Iraqi Economists Network

شبكة الاقتصاديين العراقيين

The Iraqi National Economy

Reconstruction of Iraq Debt, Construction Boom, and Economic Diversification , By Dr. Ali Merza

For full text of the paper including end-of-paper tables and appendix, click PDF file


A set of macroeconomic, development and social issues is taken-up in this paper. The argument starts from the fact that a construction boom is forthcoming, which is initiated and fuelled by sizable investment programmes. This is bound to raise important policy issues and unleash a host of economic and social consequences. Ensuing developments take place within an economic structure that had been exposed to repeated structural breaks. Our projections, for the coming decade, show that the commanding role of oil revenues could continue, thus risking the perpetuation of the rentier economy. On the other hand development efforts, especially during the critical ten years ahead, will be threatened seriously by the looming burden of debt and reparations service. Based on our projections of a balance of payments gap we find out that a reduction in external debt of about 80% is necessary to sustain development and growth. The envisaged new set of institutional and policy changes will transform the closed economy to an open one and would, most likely, improve economic efficiency. However, if not augmented by deeper structural reforms the dependence on oil may continue. The paper recommends a set of structural reforms in the education, economic and social spheres that may enhance the opportunity for economic diversification, which is not only necessary for sustainable economic development but also equally important for social and political stability and accountability.

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