On May 6, 2020, Mustafa al-Kadhimi was sworn in as Iraq's new prime minister. The move ends nearly five months of deadlock, during which time Iraq has lacked a head of government. In his new position, Mr. Kadhimi will need to steer Iraq through an undoubtedly turbulent time. Low oil prices, the resurgence of ISIS, and years of corruption have caused seemingly irreparable harm to the Iraqi system. In this short brief, the Intelligence Ledger will present the economic, political, and security issues on the top of Kadhimi's to-fix list.
The Republic of Iraq is highly dependent on oil and gas for revenue. According to the US Department of State, over 87% of government expenditures are funded from crude sales. COVID-19 has caused significant damage to the oil and gas sector across the globe, and will undoubtedly have a major impact on government that are reliant on oil based products for growth, development, and revenues.
Prior to the virus, the government in Baghdad had already forecasted a $42 billion budget deficit in 2020 with crude prices remaining around $56 per barrel. Today, oil prices are now hovering at about $30 per barrel. The International Monetary Fund, after analyzing publicly available data, predicts that the Iraqi economy could shift as much as 4.7%.
The stabilization of Iraq's already weak economy will serve as perhaps the greatest challenge facing the new government. However, once high hopes for improving the economy are now dead in the water. The best possible outcome is that Baghdad maintains the status quo, and that economic instability doesn't become major social instability across the nation.
Prior to Kadhimi, Iraq had been without a functioning government since December 2019, when mass protests against government corruption rocked the nation and Prime Minister Adil Abdul-Mahdi resigned. The protestors demands included government reforms, laws to trigger early elections, and anti-corruption measures. The overwhelming majority of the population of Iraq is young and restless, with nearly 57% below the age of 24. If the government hopes to keep this generation from revolting in the way of the 2011 Arab Uprisings, it must make small political reforms and maintain the country’s basic economic safety net.
In 2014, the Islamic State swept across Iraq, threatening the very survival o the state itself. Today, IS has been defeated, with most of their territorial gains now lost. Iraq's mounting economic and social challenges, however, may give the organization room to reemerge in isolated pockets across the country. IS attacks in and around Baghdad show the organization remains a threat to the country, and the loss of revenue may impact the government's ability to effectively manage its security forces. Furthermore, the withdrawal of US and coalition troops will result in more responsibility for Baghdad in a short period of time.
In this short brief, the Intelligence Ledger has presented the main economic, political, and security issues on the top of Kadhimi's to-fix list. With COVID-19 threatening the nation, rampant government corruption, economic stagnation, low oil prices, sectarian conflict, an unexpected terror campaign by the Islamic State (IS), and a growing US-Iranian rivalry, the new administration in Baghdad has a lot to tackle. Stay tuned to our service for the latest on the events in Baghdad.