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Last Updated: Thursday, 2 October, 2003, 15:28 GMT 16:28 UK
Iraq will be poor 'for years'
Ceyhan oil terminal in Turkey used to export Iraqi oil
There are high hopes for Iraqi oil
Iraq will remain impoverished for years to come because oil will not fund public spending, aid will fall short of what is needed and few companies will want to invest there, a report leaked to Reuters news agency has said.

Even if oil prices are favourable, stability is achieved and debts are largely written off, Iraq's economy will not reach even half the size it was in the 1970s, the US-based Institute of International Finance (IIF) said in a document sent to its members and quoted by Reuters.

The grim predictions come as governments and international agencies meet in Madrid to prepare for an Iraq donors' conference later this month.

Reconstruction costs in Iraq are estimated to amount to at least $75bn but so far pledges stand at $20bn from the US and a mere $230m from the EU.

The IFF - a leading banking body in Washington - did not deny circulating the report quoted by Reuters but refused to comment on its contents.


The report said that Iraq's GDP (gross domestic product) per head would not surpass $3,500 in the next 10-15 years.

If reconstruction costs are added, the public financing gap in 2004 is set to be far larger, perhaps as much as $15 bn
IIF report
The country's GDP per head reached $7,000 in the late 1970s, but economic mismanagement, three wars and 13 years of sanctions has pushed that to around $1,000 per capita, a level which rates it among the world's poorest countries.

Elsewhere in the region, Saudi Arabia, for example, has had GDP per capita of $9,000 over the past five years.

Iraq has massive debts which the IIF estimates at $134bn, or 400% of gross domestic product.

The report said that assuming an oil price of $25 a barrel in 2004 and oil exports reaching no more than 2.5 million barrels per day by the end of next year, export revenues would be $10bn.

Investors reluctant

"Given that it could take up to $15bn to cover recurrent public expenditure in 2004, this would leave the government with a financing gap of around $5bn," the report said.

"If reconstruction costs are added, the public financing gap in 2004 is set to be far larger, perhaps as much as $15 bn," it added.

Foreign investment is expected to fill some of the gap, but the IIF said private companies would be reluctant to invest in Iraq until stability is achieved.

"Reconstruction is therefore likely to be a slow process, ensuring that Iraq remains a poor country for years to come," the report said.

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