Monitor Global Outlook quotes Rafik Hariri Center Senior Fellow Mohsin Khan on the possible impact of the Islamic State of Iraq and al-Sham on the Iraqi economy:

The Iraqi government has “marginalized – politically and economically – the Sunnis, and the Islamic State has tapped into that,” Mohsin Khan, former director of the Middle East and Central Asia Department at the International Monetary Fund, tells Monitor Global Outlook.

Over the last half decade, public employment in Iraq has increased from 30 percent to 40 percent of the labor force – but most of that increase has been benefited the Shiite community. The government of Mr. Maliki has been “doling out jobs to its own people, in other words the Shiite population,” says Mr. Khan, who is now resident senior fellow at the Atlantic Council’s Rafik Hariri Center for the Middle East.

The recent turmoil is only increasing that marginalization. Half of Iraq’s labor force of 8 million people, he notes, is directly or indirectly employed by the state – which has been mostly hiring Shiites. “The unemployment rate is probably around 20 percent – so the other 3 million people are in the private or informal sectors – mostly small-scale informal work.”

Those informal workers are among the hardest hit by sectarian violence: Restaurants close, shops shut their doors early, and commerce comes to a halt.

“The fastest growing sector in Iraq is security, not oil,” says Khan, adding that Sunnis have been locked out of the expanding military ranks. This echoes findings of a recent classified review of the Iraqi security forces for US Central Command last month, which described a sectarian army dominated by Shiite fighters.

Breaking the cycle of sectarian strife, which reinforces economic inequality along sectarian lines, would require a large-scale hiring of Sunnis by the state, Khan and others argue.

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