The “Oil Revenue Management for Economic Diversification in Iraq” focuses on strategies to manage Iraq’s oil revenues effectively while fostering economic diversification to reduce dependency on the oil sector. The report highlights the challenges of managing oil revenue volatility, the need for sound fiscal policies, and the critical role of public investment in enabling sustainable growth in the non-oil sector.
Key Highlights:
- Challenges in Oil Revenue Management:
- Iraq faces significant revenue volatility due to fluctuations in global oil prices.
- Over-reliance on oil revenues risks fiscal sustainability and limits economic diversification.
- Current fiscal policies emphasize short-term spending, which undermines long-term development goals.
- Economic Diversification:
- Public capital investment can have the most significant impact on non-oil GDP growth.
- Sectors with diversification potential include agriculture, manufacturing, and services, but structural barriers hinder their growth.
- The government must address inefficiencies in public investment management and capacity constraints to maximize the impact of diversification efforts.
- Policy Recommendations:
- Fiscal Policies: Develop a fiscal framework that smooths oil revenue volatility and ensures sustainable spending patterns.
- Public Investment Management: Strengthen systems to prioritize high-impact investments and improve the efficiency of capital expenditures.
- Private Sector Development: Foster an enabling environment for private sector growth, including better access to finance, regulatory reforms, and infrastructure support.
Note on Preparation
This report was prepared by a World Bank team led by Kevin Carey. Arun Arya, Task Team Leader of the World Bank’s Public Finance Management portfolio in Iraq, provided significant inputs along with other contributors. The report reflects a comprehensive analysis of Iraq’s economic challenges and offers actionable recommendations to manage oil revenues effectively and promote economic diversification.