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Area (


24,001,816 (July 2002 est.)


Iraqi dinar (IQD)



Update No: 026- (27/06/05)

No deal with the Sunnis yet
The political controversy between the Sunni bloc and the other groups (chiefly the Shiites) continued in May. The Shiites offered a new deal to the Sunnis, which would have included 15 seats out of 69 in the committee charged with drafting the constitution. At present, the Sunnis hold only 2 seats out of 50. However, some within the Sunni bloc opposed the offer and insisted that it would not settle for less than 25 seats. Kurdish leader and Iraqi president Talabani seemed to be ready to endorse a greater share of seats for the Sunnis, probably because he feels uneasy about leaving a majority to the Shiites in the committee. A deal might also pave the way to a greater participation of the Sunnis in the Cabinet, where Talabani and other Kurds may feel uneasy about their role of junior partner in a coalition largely dominated by the Shiites. The request of 25 seats never had any chance to be accepted by the Shiites, since it has already been agreed that the Kurds will have 15 seats and therefore the Shiites would be left with just 29 out of 69, significantly short of a majority. There were rumours that the Americans, also wary of Shiite dominance, might have tried to put some pressure on the Shiites to give more space to the Sunnis. In the end, the majority of the Sunni bloc opted to accept the offer of 15 seats, but then issues arose concerning the selection process, which was judged not to be transparent enough by some.

No sign of improvement in the economy
The climate on insecurity shows no sign of improving, preventing reconstruction to start in earnest. Of 300 NGOs which were active before the campaign of kidnappings started, only around 100 are left. Even the US, despite having hired plenty of private security guards, cannot spend the money they have pledged to help Iraq. Only US$8.2 billion out of US$21 billion have been spent so far. The ongoing campaign of sabotage, together with the stalling of reconstruction, explains why the economic situation is actually getting worse. The production of electricity, for example, peaked at 4,800 megawatt in June 2004, which was still far short of the required 7,000 megawatt, but has since then declined back to 4,000 megawatt. The production of oil continues to stagnate, currently standing at 2.1 million bpd, of which 1.3 million are exported. Exports stand at a one year low, as maintenance problems added to sabotage in limiting production. After delaying deliveries and cutting contracts for several months now, the government has finally decided to revise downwards its production plans for the second half of 2005, from 1.65 million bpd to 1.45 million. Efforts are now ongoing to cancel Iraq's remaining external debt, which could be as much as US$30 billion. 80% of the debt owed to the main industrialised countries, that is almost US$40 billion, has already been cancelled, but the remaining amount is still large enough to cripple the Iraqi economy for years to come.

Rumours of reforms
The government is increasingly trying to raise awareness about the unsustainability of subsidies for Iraq's economy, as they absorb US$11 billion out of a total budget of US$25 billion. Although no official announcement has been made, petrol subsidies are probably the main target. At least, this is what ordinary Iraqis think, as shown by recurrent waves of panic about the possibility of rises in petrol prices, which leave pump stations empty and motorists angry. However, with as much as 50% of the work force unemployed, it will be difficult for the government to actually implement any change in the subsidies policy. The occupation authorities and the governments which followed the hand over from them last year still have few successes on their record. The main exception is the independence of the Central Bank, which was the key to the stabilisation of the currency, which has been trading at around 1,465 to the dollars since January 2004. This is turn is helping to contain inflation, currently estimated at 17%, down from 30% last year. 

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