This report summarizes key findings and recommendations from a remote technical assistance (TA) assignment performed by a short-term expert (STX), Mr. Djamel Bouhabel, from January 17 to February 4, 2021, to the General Customs Authority of Iraq (GCA). The main objective of the TA was to advise GCA on the development and effective application of customs assessment processes based on international standards and best practices.
International Monetary Fund. Middle East and Central Asia Dept.
Iraq's socio-economic fragilities have been severely aggravated by the pandemic and the sharp decline in oil revenues, which arrived on the heels of widespread social unrest and political instability. The health system’s limited capacity has been strained, while the fiscal position has become untenable as oil revenues declined sharply to a level that barely covers the government’s large wage and pension bills. Although the number of new infections declined recently, Iraq registered the second-highest COVID-related fatalities in the region, and the fiscal response to the pandemic has been one of the lowest. A six-month political paralysis preceding the formation of the government in May 2020 and plans to hold early parliamentary elections in mid-2021 have been weighing on political support for reforms. Risks of social unrest, geopolitical tensions, and insecurity remain elevated.
Iraq is substantially exposed to fiscal risks related to guarantees issued by the State, with a stock of guarantees related to foreign currency service payments and debt of USD 21.7 billion at end-June 2017 and a stock of domestic guarantees that remains to be fully assessed. In 2017, the Council of Ministers approved a set of procedures to tighten controls on the approval of State guarantees. Nevertheless, misreporting cases highlight the need to further strengthen capacities and institutional arrangements to effectively identify and monitor the fiscal implications of guarantees, including in the context of EBFs’ operations.
There have been significant developments in sovereign debt restructuring involving private-sector creditors since the IMF’s last stocktaking in 2014.
While the current contractual approach has been largely effective in resolving sovereign debt cases since 2014, it has gaps that could pose challenges in future restructurings.