Iraq's rentier economy: Risks and reforms
Shafaq News/ Iraq's continued dependence on a rentier economic model poses long-term risks, as it encourages a consumption-driven society and weakens domestic production, an Iraqi economist warned on Wednesday.
Speaking to Shafaq News Agency, economic expert Mohammed al-Hassani said, 'A rentier economy is usually fragile, creates a consumerist society dominated by imports, and neglects transformative industries — a description that fits Iraq.'
Al-Hassani urged the Iraqi government to take concrete steps toward developing the country's industrial and agricultural sectors to invigorate foreign trade. 'This would help generate higher state revenues, support the national income, and strengthen the federal treasury,' he added.
Recent data from Iraq's Ministry of Finance showed that revenues in the federal budget exceeded 27 trillion dinars (about $18,8M) between January and March 2025, with oil contributing 91% of the total — reinforcing the rentier nature of the economy.
According to financial reports released in June, Iraq's total revenues for the first quarter amounted to 27.25 trillion dinars, while total expenditures reached approximately 26.66 trillion dinars.
Oil revenues alone stood at 24.91 trillion dinars, accounting for 91% of total income. Non-oil revenues amounted to just 2.33 trillion dinars.
In a prior statement to Shafaq News, the prime minister's financial advisor, Mudher Mohammed Salih, attributed the persistence of Iraq's rentier economy to decades of war, international sanctions, and ongoing political instability — all of which have squandered the country's economic potential.
Salih added that Iraq's continued reliance on oil as its sole revenue source leaves it vulnerable to global market fluctuations. This dependence, he noted, often forces the country to resort to borrowing to cover fiscal deficits, highlighting weak financial management and the lack of viable alternative funding strategies.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Shafaq News
an hour ago
- Shafaq News
Oil falls as investors weigh chance of US intervention in Iran-Israel conflict
Shafaq News/ Oil prices fell on Thursday with investors hesitating to take new positions after President Donald Trump gave mixed signals on potential U.S. involvement in the Israel-Iran conflict, while the Federal Reserve left interest rates unchanged. Brent crude futures fell 20 cents, or 0.26%, to $76.5 a barrel by 0421 GMT, after gaining 0.3% in the previous session when high volatility saw prices fall as much as 2.7%. U.S. West Texas Intermediate crude for July fell 4 cents, or 0.05% to $75.10 a barrel, after settling up 0.4% in the previous when it dropped as much as 2.4%. The July contract expires on Friday and the more active August contract was down 8 cents, or 0.11%, to $73.42 a barrel. There is still a "healthy risk premium baked into the price as traders await to see whether the next stage of the Israel-Iran conflict is a U.S. strike or peace talks", Tony Sycamore, market analyst at IG, said in a client note. Goldman Sachs on Wednesday said a geopolitical risk premium of about $10 a barrel is justified given lower Iranian supply and risk of wider disruption that could push Brent crude above $90. Trump on Wednesday told reporters that he may or may not decide whether the U.S. will join Israel in its attacks on Iran. The conflict stretched into its seventh day on Thursday. Direct U.S. involvement would widen the conflict, putting energy infrastructure in the region at higher risk of attack, analysts said. As a result of the unpredictability that has long characterised Trump's foreign policy, "markets remain jittery, awaiting firmer signals that could influence global oil supply and regional stability," said Priyanka Sachdeva, senior market analyst at Phillip Nova. Iran is the third-largest producer among members of the Organization of the Petroleum Exporting Countries, extracting about 3.3 million barrels per day (bpd) of crude oil. About 19 million bpd of oil and oil products move through the Strait of Hormuz along Iran's southern coast and there is widespread concern the fighting could disrupt trade flows. Separately, the U.S. Federal Reserve kept its interest rates steady on Wednesday but pencilled in two cuts by the end of the year. Chair Jerome Powell said cuts would be "data-dependent" and that it expects accelerated consumer inflation from Trump's planned import tariffs. Lower interest rates would stimulate the economy, and as a result demand for oil, but that could exacerbate inflation.
Shafaq News
8 hours ago
- Shafaq News
Iraq's rentier economy: Risks and reforms
Shafaq News/ Iraq's continued dependence on a rentier economic model poses long-term risks, as it encourages a consumption-driven society and weakens domestic production, an Iraqi economist warned on Wednesday. Speaking to Shafaq News Agency, economic expert Mohammed al-Hassani said, 'A rentier economy is usually fragile, creates a consumerist society dominated by imports, and neglects transformative industries — a description that fits Iraq.' Al-Hassani urged the Iraqi government to take concrete steps toward developing the country's industrial and agricultural sectors to invigorate foreign trade. 'This would help generate higher state revenues, support the national income, and strengthen the federal treasury,' he added. Recent data from Iraq's Ministry of Finance showed that revenues in the federal budget exceeded 27 trillion dinars (about $18,8M) between January and March 2025, with oil contributing 91% of the total — reinforcing the rentier nature of the economy. According to financial reports released in June, Iraq's total revenues for the first quarter amounted to 27.25 trillion dinars, while total expenditures reached approximately 26.66 trillion dinars. Oil revenues alone stood at 24.91 trillion dinars, accounting for 91% of total income. Non-oil revenues amounted to just 2.33 trillion dinars. In a prior statement to Shafaq News, the prime minister's financial advisor, Mudher Mohammed Salih, attributed the persistence of Iraq's rentier economy to decades of war, international sanctions, and ongoing political instability — all of which have squandered the country's economic potential. Salih added that Iraq's continued reliance on oil as its sole revenue source leaves it vulnerable to global market fluctuations. This dependence, he noted, often forces the country to resort to borrowing to cover fiscal deficits, highlighting weak financial management and the lack of viable alternative funding strategies.
Iraq Business
9 hours ago
- Iraq Business
Construction starts at $300m Electrical Factory in Babil
By John Lee. Iraq's Prime Minister, Mohammed Shia Al-Sudani, officially launched the construction of the Diwan Factory Project in Babil Governorate on Wednesday. The strategic initiative by local company Etihad Group will produce electrical transformers, cables, and smart meters. The project, with a total budget of $300 million [approx. 393 billion IQD], is being built to the latest technical standards and is part of the government's broader strategy to localise electrical industries and reduce dependence on imports. Al-Sudani described the factory as a key step toward enhancing Iraq's energy security and supporting advanced smart technologies. He reaffirmed the government's commitment to supporting the industrial sector and enabling national manufacturing across all areas. The Prime Minister praised the efforts of Iraqi professionals driving transformative progress and emphasised the role of this project in laying the foundation for renewable energy initiatives and strengthening the national electricity supply chain. On his visit to the province, the Prime Minister also officially opened a major new flour factory, which is also being developed by Etihad Group. (Source: Prime Minister's Office)
