The World Bank’s investment arm is aiming to pump about $800 million into Iraq’s energy and banking industries over the next three years to help boost development in the private sector, a senior International Finance Corporation official said Wednesday.
Rashad Kaldany, vice president of the IFC, said between $300 million and $500 million of the capital would go to projects to collect gas that is currently flared at oil fields. “What we are looking to do over a three-year period is to provide financing of about $800 million … this would be our goal,” Kaldany told Reuters in an interview.
Kaldany said the IFC would focus primarily on developing the gas, power generation, banking and construction materials industries, but also the agricultural and housing sectors. Iraq’s infrastructure needs a massive overhaul after decades of war and economic sanctions.
Private industry remains relatively small compared with state-owned enterprises and the government is still the biggest employer almost nine years after the 2003 U.S.-led invasion that toppled dictator Saddam Hussein. Iraq depends on oil exports for 95 percent of government revenue.
The IFC granted a $400 million seven-year debt facility to the Iraqi unit of Kuwait-based telecoms firm Zain in February to help it expand and improve services. Kaldany said the IFC was in talks with another mobile operator in Iraq for a loan.
The IFC is the largest global development institution focused on the private sector in developing countries. It opened its first office in Iraq this year. Kaldany said the IFC was looking at providing between $50 million and $100 million through a combination of loans and taking stakes in power generation projects run by both local and foreign firms. It also plans to dedicate $50 million to $100 million to loans or equity of private banks.
OPEC member Iraq sits on the world’s fourth-largest oil reserve. Its estimated gas reserves are the world’s 10th largest, according to data from the U.S. energy department. But in most of Iraq, people receive only a few hours of electricity a day and suffer from outages during those hours. Kaldany said two of the biggest hurdles in the development of Iraq were bureaucracy and a primitive financial sector.
“What we are looking to do is to support the development of the banking system both through funding but also to help them with the advisory services and to get new financial instruments into the market,” Kaldany said. Iraq has seven state-run banks as well as 23 private and 12 Islamic private banks, both Iraqi and foreign, according to the central bank’s website.
Kaldany said the IFC also planned to sign a deal in the next two weeks to take a stake valued at $25 million in the Commercial Bank of Iraq, in which Bahrain-based Ahli United Bank BSC already has a 49 percent stake.