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Iraq
Index
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 Française 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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