There are some encouraging signs. Currency reserves are stable and
growing at $12 billion. Consumer imports of computers, cell phones,
and other appliances have increased dramatically. New businesses are
opening, and construction is moving forward in secure areas. Because
of Iraq's ample oil reserves, water resources, and fertile lands,
significant growth is possible if violence is reduced and the capacity
of government improves. For example, wheat yields increased more than
40 percent in Kurdistan during this past year.
The Iraqi government has also made progress in meeting benchmarks set
by the International Monetary Fund. Most prominently, subsidies have
been reduced--for instance, the price per liter of gas has increased
from roughly 1.7 cents to 23 cents (a figure far closer to regional
prices). However, energy and food subsidies generally remain a burden,
costing Iraq $11 billion per year.
Despite the positive signs, many leading economic indicators are
negative. Instead of meeting a target of 10 percent, growth in Iraq is
at roughly 4 percent this year. Inflation is above 50 percent.
Unemployment estimates range widely from 20 to 60 percent. The
investment climate is bleak, with foreign direct investment under 1
percent of GDP. Too many Iraqis do not see tangible improvements in
their daily economic situation.