Thursday, August 23, 2007

The Iraqi Economy

Yesterday I posted an article about the recently issued IMF report on the Iraqi economy, and I prejudged the report - I didn't even read it.  I assumed that this is just another American institution of government and commerce trying to pressure the Iraqi government into passing an oil law that would benefit western oil companies, but the report actually has some very good observations and suggestions.  Anand provided the link to the report (thanks Anand) - you can read the report here.  IMF "Directors commended the Iraqi authorities for keeping their economic program on track by strengthening economic policies and making progress in structural reforms, despite an unsettled political situation and a very difficult security environment. They noted, however, that the expansion of oil production is lagging, and that inflation, while on a downward path, remains high, reflecting in large part continued shortages, notably of fuel products. Directors considered that Iraq's economic prospects hinge critically on an improvement in the security situation."

The world has become dependent on energy - for transportation and electricity, which are key to any economy.  That is why insurgents have repeatedly attacked Iraq's electrical and oil infrastructures - they want to cripple the Iraqi economy.  The US military looks at the positive:
WASHINGTON, Aug. 22, 2007 – 'Efforts to resuscitate Iraq's electrical power grid are making progress despite challenges posed by insurgent-generated attacks on power lines and fuel pipelines, U.S. and Iraqi officials said at a Baghdad news conference today. (Video)

As part of its national plan, the Iraqi government has earmarked $40 million in annual spending over the next several years to increase electric power-generation capacity, Karim Wahid al-Hassan, Iraq's minister of electricity, told reporters.

The Iraqi government seeks to add power-generating units in every province, Hassan said. Current estimates say Iraq now requires about 9,500 megawatts of electricity to power its society. The country's electrical power-generation capability is expected to top 4,500 megawatts over the next few months, the minister added.

Hassan predicted it'll require three to four more years to totally rehabilitate and restore Iraqi's electrical power infrastructure. The power grid became severely dilapidated through government neglect and war damage during Saddam Hussein's regime, he said.

The Iraqi government wants to spend $40 million per year to repair and upgrade Iraq's electrical infrastructure. Compare that to how much the US has spent on Iraq's electrical infrastructure since 2003: $4 BILLION

'The United States has invested more than $4 billion to rehabilitate Iraq's post-Saddam electrical infrastructure, he said. But satisfying Iraq's electrical needs is proving to be a moving target, the general said, noting that the country's electric power demand has increased by more than 70 percent since 2004.'

I heard that Maliki's government has a budget of $40 billion this year.  So they want to spend just one tenth of 1% of their budget on upgrading Iraq's vital electrical infrastructure.  I think they can do better than that. 

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