Iraq’s economy is heavily burdened with debt. For the most part, this is a legacy of the embargo imposed by the international community following former president Saddam Hussein’s (1979-2003) invasion of Kuwait in 1990. Yet it continues to have a significant impact by limiting the country’s economic promise today. Fiscal deficits put pressure on state coffers and affect the government’s ability to address high rates of poverty.

The debt burden has exacerbated Iraq’s overreliance on oil by forcing successive government to focus on repayments rather than creating a diverse economy based on agriculture, tourism, industry, and commerce. Compounded over time, this has meant that revenues from commodity exports have continued to fund the bulk of government budgets, with oil sales accounting for nearly 96% of total income.

Types of debt

Iraq holds three kinds of debt, according to Mazhar Muhammad Salih, an economic advisor to Iraq’s federal government.

First, there is 50B USD in domestic public debt, Salih explained. The Central Bank of Iraq (CBI) holds 63% of this debt and pays between 2% and 3% interest per year, the Iraqi expert elaborated. The remainder of this type of debt is held by state-owned commercial banks. These are paid off through the issuing of one-year treasury funds, with interest payments coming from...