Iraqi Kurds seek to diversify economy away from oil

Iraqi Kurds are returning to agricultural production with world oil prices continuing to be dampened by reduced demand linked to the COVID-19 pandemic, according to French news site 24Matins.

Civil servants in the Kurdistan Region of Iraq have not been receiving their salaries, and some are returning to previously abandoned farms in order to make money, 24Matins said.

Officials said that the Kurdistan Regional Government (KRG) “only pays wages every couple of months”, and so “it’s better for farmers to tend to their fields than wait for the payday or for charity.”

Before the United States’ invasion of Iraq in 2003, many in the Kurdish region had survived on farming due to sanctions imposed on the regime of Saddam Hussein.

With growing Kurdish autonomy and oil wealth, many people left the agricultural sector, and investments from multinational oil companies saw the regional capital of Erbil transformed with the construction of skyscrapers and hotels.

The World Bank painted a gloomy picture for the Iraqi economy, which is one of the most exposed to oil prices. 

“Faced with this multifaceted crisis, growth is expected to contract by 9.5% in 2020, Iraq’s worst annual performance since 2003. Oil-GDP is expected to contract by 12% (capped by the OPEC+ agreement) while non-oil-GDP is expected to contract by 5% with sectors like religious tourism affected by COVID-19 measures”, the World Bank reported.

Kurdish economist Bilal Saeed told AFP the KRG had not made enough effort to diversify its economy away from oil.

“Instead of using that revenue to develop the agriculture, health and tourism sectors, the government of Kurdistan has focused mostly on developing its oil sector and ignored the rest,” he said.

This over reliance on oil also fueled corruption. Iraq’s patronage network, controlled by the two main parties, the Kurdish Democratic Party (KDP) and the Patriotic Union of Kurdistan (PUK), had failed to distribute the oil wealth equitably, according to the World Bank.

This has created a bloated public sector with over 1.2 million staff, with around 40 percent of them in the military and security sectors, out of a regional population of five million, according to 24Matins.