IMF Executive Board Reviews Noncomplying Purchase by Iraq and Breach of Obligations Under Article VIII, Section 5Press Release No. 13/464
November 21, 2013
The Executive Board of the International Monetary Fund (IMF) has reviewed a noncomplying disbursement by Iraq totaling SDR 297.1 million (about $453.7 million) that was made on March 22, 2011, following the completion of the second review under the 2010 Stand-By Arrangement (SBA) (see Press Release 11/90), and a breach of obligations under Article VIII, Section 5 of the IMF’s Articles of Agreement. The SBA was approved in February 2010 for a total amount of SDR 2.38 billion (about $3.63 billion) to cover Iraq’s balance of payments needs (see Press Release 10/60). Iraq received disbursements amounting to the equivalent of SDR 1,069.56 million (about $1.63 billion). The SBA expired in February 2013.
As the authorities have taken appropriate corrective measures since the purchase in March 2011, the Executive Board granted a waiver for the nonobservance of one continuous performance criterion (PC) and determined that no further remedial action is required in connection with its obligation to provide information under Article VIII, Section 5.
The noncompliant disbursement arose as a result of misreporting on the observance of the standard continuous PC for the nonimposition or intensification of restrictions on the making of payments and transfers for current international transactions. In October 2012, staff learned that during the last quarter of 2010 the Central Bank of Iraq (CBI) issued three circulars on the daily foreign exchange auctions that gave rise to exchange restrictions subject to IMF jurisdiction. The circulars: (a) introduced maximum limits on the availability of foreign currency cash for individuals, (b) introduced limits on the availability of foreign currency cash through the CBI foreign exchange auctions to money transfer companies and exchange bureaus, and (c) introduced and (d) later intensified a requirement to present a tax clearance certificate for firms to transfer funds in excess of certain amounts purchased through the CBI auctions.
The restriction on the availability of foreign currency cash for individuals was temporary, as the CBI repealed it in August 2011. The authorities have taken appropriate corrective action by removing the remaining restrictions in the course of 2013. On this basis, the Executive Board granted a waiver for the nonobservance of the PC.
The Executive Board also found that the inaccurate reporting on the observance of the PC also gave rise to Iraq’s breach of its obligations under Article VIII, Section 5, of the IMF’s Articles of Agreement, which requires member countries to furnish such information as the Fund deems necessary for its activities, including information that is necessary to assess observance of PCs. The CBI introduced the necessary changes in its procedures in order to share circulars with the IMF in a timely manner and regularly publish the circulars on the CBI website. In view of the commitment by Iraq to provide timely and accurate data to the IMF on the exchange system in the future, the Executive Board decided not to require any further remedial action in connection with the breach of obligations under Article VIII, Section 5.