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Weapons of Mass Destruction (WMD)

Backgrounder: Economic Doldrums in Iraq

Council on Foreign Relations

Author: Lionel Beehner, Staff Writer
June 19, 2007


Iraq’s lackluster economic development and rampant unemployment help contribute to its high levels of violence. With few jobs created since 2003, experts say Iraq’s younger populations are easily recruited by militant groups to take up arms. Much of Iraq’s economy is tethered to its oil industry, which is underperforming because of corruption and security setbacks. Still, there are small pockets of economic life returning to Baghdad as local markets reopen and neighboring states have extended promises of foreign debt forgiveness. But without political reform, civil society development, and improved security, experts say economic progress will be limited.

What is the status of Iraq’s economy?

Iraq’s $42 billion economy continues to be hobbled by rampant unemployment, sluggish growth, and insufficient oil revenue. Joblessness is anywhere between 30 and 50 percent, while a private sector has failed to materialize. “Of the nearly $20 billion of U.S. appropriated funds to reconstruct Iraq, only $805 million was directed toward jump-starting the private sector,” write Johanna Mendelson-Forman of the Center for Strategic and International Studies and Merriam Mashatt of the U.S. Institute of Peace. Meanwhile, economic growth in Iraq remains around 4 percent, according to the World Bank, though estimates vary. And revenue from oil production—whose monthly levels of roughly 2 million barrels per day (bpd) falls short of the 2.5 million bpd target—is about $3 billion per month, a pittance given Iraq’s vast, though undeveloped, oil reserves.

What factors contribute to Iraq’s poor economy?

  • Lack of security. About one out of every five dollars that goes toward nonmilitary Iraqi reconstruction is spent on security, U.S. officials estimate. “It’s incomparably more problematic than either corruption or bureaucratic red tape,” Stuart Bowen Jr., who heads the office of the Special Inspector General for Iraq Reconstruction (SIGIR), told in May 2006.

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Copyright 2007 by the Council on Foreign Relations. This material is republished on with specific permission from the Reprint and republication queries for this article should be directed to

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