#####IMF Mission Concludes Article IV Discussions with Iraq

Press Release No. 13/87
March 21, 2013

An International Monetary Fund (IMF) mission, led by Mr. Carlo Sdralevich, met with an official Iraqi delegation headed by the Acting Minister of Finance, Dr. Ali Al Shukri, in Amman, Jordan, during March 2-12, 2013 to conduct the Article IV Consultation discussion. The IMF mission met with the Acting Minister of Finance, the Acting Governor of the Central Bank of Iraq (CBI), head of the Board of Supreme Audit, AbdulBasit Al Turki Said, and other Iraqi officials from the ministries of finance, planning, and oil, and representatives from the Central Bank and the Board of Supreme Audit. The team also met with representatives from the Iraqi banking and business community.

At the conclusion of the mission, Mr. Sdralevich made the following statement:

“Following the recent expiration of the Stand-By Arrangement with Iraq approved in 2010, the IMF is committed to continue close collaboration with Iraq to support its development and help the government improve the social conditions and employment opportunities of Iraqi citizens.

“Despite a difficult security and political environment, Iraq managed to maintain macroeconomic stability over the past two years. On the back of rising oil production and robust non-oil activity, economic growth has remained strong at about 8 percent in 2012. We expect activity to accelerate further to 9 percent in 2013, as oil production increases from just under 3 million barrels per day (mbpd) in 2012 to 3.3 mbpd in 2013. In 2012, inflation was contained at 6 percent, and we project it to decline slightly next year. On account of strong oil proceeds, CBI reserves reached US$70 billion at the end of 2012, while the Development Fund for Iraq (DFI) rose to US$18 billion.

“While we welcome the achievement of a budget surplus of about 4 percent of GDP in 2012, largely due higher-than expected oil revenues, the execution of the 2013 budget should be aligned with available financing and provide for the accumulation of adequate fiscal buffers in the DFI, which suggests to target a budget surplus in 2013. Public financial management should be strengthened, notably by phasing out off-budgetary spending practices and reliance on state-owned bank financing to support public enterprises. Approval of additional spending commitments during the fiscal year should also be avoided.

“Financial sector policies are improving, but more remains to be done. The CBI’s ongoing efforts to refine monetary policy instruments, strengthen banking supervision, and accelerate the restructuring of the banking system are crucial. In this respect, the recent steps to clean up the balance sheets of Rasheed and Rafidain in preparation for their restructuring and recapitalization are key. The CBI should also take measures to gradually liberalize the provision of foreign exchange through its auctions, with the objective of avoiding in future the turbulence experienced by the market in the past year.

“Iraq will need to address serious medium-term challenges in order to be able to create the conditions for high and sustainable growth that is necessary to improve the living standards of its people. The economy continues to suffer from severe structural weaknesses such as a small nonoil sector, high unemployment, public sector dominance, and a weak business environment. In this context, we discussed the role of economic policies in leveraging Iraq’s potential and creating an enabling environment.

“With regard to the fiscal sector, the budget must be managed carefully to maintain macroeconomic stability, meet Iraq’s large social and investment needs while continuing to accumulate buffers to address oil market volatility, and ensure medium-term fiscal sustainability. At the same time, Iraq needs to strengthen fiscal institutions and public financial management to make sure that the large oil revenues are used effectively and transparently.

“Developing a stronger financial sector development will require moving away from the current model in which weak state-owned banks dominate the financial sector and enjoy favorable treatment vis-a-vis private banks. A solid banking system that can support growth and employment will require the full financial and operational restructuring of state-owned banks and creating a level playing field for both private and public banks.

“Finally, while oil-growth is projected to remain high over the coming years, boosting non-oil private sector growth will need a long-term government strategy centered on improving the business environment and opening up opportunities for the private sector.”

http://www.imf.org/external/np/sec/pr/2013/pr1387.htm

The topic Article IV Consultation is discussed in the following articles:
International Monetary Fund

TITLE: International Monetary Fund (IMF)

SECTION: Advising borrowing governments

The IMF consults annually with each member government. Through these contacts, known as “Article IV Consultations,” the IMF attempts to assess each country’s economic health and to forestall future financial problems. The fund also operates the IMF Institute, a department that provides training in macroeconomic analysis and policy formulation for officials of member countries.


http://www.britannica.com/EBchecked/topic/1284862/Article-IV-Consultation

IMF: Iraq preventive balances rose to $ 18 billion, but this is not enough to protect him


Author:
Editor: BS, NK
2013/03/23 15:16


Term Press / Baghdad

International Monetary Fund said that funds preventive Development Fund for Iraq rose in 2012 to $ 18 billion, and pointed out that this increase came from the "oil revenues unexpected," in calling the Iraqi government to end the control of banks owned by the State on the banking sector, He stressed the need for the Iraq strengthening public financial institutions to ensure efficiency and transparency in the use of oil revenues.

The Fund in a report issued in 03/21/2013 after the consultations held in Amman between a delegation of the Fund and the Iraqi delegation headed by VMware Planning Ali Shukri, and seen (long-Presse) it, "The funds preventive Development Fund for Iraq rose to 18 billion dollars with the end of the year 2012, "he added," We welcome the achievement of this surplus in the general budget for 2012, which accounts for about 4% "of gross domestic product."

He explained the fund that "this surplus is due mainly to achieve oil revenues exceeded expectations," and called in this regard to the need to achieve a surplus in the budget of the year 2013 through the consistency of implementation of budget 2013, with the volume of funding available to allow formation of sufficient funds preventive Development Fund for Iraq to cope with the vagaries of world oil prices and keep economic balance. "

He pointed Fund in its report to "an improvement in the financial sector", but stressed that it is still "need to greater efforts by the central bank to revise the monetary policy tools and strengthen banking supervision, and accelerating the restructuring of the banking system", praising the basic steps taken by Iraq finally to purify the balance sheet in the Rafidain and Rasheed bank in preparation for re Hiklthma and re Rsmmelthma ".

And called on the International Monetary Fund Central Bank of Iraq to "progressive measures towards liberalizing foreign exchange through auctions held by the Bank so as not to repeat disorders suffered by the financial market in the past year."

UNFPA emphasized that "the establishment of a banking system nationalist requires abandoning the current model, which is controlled where weak banks state-owned, which has preferential treatment apart from private banks," calling on Iraq to do to strengthen its financial institutions public to ensure efficiency and transparency in the use of oil revenues. "

The International Monetary Fund forecast, to witness economic growth in Iraq during the current year 2013 increased by 9 percent due to the rapid growth of the definitive oil in the country, while calling the Iraqi government to focus on the private sectors other than oil to secure the balance of economic not be subject to production and fluctuations in oil prices globally.

The U.S. Agency for International Development predicted in (3 December 2012) that leads the Iraqi economy, the Arab countries within five years, stressing that Iraq possessed all the qualifications to be an economically strong state.

Iraq is trying for years to attract foreign capital to develop its economy in the fields of industry especially those related to oil and housing and oil and gas extraction, and to its need of funds for infrastructure development and reconstruction, but Mariqben contend that the lack of interest the state to the private sector and the absence of investment laws which guarantees for investors and the absence of Other laws are still obstacles to the development of the economy in the form required.

Iraq relies, which has the fourth largest oil reserves in the world, 95 percent of its annual budget on its oil exports and currently produces about two million and 900 thousand barrels per day, while issued up to two million and 200 thousand barrels per day.

The Iraqi parliament approved in October 2006, the Iraqi investment law which it was said at the time that he would open the doors to foreign investment, for providing a lot of facilities to foreign investors, but many foreign companies still hesitate because of fear of the security reality instability in Iraq, and as a result frequency investors to come has been amended law by the House of Representatives in October 13, 2009, and was the most important amendments to the law to give the right of the investor Iraqi and foreign ownership of land and property belonging to the state allowance determined in accordance special system.


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