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European Development Bank: Diversifying the sources of the economy is a priority for Iraq

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European Development Bank: Diversifying the sources of the economy is a priority for Iraq
Economy News - Baghdad
A report by the British newspaper, the Financial Times, discussed
Iraq’s accession to the European Bank for Reconstruction and Development (EBRD) and what
this may constitute as a factor of support and support for Iraq’s economy and the reform of its banking sector by diversifying the sources of its economy and relying on the bank’s development plans and financial support in the transition to the alternative energy stage as well as Supporting private sector investments and creating more job opportunities.
The report indicated that while it was recently announced that Iraq belongs to the Bank and has become a member, financing Iraq’s transition to alternative energy and supporting its banking sector will be among the main priorities of the European Bank for Reconstruction and Development.
While Iraq has become the bank's 74th member, among other countries in the Middle East and North Africa region, it can now become a recipient economy of the bank's financial and investment support.
According to the Director of the European Bank for Reconstruction and Development, Heike Harmgart, as part of Iraq's attempt to transition to an environmentally friendly economy, one of the country's main priorities lies in its strategy for economic diversification away from fossil fuels of oil and gas.
According to the World Bank, during the past decade, oil revenues constituted more than 99% of Iraq’s exports, and 85% of the government budget, with a gross domestic product of 42%.
European Bank Director Harmgart says that while oil will continue to constitute a large part of Iraq's economy, the political and economic priority lies in diversifying both energy and industry sources. She confirmed by saying, "We see solar and wind energy projects as very important in Iraq, in addition to a broader diversification of its industrial base."
According to the United Nations, Iraq is considered the fifth most vulnerable country in the world to the effects of climate change.
It is particularly affected by high temperatures and low rainfall levels, with droughts, water scarcity, and floods as well.
Remember, Harmgart, that in addition to supporting renewable energy projects and reforming the electricity sector, the European Bank will develop partnerships between the public and private sectors to mitigate the effects of climate change, such as improving access to water.  She confirms by saying,
 “This may include replacing inefficient water pumps with water pumps that operate with efficient energy, through financing the public and private sectors, and also working with the government on the political side,” noting that most of the bank’s investments are in the private sector, and with regard to the public sector, The investment rate in it is only 25%.
Harmgart says that the bank's multiple developments can support Iraq with policy frameworks for public-private partnerships and power purchase agreements in the electricity and renewable energy sectors.  She goes on to say,
"The Iraqi government has a desire to move towards a transition to renewable energy, but this has not been achieved so far.
I want to see Iraq's membership in the European Bank for Reconstruction and Development as an indicator of greater focus on achieving its transition towards an environmentally friendly economy."
According to the World Bank, Iraq must accelerate the steps towards diversifying the sources of the economy, achieving sustainable growth and creating job opportunities.
On this basis, industries outside the oil and gas sector should be the priority, with the European Bank for Reconstruction and Development looking forward to making the Iraqi banking sector part of the broader significant growth of its economy and the growth of the private sector.
The Director of the European Bank confirms, saying,
Iraq has huge opportunities for private banks.
We see a growing interest from regional players in the Iraqi banking market.
The European Bank can contribute by investing in banking intermediation.
We want to help banks reach small and medium projects, and help commercial activities improve performance, and this will be done with more digital outputs.”
While the lending sector is still largely built on relationships, Harmgart says it is likely that the European Bank will conduct training courses and hone the skills of small and medium enterprises as well as banks to reduce reliance on personal guarantees.
Pointing out that there is great potential potential for the Iraqi banking sector, and
this would unleash economic growth, especially for a series of small and large projects of industrial value.
However, Renad Mansour, a researcher at the Chatham House Institute for Studies in London, says that
change in Iraq requires political will for the reform process, regardless of the type of sector.
Pointing out that multilateral development banks are well aware of the structural limitations of any sustainable development process in Iraq.
According to the Transparency Index Report for 2022, Iraq had scored 23 points out of a total of 100.
While the anti-corruption process remains one of the biggest challenges facing the government in Iraq, European Bank Director Harmgart says that the bank has experience in market challenges.  She adds,
"It is about the will to change and the will to improve practices.
Applying the digital approach in the banking sector may help reduce cases of corruption.
We have seen in many countries that adopting the digital method is the best way to reduce corruption.
This process increases transparency as well as facilitates Commercial operations without intermediaries and facilitating obtaining a license.”
Source: Financial Times     Views 66
Added 12/03/2023 - 1:25 PM

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