieving stability in the global economy after the destruction caused by the war.

Read more: IMF predicts Middle East economy to nosedive

At the same time, they also aspire to benefit the member states and their overall condition. After the rehabilitation of the war struck countries in Europe, these organizations moved towards underdeveloped states to help them stabilize their economies. Iraq was one of the states that acquired their help, especially after its downfall as a result of the war.

Destruction in Iraq

The conflict inflicted by ISIS had caused enormous destruction and forced over 5 million Iraqis to flee their homes, turn schools and hospitals into revels. Seven governorates were greatly impacted and the entire state felt the shockwaves. Today the drop in oil prices and COVID-19 pandemic are putting phenomenal strains on its economy.

A problematic political circumstance, feeble healthcare system, incapable social safety nets, widespread corruption, and frail assistance conveyance, all enhance this delicacy and have powered enormous scope protests the nation over.

Read more: Iraqi protesters torch Iran consulate amid deadly protests

While the government has been stating its grasp on security and illegal weapons and, in light of the protests, has declared a date for new parliamentary elections, it has been battling to manage the economic difficulties it faces.

Previous conditions, its substantial reliance on oil, the strength of the state in economic activities, and a helpless business climate have remained a huge matter of concern and at the same time, budget rigidities have consolidated to restrict the government’s ability to react to the COVID-19 flare-up and to offer a boost package to restart the economy.

World Bank assisting Iraq

The World Bank has actively entered the stage to assist Iraq after the destruction it has faced. It plans to stabilize the Iraqi economy and to re-establish the trust of the population in its government. For this, a long-term economic program is required with the inclusion of government and community efforts.

As a result of this, in October of 2019, the Government of Iraq signed a “Memorandum of Understanding (MoU)” with the World Bank Group. This aimed at countering the above-mentioned impediments to formulate a constructive program.

Read more: Protests Work: Iraqi PM announces reforms

A five yearlong “Country Partnership Framework (CPF)” was developed by the World Bank. The goals of the CPF include the improvement of the government, its accountability, and transparency. Furthermore, it included the improvement of the human capital and infrastructure of the state. These processes include increased engagement by the citizens as well as equal inclusion based on gender.

Climate change is also an issue upheld as a part of this. Iraq’s own “National Development Plan” is in line with the CPF. The Bank has released a detailed analysis of the health, pension and education system of Iraq under the “Iraq Human Development Public Expenditure Review Report”. This offers policy-based recommendations in order to boost these sectors.

Read more: Life comes back to bookshelves in Iraq

IMF’s suggestions for Iraq

The IMF has also been seen actively helping in the stabilization and reconstruction of Iraq. The COVID-19 pandemic has hit the world hard and Iraq is no exception, the country has faced a sharp decline in oil prices leading to an array of economic vulnerabilities. The IMF has actively investigated the reforms required for re-establishment in the country.

An IMF team led by Toukhir Mirzoev held a virtual session with Iraqi authorities on how to deal with such economic hazards amongst a pandemic. At the end of the session, Mirzoev said that the pandemic has done no favors to the country by directly hitting its oil backbone.

Current GDP estimation has decreased around 11 percent in 2020. The sharp decline in oil revenue is expected to widen the fiscal and external current account deficits to 20 and 16 percent of GDP respectively.

Read more: China gifts Iraq 50,000 Sinopharm corona vaccines

As the country enters the near term of its current government, certain decisive policies are needed for stabilization amidst the current situation. The first step would be to add revenue to the procurement of viable vaccines and management of the health crisis.

The fiscal policy of the 2021 budget should deal specifically with areas of fiscal vulnerability, and try to reverse the unsustainable expansion of wage and pension bills, reducing inefficient energy subsidies, and raising non-oil revenues.

Addressing the midterm policy, Mirzoev stated that the focus should be on strengthening public finances to enable critical health and social expenditure needs, reforming the electricity sector, fighting corruption, and expanding institutional capacity.

Read more: In Iraq’s Mosul, new statues rise from ashes of IS rule

Tending to Iraq’s administrative shortcomings

An extensive civil service reform would reinforce the adequacy of the public area while diminishing fiscal expenses. Recalibration of the annuity framework is expected to guarantee its manageability. Stemming the power sector’s mounting financial hazards and reforming the area will upgrade service provision and guarantee its financial sustainability.

Upgrading the tax and customs strategy and organization will help calibrate fiscal incomes. These endeavors should be joined with enhancements in open financial administration and reforms to limit fiscal dangers coming from the government and other unexpected liabilities.

Decreasing debasement will be crucial for Iraq’s future financial turn of events. Disentanglement, digitalization, and accountability of key public services and foundations would diminish the chances of corruption, particularly in open acquisition.

Read more: Iraq’s food markets made self-sufficient amid pandemic

Similarly, reinforcing reviews, improving lawful and administrative systems in accordance with global guidelines and extending limits with regards to risk-based supervision, and implementing consistency with AML/CFT rules will help fortify public and investor trust. The IMF team leader also thanked Iraqi authorities for their cooperation in the betterment plan.

The IMF and World Bank have effectively worked and continue to work in Iraq for its re-establishment. They have successfully aimed at all essential sectors in the state with the main focus on the government and civilization. A continuation of their plans will surely erase the war-torn years of Iraq’s history.

Read more: After years of war Iraq now battles corruption

Ameer Usama is a researcher interested in the security and socio-economic dynamics of the Middle East. He can be reached at ameerusama10@gmail.com. The views expressed in the article are the author’s own and do not necessarily reflect the editorial policy of Global Village Space.