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Iraq is facing a double shock arising from the ISIS attacks and the sharp drop in global oil prices. The conflict is hurting the non-oil economy through destruction of infrastructure and assets, disruptions in trade, and deterioration of investor confidence. The impact of the oil price decline-already felt in 2014-has fully unfolded in 2015, affecting the budget, the external sector, and medium-term growth potential. The authorities are responding to the crisis with a mix of fiscal adjustment and financing, maintaining their commitment to the exchange rate peg.
