Context Over the past 25 years, dictatorship, wars and international sanctions have undermined Iraq’s institutions and crippled its economy; in 2003, Iraq’s GDP fell by 41%. The economy rebounded in 2004, but annual growth slowed over the next two years. Since 2003, Iraq has taken steps to reintegrate itself into the international financial system by modernizing the banking sector and increasing private sector participation. The Government also committed to public financial management reform, making notable progress in budget design and implementation. A two year Stand-By Arrangement with the IMF and the World Bank’s Fiscal Sustainability Development Policy Loan (DPL) were approved in February 2010. The DPL supported structural reforms in budget management, the social protection system and the financial sector. Politically, Iraq has undergone a rapid transition: A constitution was approved through public referendum in October 2005, followed by parliamentary elections and the appointment of a constitutional government in May 2006. The 2010 Parliamentary elections proved to be an important milestone, as was the eventual agreement on a new Government. Although there are significant data constraints, poverty and human conditions in Iraq worsened in the 1990s and have not improved considerably in recent years. Overall unemployment is at 11.7%, higher among younger adults (20-24 years old) - 16.9% for men and 35.7% for women. Service delivery continues to be unreliable; only 12.5% of persons whose dwelling is connected to the public network report that their supply of water as stable. Furthermore, only 22.4% can rely solely on the public power network for electricity for their housing units. The Government continues to provide large subsidies for food, fuel and utilities. In November 2009, the Cabinet approved a new National Strategy for Poverty Reduction (2010-2014). Efforts are also underway to reform Iraq’s Public Distribution System (PDS), the country’s largest safety net program for the poor. Going forward, Iraq faces the challenge of improving security, restoring the rule of law and strengthening public sector governance, including public financial management. The recent volatility in oil prices is a clear reminder of Iraq’s dependence on oil revenues. However, with prudent management and a robust policy environment, Iraq’s abundant natural and human resource base will be the source of economic and social revival.
Strategy The World Bank’s current portfolio in Iraq of around US$1.25 billion is guided by a Third Interim Strategy Note (ISN). The strategy focuses on capacity and institution building, knowledge sharing activities, supporting the Government on managing its public resources (natural, financial and human) and developing the private sector. The ISN has three main sources of financing – the Iraq Trust fund, concessional assistance from the International Development Association (IDA) and lending resources from the International Bank for Reconstruction and Development (IBRD).  As of February 31, 2011, the World Bank Iraq Trust Fund has financed 24 grants, totaling US$526.6 million. Nearly all Iraq Trust Fund grants are implemented directly by Iraqi governmental authorities, which maximize local employment, build capacity and increase local ownership and sustainability. A new Country Partnership Strategy is currently under preparation in close consultation with Iraqi stakeholders. In late 2004, Iraq received an exceptional IDA allocation of US$500 million. Since then, the World Bank has approved five projects in the area of education, roads, electricity and water. In March 2010, the World Bank approved a US$250 million IBRD Fiscal Sustainability Development Policy Loan. The objective of the Loan is to mitigate the impact of the current fiscal crisis on Iraq’s economy and to support its medium-term economic reform program. It would also help the country to improve fiscal sustainability and reduce the vulnerability of a sudden drop in oil revenue. Going forward, World Bank financing for Iraq will be drawn primarily from IBRD and other trust fund resources. The World Bank is also providing advisory and technical assistance to support capacity building in Iraqi institutions. The International Finance Corporation (IFC) has committed $20m in two companies in Iraq - the Credit Bank of Iraq and Malia Investments (for establishment of a Greenfield hotel in Erbil). In addition, the IFC’s Iraq Small Business and Finance Facility provides funding ($68m)to local financial institutions and technical assistance ($20 million) to create capacity on the ground for micro small medium enterprise financing. Iraq recently joined the Multilateral Investment Guarantee Agency (MIGA) and private investors have shown interest in partnering with MIGA for investments in Iraq.
Results The World Bank’s Iraq program has operated under extremely difficult conditions. While the security situation has improved significantly in recent years, conditions on the ground continue to constrain implementation efforts. Despite these challenges, the World Bank continues to help build transparent and robust institutions in Iraq. The World Bank has provided intensive training and support in project management, competitive and transparent procurement methods and financial management procedures. The World Bank also provided continuous assistance to PMT staff through daily contact, periodic workshops, joint supervision missions and specialized local consultants. World Bank project financing in Iraq has led to tangible results on the ground, including: - Completion of the first nationwide household income and expenditure survey since 1998, covering 18,000 households. The survey results enabled Iraq to design a robust National Strategy for Poverty Reduction for 2010-2014, which aims to reduce poverty by 30%, among other goals. The Strategy was launched in Baghdad on January 14, 2010;
- Installation of telecommunications network (operational at 56 sites) and support to the inter-banking network, which connects the Central Bank of Iraq and commercial banks with high capacity telecommunications capabilities (operational in 29 sites);
- Rehabilitation of two water treatment plants and supply systems, serving about 300,000 people;
- Completion of 22 labor-intensive rural water supply projects, improving 89,000 hectares of irrigated lands and benefitting about 150,000 end beneficiaries;
- Rehabilitation of nine hospital emergency units, supply of essential equipment and drugs to 12 emergency units, provision of training to 48 doctors and 60 nurses in Advanced Trauma Life Support and 22 doctors in Emergency Preparedness and Response;
- Construction of five rehabilitation centers, provision of training to 82 medical personnel in physical therapy and 35 staff in the production and fitting of prostheses/orthoses;
- Rehabilitation of 133 schools and construction of 80 schools, benefitting about 48,000 students;
- Financing of the printing and distribution of more than 82 million textbooks, averaging approximately 11 textbooks per pupil, and exceeding the original objective of distributing 69 million books;
- Organization of 22 workshops for 600 Iraqi officials to provide essential project implementation tools and to help Iraqi officials develop professional networks with regional neighbors; and
- Organization of more than 60 workshops for over 1,360 Iraqi officials in economic management, public sector management and social safety nets.
The World Bank is also supporting Iraq’s candidacy to the Extractive Industries Transparency Initiative (EITI). Iraq has committed to a major launch event in January 2010. Partners Iraq’s main donor partners include the United States, United Kingdom, European Commission, United Nations and Japan. Seventeen donors have contributed to the World Bank-administered Iraq Trust Fund, as noted below. Donors work together through the Iraq Partnership Forum, which meets monthly to coordinate and harmonize development assistance to Iraq. 
 All dollar figures are in US dollar equivalents. September 2011
For more information, please contact:
Mona Ziade:Â mziade@worldbank.org
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