The Iran-Iraq war depleted Iraq's foreign exchange reserves, devastated its economy, and left the country saddled with a foreign debt of more than $40 billion. After hostilities ceased, oil exports gradually increased with the construction of new pipelines and the restoration of damaged facilities. Iraq's invasion of Kuwait in August 1990, subsequent international sanctions, damage from military action by an international coalition beginning in January 1991, and neglect of infrastructure drastically reduced economic activity. Government policies of diverting income to key supporters of the regime while sustaining a large military and internal security force further impaired finances, leaving the average Iraqi citizen facing desperate hardships.

Implementation of a UN Oil-For-Food (OFF) program in December 1996 improved conditions for the average Iraqi citizen. In December 1999, Iraq was authorized to export unlimited quantities of oil through OFF to finance essential civilian needs including, among other things, food, medicine, and infrastructure repair parts. The drop in GDP in 2001-02 was largely the result of the global economic slowdown and lower oil prices. Per capita food imports increased significantly, while medical supplies and health care services steadily improved. The occupation of the U.S.-led coalition in March-April 2003 resulted in the shutdown of much of the central economic administrative structure. The rebuilding of oil, electricity, and other production proceeded steadily in 2004 with foreign support and despite the continuing internal security incidents. A joint UN and World Bank report released in the fall of 2003 estimated that Iraqís key reconstruction needs through 2007 would cost $55 billion. According to the General Accounting Office as of April 2004, total funds available towards this rebuilding effort include: $21 billion in U.S. appropriations, $18 billion from the Development Fund for Iraq, $2.65 billion in vested and seized assets of the former regime, and $13.6 billion in international pledges. The U.S. and other nations continue assisting Iraqi ministries, to the extent requested by the ITG, and offer extensive economic support.