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COVID-19 outbreak, low oil prices put Iraq's stability at risk: report

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In an alarming prophecy, the Economist, a British renowned magazine, warned of the repercussions of the drop in oil prices on the Iraqi economy.

It said that Iraq will face severe risks due to the spread of coronavirus amid low oil prices, calling on the government to find a way out of the looming crisis.

In a report, the British magazine said that cars still pack the roads, pilgrims still pray at shrines and people still gather in shops. Many see covid-19 as either a hoax or a fast track to paradise, so they feel no obligation to comply with the government’s order to stay inside.

The government itself seems unprepared. Iraq claims to have just 1,122 cases of the virus, but it is accused of minimizing the number. Its public hospitals are not equipped to handle a big outbreak.

If the virus was Iraq’s only problem, that would be enough. Alas, the country is nearly bankrupt—the result of a precipitous decline in the price of oil, which supplies more than 90% of government revenue. Its politics are also a mess, with parties unable to agree on a new prime minister. Iraq’s militias are running amok, while the ISIS terrorists regroup.

America and Iran, which helped Iraq muddle through past crises, are focused on fighting each other. Fears are growing that the state will collapse, says an Iraqi official.

Saudi Arabia and Russia are in talks over oil-production cuts, which would provide some relief to Iraq by raising prices. But even if the price of oil jumps by half, Iraq would still be looking at a sizeable budget deficit.

As it is, the government cannot afford to pay salaries in the ever-expanding public sector. It has around $60bn in cash reserves, but that could run out by the end of the year, leaving it dependent on a loan from the IMF, which may not be forthcoming.

The state’s 7m employees and pensioners are worried. “Without salaries, that’s the end of Iraq,” says Mowaffak al-Rubaie, a former national-security chief.

That may sound alarmist, but Iraq does not have much of a private sector to fall back on. Many firms rely on government contracts. Much of the sector is informal. With a curfew in place, travel restricted and the borders closed, commerce has slowed considerably.

Even before the virus, many Iraqis struggled to get by. Such hardship, along with blatant corruption, sparked big protests, beginning last year.

Finally, some observers stressed the need to rapidly move to find out solutions to the crisis in Iraq and to face the repercussions of the deadly virus and the drop in oil prices.
Last Modified: Wednesday، 15 April 2020 03:56 AM
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