SYRIA CONFLICT BITES
A civil war in Syria has also raised the political temperature in the country and added to the uncertainty.The political troubles have meant economic reforms have taken a back seat, and the country has depended heavily on the oil sector over the past decade.To be sure, the oil sector has stepped up for the Iraqis. Thanks to soaring crude oil production, GDP per capita has more than quadrupled from USD 1,300 in 2004 to USD 6,300 in 2013. Iraq produced more than 3 million barrels per day earlier this year - its highest level in 30 years."Oil production will rise gradually by about 400-500 thousand barrels per day (bpd) per year, reaching 5.7 million bpd by 2018," the International Monetary Fund said.Despite these impressive numbers, Iraq remains vulnerable to oil price shocks. Its breakeven price of USD 102 per barrel is among the highest in the region - a remarkable statistic given that Iraq is considered one of the lowest-cost producers in the world with favorable geological basins. The high fiscal breakeven oil price is more a reflection of the heavy burden carried by the country's oil sector.
"Regulation should be streamlined, made more consistent, and focused on assisting, rather than constraining private-sector operators," said the IMF in a recent note on the country.In addition, state-owned enterprises that dominate every aspect of the economy, from the banking sector to agriculture, also need to be reviewed.
"The authorities should launch a comprehensive triage of SOEs, leading to the operational restructuring, governance reform, and recapitalization of those that can be rehabilitated and the closure of unviable enterprises."Clearly, the challenge for the authorities is to channel the oil wealth to other sectors, and nurture the private sector to bring more Iraqis into the economic fold."Failure to do so could expose the economy to the harmful effects of the natural resource curse - weak governance, rent-seeking behavior, loss of competitiveness, and a stunted non-oil private sector," said the IMF.
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