Estimates from the Iraqi Government put the total cost of reconstruction at $100 billion, with Mosul alone requiring $30 billion.
Reconstruction efforts are commencing in areas of Iraq destroyed as a result of ISIS “scorched earth” tactics. In October 2017, Iraq formally declared an end to military operations against ISIS militants. But the success of Iraq’s operations have come at a high cost: previously occupied cities and provinces such as Nineveh, Anbar and Salahuddin have faced up to 80% destruction.
The Iraqi Ministry of Planning and World Bank (WB) estimate that reconstruction will cost $100 billion, with Mosul alone requiring $30 billion, and will take up to ten years.
In February 2018, 150 investment projects were presented to an international conference for reconstruction in Kuwait, in co-ordination with the Kuwaiti Government, International Monetary Fund (IMF) and United Nations.
The conference was attended by 2000 local and international companies from 70 countries. It raised $30 billion, mostly in the form of sovereign loans, with the conference well received in Iraqi circles. However, many foreign investors and countries are waiting until after Iraq’s May elections before making a decision on investment. “They want to know the composition of the government first”, a senior US official told Foreign Policy. “In part because investors fear a rise in Iranian influence”.
“The conference showed that the international community does not trust the Iraqi government due to its corruption and the inappropriate environment for investment in the country”, Professor Salam Samisem, a finance and economics expert, said before questioning what Iraq has to offer as collateral.
The absence of legal accountability and weak laws of integrity mean that Iraq has become one of the world’s most corrupt countries since 2003. Furthermore, the investment environment is inappropriate because of the unstable security and political situation and lacks the necessary guarantees to protect investors. This requires the US to act as guarantor for Iraqi loans.
Financial specialists have asserted that if Iraq accepts foreign loans, its monetary policies would be be hostage to WB and IMF policies for the foreseeable future. Prime Minister, Haider al-Abadi, has already stated that the country will not accept loans which go beyond amounts with affordable repayments from its federal budget. But ongoing financial crises, including oil prices falling for a third month running and a growing budget deficit, mean that the country will struggle to meet reconstruction costs without international assistance.
Despite Turkey pledging a further $5 billion to Iraq, the loan could be threatened by ongoing disputes between the two countries over the presence of Kurdistan Workers’ Party (PKK) forces in northern Iraq, especially if Turkey believes Iraq is not responding adequately to counter the PKK threat. Rumours of Turkish forces conducting operations in Sinjar this week threatens to further undermine the future of Turkey’s reconstruction loan.