Iraq now finds itself in a period of uncertainty and transition after more than three decades of Ba'ath party rule. Following the end of Saddam Hussein's rule in the spring of 2003, Iraq was governed for a year by the "Coalition Provisional Authority (CPA)" led by the United States and the United Kingdom. On June 28, 2004, the CPA transferred power to a sovereign Iraqi interim government, with national elections held on January 30, 2005. On May 3, 2005, the new transitional government was sworn in, with Ibrahim Jaafari as Prime Minister. A constitutional referendum was held in October 2005, with the constitution being approved overwhelmingly. Elections for a permanent government were held in mid-December 2005. The constitution (articles 108-111) addressed the control and distribution of oil resources in general terms, but many details (e.g., exactly how oil revenues will be distributed) were not spelled out exactly. Another question that remains outstanding is whether or not Iraq will form a new Iraqi National Oil Company (INOC).
Although Iraq's unemployment rate remains high (27-40 percent), the overall Iraqi economy appears to be recovering after more than a decade of economic stagnation, sanctions, and war. However, it is important to note that estimates of economic growth vary widely. For instance, Iraqi real GDP growth is estimated by Global Insight at 34 percent growth for 2005 and 22 percent for 2006. In contrast, the International Monetary Fund (IMF) recently lowered its Iraq GDP growth forecast to just 3.7 percent, citing “the continuing sabotage of oil installations,” with forecast growth of 17 percent for 2006.
On October 15, 2003, a new Iraqi currency -- the "New Iraqi Dinar" (NID) -- was introduced, replacing the "old dinar" and the "Swiss dinar" used in the north of the country. Since then, the NID has appreciated sharply, from around 1,950 NID per $U.S. in October 2003 to around 1,470 NID per $U.S. by mid-December 2005. In early February 2004, Iraq was granted observer status at the World Trade Organization (WTO). In late September 2004, Iraq sent the WTO a formal request for membership.
Total, long-term Iraqi reconstruction costs could run to $100 billion or higher, with an October 2003 donors conference in Madrid resulting in pledges of $33 billion (channeled partly through the International Reconstruction Facility Fund for Iraq -- IRFFI). In mid-October 2004, donor countries meeting in Tokyo agreed on the need to speed up the disbursement or promised assistance to Iraq. To date, only a small fraction of the money pledged in Madrid has been disbursed. In late November 2005, the World Bank approved a $100 million loan (for education projects) to Iraq, the first such loan in 30 years.
On May 22, 2003, the U.N. Security Council passed Resolution 1483, lifting sanctions on Iraq, phasing out the 6-year-old U.N. oil-for-food program over six months (the program ended on November 21, 2003), and designating a U.N. "special representative" to assist Iraq in its reconstruction efforts. On May 27, 2003, the U.S. Treasury Department lifted most U.S. sanctions on Iraq, thereby implementing U.N. Security Council Resolution 1483.
In November 2003, the U.S. Congress authorized $18.4 billion for Iraq in a "supplemental allocation" aimed at boosting Iraqi reconstruction and economic development. As of late October 2005, only around 79 percent of that total had been committed to projects. About $2 billion reportedly had been spent on oil projects and over $4 billion on power projects, with mixed results.
Iraq assumed a heavy debt burden during the Saddam Hussein years, around $100 billion if debts to Gulf states and Russia are counted, and even more if $250 billion in reparations payment claims stemming from Iraq's 1990 invasion of Kuwait are included. Under U.N. Security Council Resolution 1483, Iraq's oil export earnings are immune from legal proceedings, such as debt collection, until the end of 2007. In November 2004, the Paris Club group of 19 creditor nations agreed to forgive, in stages, up to 80 percent on $42 billion worth of loans. The relief is contingent upon Iraq reaching an economic stabilization program with the IMF.
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