Widespread corruption throughout Iraq's government has hampered development, resulting in slow improvement of public services, the International Crisis Group said in a report published on Monday.
The Brussels-based organisation's sharp criticism comes around two weeks after Iraq's anti-corruption chief stepped down, citing political interference in his work and describing graft as "part of the struggle for power."
ICG said in its 38-page report that Baghdad's government had succeeded in reducing nationwide violence in recent years, but "has allowed corruption to become entrenched and spread throughout its institutions."
"Public services continue to be plagued by severe deficiencies, notably widespread corruption, which spread like a virus throughout state institutions during the years of lawlessness that prevailed until 2008," the report said.
It said Iraq's anti-corruption institutions had been hampered by "government interference, intransigence and manipulation, a deficient legal framework and ongoing threats of violence."
ICG said that parliament was "hopelessly sectarian" and the judicial system was "highly vulnerable to political pressure."
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"The impact is palpable: billions of dollars have been embezzled from state coffers, owing mostly to gaps in public procurement; parties treat ministries like private bank accounts; and nepotism, bribery and embezzlement thrive," it said.
"Partly as a result, living standards languish, even paling in comparison with the country’s own recent past. This applies to practically all aspects of life, including the health, education and electricity sectors, all of which underperform despite marked budget increases."
The organisation recommended Iraq strengthen its anti-corruption framework, require political parties to publish annual accounts listing sources of income and expenditure, reform cumbersome parliamentary bylaws and streamline the legislative process.
It also called on the international community, particularly the United States, to support such efforts and publicly express disapproval of the government and parliament's "failures regarding long-overdue reform."
The report comes after anti-corruption chief Rahim al-Uqailee resigned on September 8.
After stepping down, Uqailee issued an open letter to parliament, saying: "The fight over stealing the money of the state and its property is the unspoken part of the struggle for power in Iraq today."
Watchdog Transparency International ranks Iraq among the world's four most corrupt countries, and the country has seen periodic protests since February decrying, among other things, official graft.