Why might this government be the most important turning point in the history of the Iraqi economy?

Why might this government be the most important turning point in the history of the Iraqi economy?

5-31-2026

Researcher Shatha Khalil*
The speech of Iraq’s new Prime Minister, Ali al-Zaidi, was not merely an announcement of a new government program; it was laden with economic and political messages reflecting the magnitude of the challenges facing the Iraqi state at this pivotal moment in its history. When the government speaks of comprehensive economic reform, combating corruption, stimulating investment, and supporting the private sector, it implicitly acknowledges that Iraq is not facing a passing financial crisis, but rather a structural crisis that has accumulated over many years and has impacted the state’s ability to achieve sustainable development.

Iraq today remains almost entirely dependent on oil revenues to finance its general budget, while other productive sectors have a limited impact. This is what is known economically as a rentier economy, a model that makes the country’s future more dependent on global oil prices than on production, investment, and innovation. Given the rapid global shift towards alternative energy and modern technology, the continuation of this model is fraught with long-term risks.

This underscores the importance of discussing support for the private sector. The issue is not simply about encouraging entrepreneurs or attracting investors, but about redefining the relationship between the state and the economy. Governments cannot indefinitely absorb hundreds of thousands of young people into the public sector, while Iraq needs to create new job opportunities annually to accommodate the growing number of graduates and job seekers. Therefore, building a productive economy capable of generating added value is no longer an option, but a strategic imperative.

But corruption remains the biggest and most complex challenge. Corruption in Iraq is no longer merely administrative overreach or individual transgressions; it has become an interconnected system that has undermined the efficiency of institutions, depleted resources, and eroded the trust of both citizens and investors. Therefore, any genuine reform project will not be measured by the number of statements issued or temporary committees formed, but rather by the government’s ability to build an oversight and institutional framework capable of uncovering shortcomings, holding officials accountable, and closing the loopholes that allow mistakes to be repeated.

If the government is serious about addressing this issue, it must move from pursuing individual cases to a comprehensive review of the state’s performance since 2003. True reform begins with understanding what has happened over the past years, how the enormous budgets were spent, and what results have actually been achieved on the ground. This underscores the need for an independent national body comprised of economic, financial, legal, and technical experts to review government projects and public spending, and to evaluate institutional performance across various ministries and governorates.

The aim of this review is not merely to uncover wasted funds or assign responsibility, but to measure the true economic cost of corruption. Every stalled or delayed project, every inflated contract, and every investment opportunity lost due to mismanagement represents a direct loss to economic growth, jobs, and public services. In other words, corruption doesn’t just steal money; it steals years of development that could have transformed the lives of millions of citizens.

Such a review would also allow for an assessment of the effectiveness of government policies and the administrative leadership that managed institutions during previous phases, and determine whether senior positions were assigned based on experience and competence or on political quotas and party affiliations. This point, in particular, represents one of the key elements of any long-term reform, because building a strong state begins with building institutions led by experienced and qualified individuals.

Politically, this path is no less important than its economic significance. Countries are not measured solely by the size of their resources, but also by their ability to manage those resources efficiently, equitably, and transparently. The higher the levels of accountability and governance, the greater the citizens’ trust in the state, and the more capable Iraq becomes of attracting investment and building strong economic ties with the world.

Iraq stands today before a historic opportunity that may not present itself again. Either reform will transform into a genuine national project that rebuilds institutions, liberates the economy from excessive dependence on oil, and lays the foundations for sustainable development, or reforms will remain confined to mere promises and slogans. Ultimately, the question that will determine Iraq’s future is not how much natural wealth it possesses, but how it manages these resources and transforms them from a temporary source of income into a foundation for building a strong economy and a state with institutions capable of meeting the challenges of the future.

Economic Studies Unit / North America Office,

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