By Dr. Saman Shali

The International Monetary Fund (IMF) and the World Bank (WB) are two international financial institutions that play essential roles in global economic governance. Its primary purpose is to promote global economic stability and support the development of member countries. However, there are also concerns and criticisms about the impact on third countries. Iraq is considered one of the third countries. It has loans from these two institutions, so they must carefully consider these conditions, which do not serve all classes of the Iraqi people. Some potential risks have been raised about these loans:

1. Influence on Domestic Politics: The IMF and World Bank exert significant influence over the economic policies of recipient countries. The impact has been criticized for undermining national sovereignty and democratic decision-making processes. Critics argue that these institutions prioritize market-oriented policies that do not always align with the social and developmental needs of the country. This control can lead to a loss of control over economic policy and hinder the pursuit of alternative development strategies.

2. Debt Burden: The IMF and World Bank loans can increase recipient countries' debt burden. Loans may be required to deal with an impending economic crisis. However, debt service obligations can strain government budgets and divert resources from essential social services such as education and health care. In some cases, countries may find themselves in a cycle of repeated borrowing to service existing debt, leading to debt crises and potential economic instability.

3. Conditionality and Structural Adjustment Programs: When the IMF provides financial assistance to countries in need, it often imposes conditions on the loans known as conditionality. Such situations usually require recipient countries to implement specific economic reforms, such as cutting government spending, liberalizing markets, or implementing austerity measures. Critics argue that the IMF's harsh terms could negatively affect third countries, including worsening poverty, cutting social spending, and weakening local industries.

4. Inequality and Marginalization: Some argue that the policies promoted by the IMF and World Bank can exacerbate inequalities within and among countries. Structural adjustment programs, for example, have been accused of disproportionately affecting the poor and marginalized communities, as they often involve reductions in public spending on social services and subsidies. Additionally, critics claim that the decision-making processes of these institutions lack transparency and inclusiveness, leading to a concentration of power in the hands of a few dominant economies.

While these criticisms exist, it is essential to note that the IMF and World Bank have tried to address some of these concerns over the years. They have implemented reforms to reduce the harmful effects of conditionality, provide debt relief, and engage in dialogue with civil society organizations to include broader perspectives in decision-making processes. Nevertheless, debates continue among policymakers, economists, and civil society groups about the influence of these institutions and potential threats to third countries.

Iraq's national debt in 2023 is estimated at $115.77 billion. The IMF expects it to grow continuously from 2023 to 2028 by $94.5 billion (+81.63%). The national debt is estimated at $210.27 billion by 2028. These loans will present future risks to the additional provisions of the IMF and World Bank. The Ministry of Finance should have a plan to roll back before increasing debt. However, with this deficit of the Iraqi budget for the 3-year budget deficit (2023-2025), after this deficit, they cannot reduce the national debt of Iraq, which shows the inability of the government to govern. These debts jeopardize the future of the Iraqi people. 

Saman Shali has a Ph.D. in Science (1981) from the University of Sussex. Dr. Shali worked as an Assistant Researcher and Assistant Professor at the University of Sussex, King Saud University, and Pennsylvania State University. He is also a senior fellow at the Mediterranean Institute for Regional Studies.