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OPEC member Iraq needs to copy other Gulf oil producers in creating a Sovereign Wealth Fund (SWF) to tap part of its crude sales and fund development projects, experts said.
An SWF will also help Iraq diversify its oil-reliant sources of income and better exploit its dormant assets in the US, they said.
While OPEC’s second largest oil producer has national funds as the Pension and Social Security Fund, the Education Fund and the Development Fund, they all have only Iraqi dinar-based reserves, which cannot be invested abroad, according to Mustafa Akram, a professor at Baghdad College of Economic Sciences.
“There is a need for Iraq to set up a dollar-based SWF in order to tap the oil income instead of leaving these earnings lying in the US Fed without being exploited,” Akram told Iraq’s Al-Forat News agency at the weekend.
“The SWF will allow Iraq to enter safe investments that will yield large profits, especially in oil and gas sectors…this will in turn help in achieving fiscal stability, support the domestic economy and allow the country to diversify away from oil by channeling part of the SWF earnings into development projects, including infrastructure, energy and technology..this will support Iraq’s financial autonomy in the long term,” he added.
Akram referred to what he described as “successful” SWF experiences in the other Gulf states of Saudi Arabia, Qatar, Kuwait and the UAE, adding that these funds have enabled those countries in easing dependence on unpredictable oil export earnings.
But he cautioned:”The creation of a SWF in Iraq faces big challenges, including shaky political stability and administrative corruption, which could hamper the good management of the SWF and the efficient investment of its funds.”
Another expert said Iraq controls more than $100 billion in foreign reserves in addition to gold reserves, the third largest in the Arab world after Saudi Arabia and Lebanon.
Pointing to the need for an investment fund, Bassim Antoine, a well-known Iraqi economist, told Al-Forat News: "These funds must be invested in productive sectors to create jobs for citizens and ensure financial protection for Iraq.”
According to Mudhar Saleh, economic adviser to Prime Minister Mohammed Al-Sudani, Iraq’s gold reserves are estimated at 152 tonnes, with their value currently standing at about $14 billion, nearly 13 percent of the country’s total foreign assets.
Figures by the US-based SWF Institute show that the UAE’s SWF-- the Abu Dhabi Investment Authority (ADIA) is the world’s fourth largest SWF with assets of nearly $1.057 trillion.
The Kuwait Investment Authority (KIA) is the fifth largest, with assets of around $1.029 trillion while Saudi Arabia’s Public Investment Fund (PIF) ranks sixth, with about $925 billion. Qatar Investment Authority (QIA) is the ninth largest SWF with around $526 billion.
Read more: GCC sovereign wealth funds deployed $55bln in first nine months of 2024
(Writing by Nadim Kawach; Editing by Anoop Menon)
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