Statement by the IMF Mission at the Conclusion of a Staff Visit for Iraq
Press Release No. 14/124
March 25, 2014
An IMF mission led by Carlo Sdralevich, Mission Chief for Iraq,
visited Amman during the period March19-24 to meet with an official
Iraqi delegation led by Acting Minister of Finance,
Dr. Safa Al Safi. The mission also met with the Acting Governor of the
Central Bank, Dr. Abdul Basit Al Turki Said, and officials from the
ministries of finance, planning, and oil, the central Bank, and the
Board of Supreme Audit. The IMF team also consulted with representatives
of Iraqi private sector and diplomatic community in Amman. The mission
reviewed recent macroeconomic developments and the current fiscal and
monetary issues. This work will help prepare the 2014 Article IV
consultation with Iraq later in the year.
At the conclusion of the mission, Mr. Sdralevich made the following statement from Amman:
“Iraq maintained macroeconomic stability in 2013, despite lower than projected oil production and exports. Growth remained solid at 4.2 percent, thanks to non-oil activity of about 7 percent, driven by construction and retail trade. Inflation declined slightly to 3.1 percent from 3.6 percent in 2012, reflecting stable world food and fuel prices. The exchange rate remained stable, and international reserves grew by $7 billion to $78 billion at end-2013 (about 10 months of imports of goods and services).
“Economic activity is projected to strengthen in 2014, with GDP
growth rising to over 6 percent thanks to oil production of 3.2 million
barrels per day (mbpd) and oil exports of 2.6 mbpd, even though non-oil
activity is affected by the security situation.
“However, in 2013, lower than expected oil revenues and increased
spending pressures—largely arising from the difficult security
situation—weighed on the overall fiscal performance. As a result, the budget deficit rose to 6 percent of GDP for 2013, financed though the Development Fund for Iraq, which declined from over $18 billion to $6.5 in the course of the year.
“The draft 2014 budget envisages large spending outlays reflecting new commitments for security, social assistance
and pensions, and transfers to the provinces. To preserve macroeconomic
stability, planned expenditure commitments should be scaled down, while
preserving key social spending. In the longer run, Iraq should strive
to manage well its large, and rising, oil revenues by containing current
spending and building up fiscal and external buffers.
“In this connection, we also underlined the importance of strengthening public financial management, including budgetary processes, classification, and reporting, and introducing an integrated information system, to help prepare and execute sustainable fiscal policies.
“We also discussed progress in the financial sector
reform agenda. The Central Bank of Iraq is pressing ahead with the
improvement of its operations and the reform of the financial sector by
preparing new central bank, commercial bank, and anti-money laundering/combating
the financing of terrorism legislation, and introducing a new payment
system. However, more needs to be done by the government and the central
bank to restructure the large state-owned banks, and leveling the
playing field for private banking sector, gradually increasing their access to government business.
“The exchange rate—supported by ample international reserves of the central bank—provides
a key nominal anchor to the economy and has served Iraq well. We
encouraged the Central Bank of Iraq to renew its efforts to liberalize
gradually the foreign exchange market, further reducing the spread
between the auction and parallel market rates.
“We would like to thank the acting minister of finance, the acting
governor of the Central Bank of Iraq, and their staff for the productive
and candid discussions we had during the mission.”
Source: International Monetary Fund