Iraq’s converging crises will set back fiscal reform

Significance

Promised extra food rations have yet to appear, deepening economic pressure on households. Last year’s twin shocks of the pandemic and oil-price collapse contributed to a fiscal and socioeconomic crisis. The revised 2021 budget, signed into law on April 8, avoids structural economic reforms ahead of parliamentary elections due in October.

Impacts

• The government’s lack of policy credibility will make it difficult to secure a reform-linked long-term bailout package from the IMF.
• Riyadh and Abu Dhabi will offer limited reconstruction assistance, seeking to counterbalance Iranian influence.
• Service delivery, especially of electricity, will be critically constrained as the government deprioritises capital expenditure.