Iraq: Iraq's Economy: An Empty Chest

Mar 21, 2015 | The Economist
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Almost 90% of government revenue in Iraq comes from oil. Yet the price of the stuff has fallen by more than half over the past year, and the volume of Iraq’s exports has fallen by a fifth, even as the government embarks on an expensive military campaign against Islamic State (IS), the militant group that has taken over much of the north and west of the country. The country’s fiscal problems, in short, are almost as big as its political ones.

In January Iraq’s parliament passed a budget of 119 trillion Iraqi dinars ($105 billion). That constitutes a 16% cut in spending: funds to every ministry were slashed. The budget also attempts to raise revenue, by introducing a sales tax on mobile and internet top-up cards, airline tickets, vehicles, alcohol and cigarettes. It nonetheless projects a deficit of 25 trillion Iraqi dinars, or about 9% of GDP.