BAGHDAD/ABU DHABI (Business Emerge), October 10: In an unexpected turn of events, Iraq has achieved a record wheat harvest this year, resulting in a surplus of approximately 1.5 million metric tons. While this achievement brings good news for farmers, the Iraqi government is grappling with the significant financial repercussions of its generous subsidy program, potentially leading to a net loss of nearly $458.37 million.
The government’s decision to incentivize wheat production has resulted in farmers receiving prices more than double those on the global market. This subsidy scheme, aimed at fostering agriculture in the country’s often challenging climate, is backfiring, as officials now must deal with the implications of oversupply. With better-than-expected rainfall and government support driving this surge, farmers have benefited greatly. However, the economic strain on the government’s budget cannot be overlooked.
In discussions with over ten government officials, farmers, mill owners, and industry analysts, it has been revealed that the cost of these subsidies will amount to a staggering loss, assuming the government successfully sells the surplus to local millers at a predetermined price. This situation raises critical questions regarding the balance between encouraging agricultural production and the financial realities faced by the state.
“This is a result of inadequate planning,” commented Adel Al Mokhtar, a former adviser to the Iraqi parliament’s agriculture committee. He expressed concerns about the implications of producing more wheat than necessary, particularly in relation to water resource management. “Why are we generating more than we require, which inevitably leads to wastage of water?” he further questioned.
To sustain its subsidy program, the government needs between 4.5 and 5 million tons of wheat annually. Historically, Iraq is part of the Fertile Crescent, a region where agriculture first emerged over 10,000 years ago. However, recent trends have shown that Iraqi farmers are increasingly vulnerable to the impacts of climate change, with diminished rainfall affecting crop yields. The country is also facing challenges from reduced water flow in the Tigris and Euphrates rivers, crucial lifelines for agriculture.
The United Nations classifies Iraq among the top five countries most susceptible to climate change effects globally. As a result, food security has become a critical focus for the government. The complexities of managing agriculture in such a changing climate are compounded by financial constraints. Additionally, as Iraq is the second-largest producer within the Organization of the Petroleum Exporting Countries (OPEC), it is anticipated that the nation will experience a budget shortfall in 2025 due to declining oil prices, further complicating the agricultural landscape.
As the Iraqi government navigates this complex situation, the dual challenge of supporting local farmers while maintaining fiscal responsibility will require innovative strategies and careful planning. This balance is essential for ensuring the sustainability of both agriculture and the national economy in the face of growing environmental challenges.