Al Jazeera correspondents
Iraqi Prime Minister Ali al-Zaidi’s statement calling for moving beyond the “socialist mentality” in managing the economy opened a wide discussion about the future of the Iraqi economy, and the possibility of moving from a state-led economy to a greater role for the private sector, in a country that still relies heavily on oil and government employment.
On May 24, 2026, Al-Zaidi said during his visit to the Federal Ministry of Finance: “The role of the state is to regulate and monitor, and we support the private sector, as it will promote development. It is our duty to take into account the poor groups, but the socialist mentality must not continue to work in the economy.”
Read also
list of 3 itemsend of list
Will Al-Zaidi’s vision come true?
In this regard, the Executive Director of the Iraq Fund for Development, who holds the rank of minister, Muhammad al-Najjar, in an interview with Al Jazeera Net, believes that Prime Minister Ali al-Zaidi’s talk about shifting from the socialist mentality in managing the economy opens for the first time in decades a different discussion regarding the shape of the Iraqi economy and its future, after long years of reliance on the state as the main driver of all aspects of the market.
Al-Najjar traces the roots of this model back to the successive governments in Iraq since the 1950s, when the economy was managed with a mentality based on the centralization of the state and its dominance over economic activity, an approach that continued even after 2003.
With the escalation of recent regional crises, especially with the closure of the Strait of Hormuz, the fragility of this model became clearer, when the extent of Iraq’s dependence on oil revenues, which constitute more than 90% of its financial resources, was revealed. Hence, Al-Najjar believes that these developments may finally push the country towards a real economic transformation
After decades of excessive dependence on oil revenues.
According to Al-Najjar, the beginning of this transformation comes through reformulating the role of the Ministry of Finance itself, so that it no longer remains a body whose mission is to distribute funds only, but rather turns into an institution that plans to manage resources and direct spending according to development priorities. In parallel, Al-Najjar raises the necessity of building a new legislative environment that gives the private sector an actual space to participate in development and economic diversification projects, given that any transition from a rentier economy to a more sustainable economy will not be possible without a real role for the market and private investment.
The Iraqi Prime Minister’s speech comes at a time when Parliament read, during its previous legislative term, 23 draft laws distributed among various committees, and about 70% of these drafts included a trend towards increasing functional slackness through the creation of new bodies and councils, some of which are linked to ministries, and some of which are not directly linked.
Private sector challenges
Financial and economic expert Ali Al-Rawi, speaking to Al Jazeera Net, believes that the Iraqi economy, in its current form, is still not prepared to lead a private sector capable of carrying an essential part of economic activity, but the crises that the country has gone through in recent years have made the need for this transformation more urgent than ever before.
But this transformation, as the narrator sees it, cannot be achieved without a complete reorganization of the economic work environment, as the private sector continues to encounter complex obstacles ranging from corruption and bureaucracy that hinder the launch of projects, all the way to the weakness of the banking sector that does not provide sufficient financing and does not create a real space for the growth of companies and investments.
The challenges do not stop at the administrative and financial aspect only, but also extend to the societal culture associated with the labor market, as a government job still represents for many graduates the most stable job guarantee. Al-Rawi believes that this concept needs to be gradually changed, by establishing the conviction that the private sector is capable of providing broader opportunities and higher salaries, if it is provided with the appropriate environment for growth.
With the increasing number of graduates annually and the expanding size of the workforce, the Iraqi economy has become unable to provide sufficient job opportunities through the government sector alone, at a time when the budget is under mounting pressure due to inflation in salaries and operational spending.
Do Iraqis trust the private sector?
Karar Muhammad, a contracted government employee, speaking to Al Jazeera Net, believes that the majority of Iraqis still prefer government employment due to the absence of a private sector that guarantees workers’ rights or effectively implements the laws regulating the labor market, which makes government employment the most stable and secure option. He called on the government to revive the local industry and move the wheel of production to absorb the large numbers of unemployed graduates, wondering at the same time about the fate of the services provided by the state, such as free education and health, if the shape of the current Iraqi economy changes.
For the first time, the Iraqi government is trying to engage in a direct confrontation with an economic legacy that was formed over decades around the rentier state and the government job. However, moving towards an economy more open to the private sector does not seem like an easy task – according to economists – in a country whose institutions are still suffering from bureaucracy, while the government job is seen as the most stable social security.
Between the need for real economic reform, and the street’s fears of losing the privileges and services that the state has provided for decades, the battle to reshape the Iraqi economy is turning into a complex test that is open to major challenges.
