Coronavirus, falling oil prices leave Iraq reeling in crisis

Country struggling to finance ways to contain pandemic amid losses

BAGHDAD—The

economic fallout from the coronavirus coupled with a sudden drop in oil prices is threatening to catapult Iraq into an unprecedented crisis.

The crude-exporting country is struggling to finance measures to contain the pandemic amid a leadership void in the federal government, and the unexpected oil price war between Russia and Saudi Arabia is further exacerbating budget shortfalls as losses accrue daily in trade, commerce, tourism and transportation.

“This epidemic is striking our economy more than it is striking our health,” said Thamir Gharib, a hotel owner in Karbala. The Shiite holy city in southern Iraq that hummed with religious pilgrims all year long is now ghostly quiet.

Gone are the dozens of buses primarily from neighbouring Iran, the Gulf and Europe carrying visitors to the Imam Hussein shrine and filling up Karbala’s hotels and restaurants.

Revenues from tourists who travelled to holy sites in Iraq accounted for nearly eight per cent of the country’s GDP, according to figures from the World Travel and Tourism Council.

But as the global pandemic takes hold of the country, religious tourism has ground to a halt and Gharib’s hotel doors — like others in Karbala and the nearby city of Najaf — are shuttered.

A potentially weeks-long curfew went into effect in the capital Baghdad earlier this week, further compounding economic losses.

“If we calculate the damages with the fall of oil prices, it’s no less than $120-130 million (U.S.) per day,” said Mudher Saleh, financial adviser to the prime minister.

“It is necessary to legislate an emergency budget in the short term that provides financial sustainability at this stage to meet the necessary needs,” he added.

But Iraqi officials appear to be slow to heed these calls amid a deepening political crisis as rival blocs sparred for weeks over the naming of the next prime minister, precipitating a void in the country’s top leadership. Last Tuesday, former governor of Najaf, Adnan al-Zurfi, was named premier-designate, but it remained to be seen whether political blocs will approve his cabinet lineup.

Prime Minister Adel AbdulMahdi’s government has been functioning in caretaker status since his December resignation under pressure from mass protests. Previous premier-designate Mohammed Allawi withdrew his candidacy amid delays and political dysfunction.

Other officials expressed optimism that oil prices would bounce back in a matter of months and that Iraq could rely on central bank reserves in the meantime.

Based on assessments from the bank and the Finance Ministry, these reserves stand between $45 to $60 billion.