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Iraq
GROWTH AND STRUCTURE OF THE ECONOMY
In the 1960s, investment in industry accounted for almost one-quarter
of the development budget, about twice the amount spent under
the monarchy in the 1950s. After the 1968 Baath revolution, the
share allocated to industrial development grew to about 30 percent
of development spending. With the advent of the Iran-Iraq War,
however, this share decreased to about 18 percent. Development
expenditure on agriculture fell from about 40 percent under the
prerevolutionary regime to about 20 percent under the Baath regime
in the early 1970s. By 1982, investment in agriculture was down
to 10 percent of the development budget.
Total Iraqi GDP, as well as sectoral contribution to GDP, could
only be estimated in the 1980s. On the eve of the Iran-Iraq War,
the petroleum sector dominated the economy, accounting for two-thirds
of GDP. The outbreak of war curtailed oil production, and by 1983
petroleum contributed only one-third of GDP. The nonpetroleum
sector of the economy also shrank, and, as a consequence, total
real GDP dropped about 15 percent per year from 1981 to 1983.
To a lesser extent, nominal GDP also shrank, from about US$20
billion to US$18 billion, an indication of high wartime inflation.
The decline in GDP was reversed between 1984 and 1986, when oil
production grew at about 24 percent per year as the government
secured outlets and resumed exports. But over the same period,
the nonpetroleum sector of the economy continued to contract by
about 6 percent per year, offsetting gains from increased oil
production. In 1986, the petroleum sector revived to the extent
that it contributed about 33.5 percent of GDP, while the nonpetroleum
sector, including services, manufacturing and agriculture accounted
for the remainder. Business services, the largest component of
nonpetroleum GDP, amounted to about 23 percent of GDP. Agriculture
accounted for about 7.5 percent of GDP, mining and manufacturing
for slightly less than 7 percent, construction for almost 12 percent,
transportation and communications for about 4.5 percent, and utilities
for between 1 and 2 percent. The total estimated GDP for 1986
was equivalent to US$35 billion.
Projections based on economic trends indicated that total GDP
would grow about 6 percent annually over the five-year period
from 1987 to 1991. In fact, however, 1987 GDP was estimated at
a 1.7 percent real growth rate. The petroleum sector would continue
to grow, although at a slower rate of about 8 percent per year,
and it would account for more than half of GDP. The nonpetroleum
sector was expected to resume modest growth in 1987. Construction
would be the fastest growing sector, at about 7 percent per year.
Agriculture would grow only marginally, and therefore its share
of overall GDP would decline from 1986 levels. Other nonpetroleum
sectors would grow at a rate of between 3 and 4 percent per year
and, because these projected growth rates were smaller than the
overall GDP growth rate, would likewise decline as a percentage
of total GDP.
In early 1988, Iraq's total external liabilities were difficult
to determine accurately because the Iraqi government did not publish
official information on its debt. Moreover, Iraqi debt was divided
into a number of overlapping categories according to the type
of lender, the terms of disbursement or servicing, and the disposition
of the funds. For example, some loans were combined with aid grants
in mixed credits, and some loans were authorized but never disbursed.
And, in a process of constant negotiation with its creditors,
Iraq had deferred payment by rescheduling loans. Finally, some
loans were partially repaid with oil in counter-trade and barter
agreements. Nevertheless, experts estimated that Iraqi debt in
1986 totaled between US$50 billion and US$80 billion. Of this
total, Iraq owed about US$30 billion to Saudi Arabia, Kuwait,
and the other Gulf states. Most of this amount was derived from
crude oil sales on Iraq's behalf. Iraq promised to provide reimbursement
in oil after the war, but the Gulf states were expected to waive
repayment.
A second important category of debt was that owed to official
export credit agencies. The authoritative Wharton Econometric
Forecasting Associates estimated in 1986 that Iraqi debt guaranteed
by export credit agencies totalled US$9.3 billion, of which US$1.6
billion was short-term debt and US$7.7 billion was medium-term
debt.
In the category of private sector debts, Iraq owed up to US$7
billion to private companies that had not secured the trade credit
they extended to Iraq with their government export credit agencies.
The firms that were owed the most were based in Turkey, in the
Republic of Korea (South Korea), and in India, which lacked access
to official export credit guarantees. European companies were
also owed large amounts. By the late 1980s, Iraq had placed a
priority on settling these private sector debts. In addition,
Iraq owed an estimated US$6.8 billion to commercial banks as of
mid-1986, although much of this sum was guaranteed by government
export credit agencies.
In the realm of government debts, Iraq had accrued considerable
debts to Western governments for its purchases of military materiel.
Iraq owed France more than US$1.35 billion for weapons, which
it was repaying by permitting Elf-Aquitaine and Compagnie Franηaise
des Petroles-Total (CFP)--two oil companies affiliated with the
French government--to lift 80,000 barrels of oil per day from
the Dortyol terminal near Iskenderun, Turkey. Finally, Iraq owed
money to the Soviet Union and to East European nations. Iraq's
debt to the Soviet Union was estimated at US$5 billion in 1987.
Data as of May 1988
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