Press Release No. 16/142

Press Release: IMF Staff Completes Mission for a Staff-Monitored Program Review and a Stand-By Arrangement Discussion with Iraq

March 29, 2016

An International Monetary Fund (IMF) mission led by Christian Josz visited Amman from March 17-29, 2016 to review the Staff-Monitored Program (SMP) and begin discussions on a Stand-By Arrangement (SBA) with the Iraqi authorities.

At the end of the visit, Mr. Josz issued the following statement:

“Iraq continues to face a number of challenges. Key among those is the ongoing armed conflict with ISIS, which continues to strain the country’s resources and results in new waves of internally displaced people, now reaching over 4 million. The other key challenge is the steep fall in oil prices, causing a large external shock to the balance of payments and budget revenue, which depend predominantly on oil export receipts.

“Real GDP contracted by 2.1 percent in 2015 owing to the conflict, destruction of infrastructure and assets, disruptions in trade, and deterioration of investor confidence. The increase in oil production, which is located in areas under control of the Iraqi government and the Kurdistan Regional Government, helped to mitigate the economic deterioration in the non-oil sector. The current account deficit of the balance of payment widened to 5.1 percent of GDP in 2015. As a result, foreign exchange reserves dropped by $13 billion to $54 billion at end-2015.

“Preliminary estimates indicate that the authorities continue to make progress under the SMP. Three out of the five indicative targets at end-December 2015 were met, owing to the under execution of expenditure on wages and pensions, goods and services, and transfers. The target on social spending was missed by a small margin. The target on non-accumulation of external arrears was missed due to the government’s cash constraint. One out of three structural benchmarks was met and the other two were not yet met but good progress has been made and authorities expect to meet them shortly.

“The Iraqi authorities and IMF staff have made good progress towards reaching an understanding on a program of economic and financial policies that could be supported by financing. This program would include further fiscal consolidation to bring spending into line with the lower level of oil prices and maintain debt sustainability. It would also include measures to protect the poor and public financial management reforms to strengthen fiscal transparency, improve the quality of public spending, and enhance financial sector stability. The discussions will continue during the April 2016 IMF-World Bank Spring meetings in Washington, D.C.

“During the mission the team met with the Minister of Finance Hoshyar Zebari, Acting Governor of the Central Bank of Iraq (CBI), Ali Allaq, the Financial Adviser to the Prime Minister Mudher Saleh, and officials from the ministries of finance, oil, planning, electricity, the CBI, and representatives from state-owned banks and the Iraq Business Council. The team would like to thank the Iraqi authorities for their cooperation and the open and productive discussions.”