IMF

  • First and Second Reviews Under the Stand-By Arrangement (09 Aug 2006)

    The IMF has conducted its 1st and 2nd quarterly reviews of Iraq under the Stand-By Arrangement at the same time due to delays in forming the new government;

    • Iraqi authorities have been largely successful in meeting the SBA targets; when these have not been met, the IMF Executive Board has accepted their requests for waivers (accompanied by a list of corrective measures); the IMF staff have also been favourably impressed by the new government's resolve to continue with the programme. Thus, the SBA is "back on track".

    • economic growth fell to 4% in 2005, and is predicted to continue at that over 2006; inflation has begun to accelerate, a problem worsened by a fixed nominal exchange rate; the fiscal balance is in surplus, in part due to government's inability to undertake investment projects; reserves (oil revenues in the DFI and dollars held by the CBI) are high.

    • the new government is holding the line on spending outside the 2006 budget: there will not be a supplemental budget. Wages and pensions are felt to provide the greatest risk to fiscal balance. The IMF has therefore stressed the omportance of reforming the new pensions law before it takes effect, and claims that the GoI plans to do so (with the World Bank) before the end of September.

    • domestic refined fuel prices have again been increased, bringing them ahead of the SBA schedule in some cases.

    • a draft law to allow private imports of refined products has been passed following removal of clauses setting price controls on resale of the products. It is hoped that this will ease the fuel crisis, and bring black market prices down towards international levels.

    • the Ministry of Finance will resume its bi-weekly T-bill auctions although it already has large reserves

    • to address inflation, the CBI has been raising interest rates. As the monetary transmission mechanism is weak, it is unclear that this does much other than signal the CBI's concern.

    In conclusion, "Iraq's medium term economic prospects look reasonably favorable, but are subject to considerable risk".

  • IMF Approves Stand-By Arrangement for Iraq (23 Dec 2005)

    The Executive Board of the International Monetary Fund (IMF) approved the institution's first-ever Stand-By Arrangement for Iraq, which is designed to support the nation's economic program over the next 15 months. A pdf file containing a report by IMF staff completed endorsing the SBA request, an Appendix containing documents from the Iraqi government in support of their SBA request, a supplemental report by IMF staff indicating that Iraq had enacted the remaining pre-conditions to the SBA, and a statement by Iraq's Executive Director at the IMF is now available. The main elements of the reports are:

    • the SBA allows Iraq to draw on 40% of its IMF quota in the event of a crisis; Iraqi authorities plan not to use this right;

    • the SBA runs until March 2007

    • in return for this facility, Iraq accepts a number of quantitative performance criteria and targets (p. 29, Table 11) centred on fiscal stability as well as a number of qualitative structural performance criteria and benchmarks (p. 31, Table 13) centred on central bank operations, government statistics (including audits thereof) and the development of the banking sector, largely by implementing modern clearing systems between the CBI and commercial banks.

    • approval of the SBA triggers the second 30% reduction of Paris Club debt. The IMF staff still regard Iraqi debt as 'unsustainable'; with the third reduction (to occur if Iraq undergoes three years of programmes like the SBA) it becomes 'sustainable'

    • the document reports on Iraqi economic and governance performance

    None of the ongoing criteria or targets listed above relate directly to petroleum product subsidies. That which seems to bear on this most closely is the floor on revenues from oil related enterprises (Table 11). This would see ID3,250bn (US$2.2bn) raised over 2006, compared to ID900bn (US$600mn) over 2005. To put this in perspective, the 2006 target is a bit less than what the Iraqi government has been spending annually to import refined products.

    In December 2005, as a 'prior action', the Iraqi government did reduce subsidies on a number of petroleum products. The price schedule is displayed in Table 6 (p. 24), which includes an average of prices in the Gulf. These are listed as the IMF staff "urge" Iraq (p. 10, para. 21) to align domestic prices to this average by 2007; the strategy of Iraqi authorities is to further increase prices on a quarterly basis.

    There is almost no discussion about how these prices rises are expected to influence Iraqi society: no information is presented on who currently benefits from the subsidies, in part as this is probably not known - a household income and expenditure survey is only expected to be ready by the end of 2006 (p. 15, para. 39). Thus, steps are mentioned to offset the disruption that will be caused - better control over ration expenses, a 'safety net' equal to one third the savings gained from subsidy reductions targetted at the million poorest households (p. 11, para. 25) - but no further details are provided.

  • 2005 Article IV Consultation (Aug 2005)

    Annual IMF report, including data on oil production, inflation, assesment of Millenium Development Goals progress. Notes a lack of macroeconomic data and urges the Iraqi government to reduce Petrol subsidies. There is also a statistical appendix

  • Considerations on Intergovernmental Fiscal Relations for the Constituent Assembly (Apr 2005)

    Working paper considering inter-departmental relationships and goverment reform.

  • Use of Fund Resources—Request for Emergency Post-Conflict Assistance (Sept 2004)

    IMF Country Report No. 04/325