IMF Gives Iraqi Reconstruction Poor Marks

The International Monetary Fund Emergency Post-Conflict Assistance program keeps an eye on the Iraqi economy and the reconstruction of the country. Its latest report is not all that promising. While each political actor on the stage has his own ax to grind and therefore his own interpretation of the facts, this is one instance where statistics give a pretty accurate picture of the progress thus far -- and it isn't enough.

In 2005, GDP is now expected to be about 3.7%. For the USA, that is a respectable figure representing billions of dollars of new wealth. For some members of the EU, it would be a miraculous result. For Iraq, where the economy has been devastated by three wars and a decade of sanctions, it is a pittance. Worse, it is a downward revision from the 16.7% the IMF initially expected. And worst, it is radically down from 2004’s 46.5% growth (admittedly from a small base).

Oil production was expected to rise to 2.4 million barrels a day in 2005, but now, the IMF says that it will be flat at 2.0 million. Before the US-led invasion, Iraq was pumping 2.5 million. And this affects oil export revenues that were supposed to pay for the war. The IMF expects the country to earn 27.6 trillion dinar (US$1=1,475 dinar – officially) in 2005 up from 25.3 trillion in 2004. This would be impressive, or at least a sign of progress, but it took oil to rise above $50 a barrel to make it happen.

Inflation is running at 20% annually, an improvement over 32% in 2004, but not as good as the 15% the IMF had initially expected. Meanwhile, tax revenues have almost doubled from 160 billion dinar in 2004 to 315 billion in 2005, still shy of the 393 billion expected initially for the year. It’s progress, but it’s also a mere $216 million. Not enough to fight an insurgency, pave roads, pay teachers and policemen or do much of anything that needs doing.

Nor does it look like foreign assistance is going to help in the near future. The US still hasn’t spent everything in Iraq it planned to spend. Not a single foreign bank that got a license to do business in 2003 has opened up Iraqi operations. Insurance and security now eat up 30-50% of reconstruction costs, money that could be spent on capital development. The spin depends on where one sits, but the statistics are what they are.


© Copyright 2005 by The Kensington Review, J. Myhre, Editor. No part of this publication may be reproduced without written consent.
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