The breach of the blast walls towering in the way of Baghdad’s highly fortified Green Zone marked a crucial moment. It has laid bare, once again, the widening chaos that have brought Iraq’s security and economy to the knees ever since 2003.
The storming of parliament and the hitherto impenetrable Green Zone, which houses foreign diplomatic missions, important political institutions and government offices, has undermined Prime Minister Haidar al-Abadi’s reform push amid allegations of omnipresent corruption and patronage.
Almost two years after Islamic State militants captured Mosul, the country’s biggest northern city, government forces are struggling in the fight against the militant group. The war, as well as the plunge in oil prices, has battered the finances of the second-largest producer in the Organisation of Petroleum Exporting Countries.
What does the latest crisis mean for Iraq’s war-torn economy?
On the brighter side, the prolonged fighting against the IS and the current political unrest haven’t dented crude production based in the south. Exports approached a record high in April, with shipments rising to 3.36mn bpd, or 101mn barrels for the month. The International Monetary Fund estimates Iraq’s oil gross domestic product will expand 15.8% in 2016.
Iraq’s oil revenue, however, has plunged as global prices have plummeted by an estimated 70% from their mid-2014. The financial crunch is compounded by the government’s expensive war against the IS, which captured swaths of northern Iraq in the summer of 2014, has destroyed economic infrastructure, disrupted trade and discouraged investment.
Iraq’s almost entirely oil-fuelled economic growth slumped to 2.4% last year compared with an average of 12.7% from 2000-12, according to the IMF. Gross government debt is projected to reach 93% of economic output this year. The prolonged imbroglio could also affect Iraq’s ability to secure a much-needed IMF loan agreement, which could also help the country tap international debt markets.
Even though the protest was largely peaceful, the unprecedented breach of the Green Zone raises alarm bells. Following the ouster of Saddam Hussein in 2003, the area served as an intimidating symbol of American hegemony in the country; later on it showed off the growing influence of the country’s new governing elite.
In a wider sense, Iraq, a country on the borders of Saudi Arabia and Kuwait, is in the midst of a make-or-break struggle for existence. And what comes of it, as well as other regional conflicts, could help redefine the political future of the Middle East; it could either bring about lasting peace or incite further conflicts in the region.
For Iraq, the compelling priority of any government should be to address the concerns of its Shia, Sunni, Kurdish as well as other minority sects to start building the elusive unity. The country has to rebuild a war-torn economy with its abundant oil riches. Political stability and peace, for sure, is a prerequisite to bring about economic growth.
A stable Iraq, undoubtedly, is in the best interest of other countries in the region.
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