The Executive Board of the International Monetary Fund (IMF) today completed the first review of Iraq’s economic performance under a program supported by a 24-month Stand-By Arrangement (SBA). Completion of the first review makes an additional SDR 475.36 million (about US$ 741 million) available for disbursement, bringing the total resources that are currently available to Iraq under the arrangement to SDR 772.46 million (about US$ 1,204 billion).
The Executive Board also approved a waiver for nonobservance for the end-June performance criterion on the net international reserves and a waiver of applicability for the end-June performance criterion on the central government current spending bill for which data is not yet available. A rephasing of the remaining disbursements was also approved by the Board.
The SBA was approved on February 24, 2010 (see Press Release No. 10/60) for SDR 2.38 billion (about US$3.7 billion). In addition to providing temporary budget support, the SBA supported program aims to ensure macroeconomic stability and provide a framework for advancing structural reforms in Iraq.
Following the Executive Board’s discussion on Iraq, Mr. Naoyuki Shinohara, Deputy Managing Director and Acting Chair, stated:
“Iraq has continued to make good progress in rebuilding key economic institutions and maintaining macroeconomic stability, under very difficult circumstances. The Fund-supported program has provided a valuable anchor for economic policy during a period of high vulnerability. In the first half of 2010, oil revenues remained strong, inflation continued to be subdued, and the budget recorded a surplus. For 2010 as a whole and 2011, based on conservative assumptions for oil prices and export volumes, Iraq’s external and fiscal positions are expected to remain in deficit but return to a surplus in 2012.
“The 2011 budget will need to be consistent with the goal of achieving medium-term fiscal sustainability and be based on conservative assumptions for oil prices and volumes. Containing current spending would allow further increases in investment, and a stronger emphasis on improving the quality of spending and rebuilding public infrastructure will help achieve higher economic growth.
“Success in reconstructing the economy will depend on accelerating the pace of implementation of the government’s fiscal and financial sector structural reform agendas. The modernization of Iraq’s public financial management system encompasses further improvements in fiscal reporting and the budgetary process, and the adoption of a single treasury account. Further progress in strengthening the Central Bank of Iraq’s supervisory role and moving ahead with the financial and operational restructuring of the two largest state-owned banks will help in increasing financial intermediation. As a candidate member of the EITI, the Iraqi authorities intend to continue making progress in strengthening governance and transparency in the hydrocarbon sector.
“The authorities have made commendable efforts to conclude debt agreements. Further progress in resolving outstanding claims under terms comparable to the 2004 Paris Club Agreement will be important.”