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Iraqis Forced To Cope With Country's Economic Hard Times

RACHEL MARTIN, HOST:

Looking now to another part of the world to Iraq. The economy there relies on government salaries, but its government relies on oil revenues, which have been falling. NPR's Alice Fordham reports.

ALICE FORDHAM, BYLINE: In the shadow of the lovely green-and-gold domes of a famous shrine, Baghdadis stroll on a mild winter evening.

UNIDENTIFIED CHILD: (Shouting, unintelligible).

FORDHAM: Families sip tea from street vendors and bright shop windows display cascades of colored candy. But folks aren't buying much.

SAAD SALMAN: (Speaking Arabic).

FORDHAM: "The economic situation destroyed the people," says Saad Salman, the owner of one of the sweet shops.

SALMAN: (Speaking Arabic).

FORDHAM: Bags of sugar have gotten nearly 50% more expensive.

SALMAN: (Speaking Arabic).

FORDHAM: And purchasing power has dwindled. Someone who used to buy a kilo, now they buy half a kilo.

SALMAN: (Speaking Arabic).

FORDHAM: The reason for the slump is that Iraq's government depends on oil exports. And during the pandemic, as travel stopped and demand for oil fell, the country's revenue collapsed. So Iraq devalued its currency against the dollar. The idea was to make it easier to pay government employees and to stimulate Iraq to produce more rather than importing most things. But the short-term impact was to drive up prices.

ALI AL-SAFFAR: Iraq's economic situation can probably best be described as being dire.

FORDHAM: Ali Al-Saffar is an analyst at the International Energy Agency. He says Iraq, of course, isn't the only oil exporter suffering. But...

AL-SAFFAR: Iraq is more vulnerable to oil price swings than even its oil-dependent peers.

FORDHAM: Exporters like the United Arab Emirates have other industries or huge savings. In Iraq, reserves have been drained by rebuilding cities destroyed in the fight against the Islamic State. Looking ahead, Al-Saffar says the world could soon use less fossil fuel and that would help fight climate change but would crater oil revenue.

AL-SAFFAR: When you take that risk and combine it with the fact that the population is due to grow by something like 10 million to 15 million in the next decade, then these risk factors become compounded. In my job, I cover the entire region. But the one that really is probably most alarming is Iraq.

FORDHAM: One consequence of growing hardship could be unrest on the streets.

(SOUNDBITE OF PROTEST)

UNIDENTIFIED PROTESTERS: (Chanting in non-English language).

FORDHAM: Demonstrations like this one have become more common in the last couple of years in Iraq, especially in the southern city of Nasiriyah.

ZIYAD AL ASAAD: The economic situation to all of the people in Nasiriyah and in Iraq is getting worse day after day.

FORDHAM: Ziyad al Asaad (ph) is an activist who blames politicians for the wealth gap.

ASAAD: We will see more demonstrations, more protest in the streets, in the square.

FORDHAM: Finance Minister Ali Allawi tells NPR he does have a plan.

ALI ALLAWI: There is a strong determination on the part of the executive here to implement a reform program because without it, there are no doubt that the economy as a whole will be entering into very, very turbulent waters.

FORDHAM: He wants to increase taxes, reduce the number of government employees, improve education to ultimately stimulate the private sector so people aren't so dependent on government money.

ALLAWI: We have to shift a very, very distorted, dysfunctional set of economic parameters into another place. In this exercise, there'll be a number of people who will lose and a much greater number who will benefit.

FORDHAM: That transition is going to be painful for millions of people. In hopes of making it easier, Iraq is asking the International Monetary Fund for a loan of billions of dollars. Alice Fordham, NPR News, Baghdad. Transcript provided by NPR, Copyright NPR.

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