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Sudani makes fitful progress as Iraq’s premier

10 May 2023

 

Mohammed al-Sudani has served almost 200 days as Iraq’s prime minister since being sworn into office in late October.

In that time, he has launched a high-profile anti-corruption drive, sought to repair relations between Baghdad and the Kurdistan region, find an amiable balance in relations with Iran on the one hand and the Arab Gulf states and Western powers on the other, as well as giving greater stability to the state’s finances.

These are challenging issues and it remains too soon to judge if he can succeed, but progress on many fronts has often appeared fitful at best.

Soon after coming into office, Sudani threw his weight behind a high-profile anti-corruption drive, prompted by the multibillion-dollar ‘Heist of the Century’, which emerged just before his government took charge. The scandal involved the theft of an estimated ID3.7tn ($2.5bn) from the General Commission for Taxes.

However, after some early positive signs, observers say that the anti-graft drive appears to be losing momentum. One of the main suspects, Haitham al-Jubouri, was released on bail in January. The assets of another suspect, Nour Zuhair Jassim, were unfrozen by a court in April.

Corruption has been endemic in Iraq for years and continues to hobble the economy. There has also been limited progress in other areas of economic activity.

As the Washington-based IMF pointed out in its most recent Article IV report on Iraq, issued in early February, the economy has been growing, but that is in large part due to high oil prices. Indeed, it said Iraq’s dependence on oil revenues has increased rather than decreased.

Gas deal success

The importance of the energy sector is unlikely to diminish anytime soon, given current project activity. Sudani was involved in broking a deal with French oil major TotalEnergies in early April over the $10bn Gas Growth Integrated Project (GGIP), following four meetings with its chief executive Patrick Pouyanne.

The mammoth scheme had been announced in September 2021, but had stalled amid a dispute between Baghdad and Total over what size holdings each side would have. A resolution was helped by the arrival of QatarEnergy, which has taken a 25 per cent stake, leaving Iraq with 30 per cent (held via state-owned Basra Oil Company) and Total with 45 per cent.

That should enable more productive use of the country’s gas resources in the future and will also see the development of a 1GW solar power plant.

On the other hand, oil exports through Turkey have stopped since the International Chamber of Commerce (ICC) arbitration court in Paris ruled in favour of Baghdad in late March over Kurdish oil flows to Turkey via a cross-border pipeline.

Sudani has been building good publicity and a positive image for himself domestically and abroad, but it’s a rather thin veneer, behind which the machinery of entrenched interests is carrying on as usual
Omar al-Nidawi, Enabling Peace in Iraq Centre

Mixed reception

The former Iraqi ambassador to the US, Rend al-Rahim, has described Sudani as an “energetic and shrewd politician” – both necessary qualities to rise to the top in Baghdad and even more important to survive. Others have been less impressed by Sudani’s performance, though.

“He has been building good publicity and a positive image for himself domestically and abroad, but it’s a rather thin veneer, behind which the machinery of entrenched interests is carrying on as usual,” says Omar al-Nidawi, director of programmes at the Washington-based Enabling Peace in Iraq Centre (Epic).

Sudani came to power due to the support of former prime minister Nouri al-Maliki and the Coordination Framework, the grouping of Shia-majority parties with close links to Iran. They and their related militias remain influential to this day – part of a political system in which groups continue to use the state’s resources to entrench their own influence.

Budget concerns

Sudani’s budget plans have prompted concern among some about how that system of patronage might grow even larger. A three-year budget covering the period 2023-25 was finalised by the cabinet in mid-March and then sent to parliament in what was his administration’s first major piece of legislative action.

It included record spending of some ID198tn ($152bn) a year, including current spending of ID150tn and capital expenditure of ID48tn, as well as record annual deficits of some ID63tn, based on an average oil price of $70 a barrel and output of 3.5 million barrels a day (b/d). The plans include a sharp rise in the public sector wage bill, taking that item to a total of ID88tn.

That approach was the opposite of what the IMF had urged Sudani to do. In February, it said the government should save “the bulk of the oil windfall” and added that the 2023 budget “should avoid a procyclical spending boost and aim to increase savings with a gradual tightening of the fiscal stance”.

According to Nidawi, the budget plans point to a government that is more focused on using the state’s resources to bolster its support and minimise criticism rather than rebuild the economy. He described the budget as “exceptionally disappointing”, adding that the spending measures “threaten to waste the financial surplus from high oil prices by expanding the already bloated public payroll”.

The budget also included an attempt to find a new modus vivendi with the Kurdistan Regional Government (KRG), allowing for a 12.7 per cent budget share for Kurdistan and joint management of some 400,000 b/d of oil from the region. Sudani said on 13 March that Baghdad and Erbil had reached “a comprehensive agreement”. However, it remains to be seen if the system they have agreed will work effectively in practice.

In addition, Sudani’s budget has yet to be passed by parliament, and MPs could still force him to change his approach – a final vote may not happen until late May. What is not expected to change, for a time at least, is the parliament itself. When Sudani took office, it was amid speculation that an early election could be called, following the resignation of Moqtada al-Sadr’s bloc of MPs.

Since then, the idea of an early poll has faded and Sadr has remained in the background. Should he decide to change tack once again, Sudani could quickly face a far more challenging political situation, given Sadr’s past ability to quickly fill the streets with his supporters. At that point, Sudani’s political strengths and weaknesses will become far more apparent.

Iraq power projects make headway

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Dominic Dudley

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    In a region where geopolitical turbulence has amplified by an order of magnitude, Jordan is managing to stand out as a beacon of relative stability, with the Hashemite kingdom’s banking sector acting as a case in point.

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    The IMF took care to note an increase in credit to the private sector in its latest Article IV assessment of Jordan, standing at 80.1% of GDP at end-2024, compared to just 66.6% 10 years earlier.

    Banks in the kingdom ended 2025 in a liquid state, but caution remains the watchword for local lenders. The loan-to-deposit relationship bears that out. For that year, deposits ended up 7.1% to JD50bn ($70.5bn), while credit facilities were up just 3.7% to JD36.1bn ($50.9bn).

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    According to Christos Theofilou, an analyst at Moody’s Investors Service, it is cautious lending in fraught macroeconomic conditions.

    “On the one hand, we’ve seen a structurally strong and stable deposit base that has been growing more compared to lending. That indicates a certain degree of limited risk appetite, but also the fact that, given the challenging operating conditions, there were limited business opportunities in the market,” says Theofilou.

    Liquidity banked

    Jordan’s banks look able to withstand further shocks, given solid capital positions and relatively strong earnings performances. Arab Bank, the largest lender, saw net profits grow 12% last year to $1.13bn, despite a highly charged geopolitical situation across Jordan and the neighbouring Palestinian territories.

    As Moody’s notes, Jordanian banks’ funding base remains stable, with banks mainly deposit-funded – with deposits at 67% of total assets as of December 2025 – mostly comprising well-diversified retail deposits. The ratings agency noted that banks retain the capacity to increase lending without relying on more volatile and costly external funding, as indicated by the 72% loan-to-deposit ratio.

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    “Profits should remain resilient, but we’re not expecting any significant improvement,” says Theofilou. “We have the challenging operating conditions, and the lower interest rates that have come down over the past few years. On the other hand, banks have had lower provisioning in the past 12 to 18 months compared to the period prior to that.”

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    In the year ahead, Jordanian banks will be looking to find exposures to new lending opportunities, given the past risk aversion that has prevented them from building stronger growth avenues.

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    Big new infrastructure projects could yet come to the fore as bankable opportunities for local players. For example, the National Water Carrier Project, costed at $5.8bn and aiming to increase water supply by 40%, is looking to achieve financial close this summer. It is the type of project that could prove significant in helping diversify local lenders’ exposure away from real estate towards infrastructure.

    “If we see a lot of these infrastructure projects requiring financing coming to the market, then we could see a bit of a pickup in lending growth as well,” says Theofilou.

    New lending opportunities will come from large corporates and infrastructure-related lending. Those will play the key role in any significant pickup in credit growth, says the Moody’s analyst, in contrast to the small- and medium-enterprise (SME) sector, which poses a different challenge for banks.

    “The SME segment does represent a potential growth opportunity and it’s supported by policy focus, however its expansion is constrained by the operating environment. The sector is exposed to high overall credit risks, and when conditions are challenging, banks tend to be more cautious in lending to the SME markets,” says Theofilou.

    So long as the regional conflict persists, banks will be inclined more towards caution than exuberance in their lending approaches. And yet that strong and stable inclination may be what serves them best in a notably turbulent year in the Middle East’s recent history.

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