IMF Executive Board Approves US$5.34 billion Stand-By Arrangement for Iraq
IMF News, July 7, 2016
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- Published: July 7, 2016
Program approval and financing
- The Executive Board approved a three-year Stand-By Arrangement (SBA) for Iraq for SDR 3.831 billion (about US$5.34 billion, or 230 percent of quota).
- The Board’s approval enables the disbursement of SDR 455 million (about US$634 million).
- In July 2015, Iraq received a disbursement under the Rapid Financing Instrument equivalent to SDR 891.3 million (about US$1.24 billion at the time of approval).
- Iraq’s IMF quota: SDR 1,663.80 million (about US$2.32 billion).
Program objectives and pillars
- Primary aims:
- Address the urgent balance of payments need.
- Bring spending in line with lower global oil prices.
- Ensure debt sustainability.
- Protect the poor, strengthen public financial management, enhance financial sector stability, and curb corruption.
- The program is centered around four pillars:
- Managing external pressures:
- Maintain the exchange rate peg as the key nominal anchor.
- Gradually remove remaining exchange restrictions.
- Strengthen the anti-money laundering and combating financing of terrorism (AML-CFT) framework.
- Implementing fiscal consolidation while protecting the poor:
- Continue fiscal consolidation mostly through capital expenditure retrenchment while protecting social spending.
- Design and implement deeper revenue and expenditure reforms to hold the lid on the non-oil primary balance and achieve debt sustainability.
- Implement the budget-sharing agreement with the Kurdistan Regional Government.
- Strengthening public financial management and curbing corruption:
- Strengthen public financial management legislation and report fiscal tables in compliance with international standards.
- Enhance commitment controls and cash management; conduct regular surveys and audits to monitor and curb arrears; reform public investment management; improve debt management with technical assistance.
- Monitor financial risks to preserve financial sector stability:
- Strengthen the legal framework of the Central Bank of Iraq.
- Restructure state-owned banks.
- Strengthen prudential standards and bank supervision with external support.
- Implement measures to prevent money-laundering, counter financing of terrorism, and strengthen anti-corruption legislation.
Key messages from the Acting Chair (Min Zhu)
- The Iraqi economy suffered a double shock from ISIS attacks and the sharp drop in global oil prices.
- Fiscal policies in place are appropriate: sizable fiscal adjustment mainly via capital expenditure retrenchment while protecting social spending; and maintaining the peg to the U.S. dollar as a key anchor.
- The fiscal adjustment envisaged in 2016–19 is appropriate, but the composition should be improved over time to allow increased and more efficient investment expenditure.
- Overhaul of the public financial management system is necessary to improve fiscal discipline and spending quality.
- Existing external arrears to international oil companies and domestic arrears should be paid down following due process and controls to prevent further accumulation; preventing future external and domestic arrears is essential to secure oil revenue streams and preserve financial sector stability.
- Recommendations to strengthen growth and financial stability include: strengthening the Central Bank of Iraq’s legal framework, restructuring state-owned banks, gradually removing exchange restrictions, implementing AML-CFT measures, and strengthening anti-corruption legislation.
Recent economic developments and vulnerabilities
- Conflict and humanitarian impact:
- Ongoing armed conflict with ISIS has produced new waves of internally displaced people, now reaching over 4 million.
- Around 10 million people, comprising some 27 percent of the population, are in need of humanitarian assistance.
- Oil shock and macroeconomic effects:
- Real GDP contracted by 2.4 percent in 2015 despite a 13 percent increase in oil production.
- Non-oil economy contracted by -19 percent in 2015.
- The steep fall in oil prices caused a large external shock to the balance of payments and budget revenue, given heavy dependence on oil export receipts.
- Policy response:
- Authorities are implementing fiscal adjustment and securing financing while maintaining the exchange rate peg and protecting social spending (health, education, food and agricultural subsidies, transfers to internally displaced people and refugees).
Selected economic and financial indicators (highlights from Table 1)
- Population: 34.3 million; 2014.
- Poverty rate: 23 percent, 2014.
- Main export: Crude oil.
- Real GDP (percentage change):
- 2013: 7.6
- 2014: -0.4
- 2015: -2.4
- 2016 (Est.): 10.3
- 2017 (Prog.): 0.5
- 2018 (Proj.): 0.7
- 2019 (Proj.): 2.0
- 2020 (Proj.): 1.9
- Non-oil real GDP (percentage change):
- 2013: 12.4
- 2014: -5.1
- 2015: -18.7
- 2016 (Est.): -5.0
- 2017 (Prog.): 0.0
- 2018 (Proj.): 3.0
- 2019 (Proj.): 4.0
- GDP per capita (US$):
- 2013: 7,021
- 2014: 6,492
- 2015: 4,514
- 2016 (Est.): 4,161
- 2017 (Prog.): 4,395
- 2018 (Proj.): 4,542
- 2019 (Proj.): 4,745
- 2020 (Proj.): 4,962
- 2021 (Proj.): 5,164
- GDP (in ID trillion):
- 2013: 273.6
- 2014: 259.5
- 2015: 185.1
- 2016 (Est.): 177.1
- 2017 (Prog.): 191.8
- 2018 (Proj.): 203.4
- 2019 (Proj.): 217.9
- 2020 (Proj.): 233.8
- 2021 (Proj.): 249.6
- GDP (in US$ billion):
- 2013: 234.6
- 2014: 222.5
- 2015: 158.7
- 2016 (Est.): 150.1
- 2017 (Prog.): 162.6
- 2018 (Proj.): 172.4
- 2019 (Proj.): 184.7
- 2020 (Proj.): 198.1
- 2021 (Proj.): 211.5
- Oil production (mbpd) 1/:
- 2013: 3.1
- 2014: 3.5
- 2015: 4.2
- 2016 (Est.): 4.3
- 2017 (Prog.): 4.4
- Iraq oil export prices (US$ pb):
- 2013: 102.9
- 2014: 97.0
- 2015: 47.5
- 2016 (Est.): 34.5
- 2017 (Prog.): 40.3
- 2018 (Proj.): 42.5
- 2019 (Proj.): 44.6
- 2020 (Proj.): 46.4
- Consumer price inflation (end of period):
- 2013: 1.6
- 2014: 2.3
- Public finance (in percent of GDP):
- Government revenue and grants:
- 2013: 42.2
- 2014: 40.2
- 2015: 34.3
- 2016 (Est.): 36.2
- 2017 (Prog.): 38.7
- 2018 (Proj.): 38.5
- 2019 (Proj.): 38.2
- 2020 (Proj.): 37.3
- 2021 (Proj.): 36.1
- Government oil revenue:
- 2013: 38.6
- 2014: 38.0
- 2015: 31.2
- 2016 (Est.): 32.0
- 2017 (Prog.): 34.4
- 2018 (Proj.): 34.2
- 2019 (Proj.): 33.9
- 2020 (Proj.): 32.9
- 2021 (Proj.): 31.5
- Expenditure (total):
- 2013: 48.0
- 2014: 45.8
- 2015: 48.5
- 2016 (Est.): 50.8
- 2017 (Prog.): 49.8
- 2018 (Proj.): 44.5
- 2019 (Proj.): 41.8
- 2020 (Proj.): 39.1
- 2021 (Proj.): 36.7
- Overall fiscal balance (including grants):
- 2013: -5.8
- 2014: -5.6
- 2015: -14.3
- 2016 (Est.): -14.7
- 2017 (Prog.): -11.1
- 2018 (Proj.): -6.0
- 2019 (Proj.): -3.6
- 2020 (Proj.): -1.8
- 2021 (Proj.): -0.6
- Non-oil primary fiscal balance (percent of non-oil GDP):
- 2013: -67.6
- 2014: -58.7
- 2015: -51.6
- 2016 (Est.): -53.3
- 2017 (Prog.): -50.2
- 2018 (Proj.): -46.4
- 2019 (Proj.): -42.5
- 2020 (Proj.): -38.5
- 2021 (Proj.): -34.8
- Memorandum items:
- Development Fund of Iraq/MoF US$ account (in US$ billions) 4/: 6.3
- Total government debt (in percent of GDP) 5/:
- 2013: 33.5
- 2014: 63.9
- 2015: 84.0
- 2016 (Est.): 85.2
- 2017 (Prog.): 83.1
- 2018 (Proj.): 79.3
- 2019 (Proj.): 74.9
- Total government debt (in US$ billion) 5/:
- 2013: 73.1
- 2014: 74.6
- 2015: 100.2
- 2016 (Est.): 118.5
- 2017 (Prog.): 136.5
- 2018 (Proj.): 146.9
- 2019 (Proj.): 153.5
- 2020 (Proj.): 157.1
- 2021 (Proj.): 158.4
- External government debt (in percent of GDP):
- 2013: 25.3
- 2014: 25.9
- 2015: 42.3
- 2016 (Est.): 47.7
- 2017 (Prog.): 49.6
- 2018 (Proj.): 49.1
- 2019 (Proj.): 44.8
- 2020 (Proj.): 39.2
- 2021 (Proj.): 33.1
- Gross reserves (in US$ billion) 6/:
- 2013: 77.8
- 2014: 66.7
- 2015: 53.4
- 2016 (Est.): 42.7
- 2017 (Prog.): 40.1
- 2018 (Proj.): 39.3
- 2019 (Proj.): 35.4
- 2020 (Proj.): 31.6
- External sector (selected):
- Overall external balance (percent of GDP):
- 2013: -10.5
- 2014: -9.3
- 2015: -10.3
- 2016 (Est.): -7.4
- 2017 (Prog.): -3.0
- 2018 (Proj.): -1.1
- 2019 (Proj.): 0.9
Implementation priorities and international support
- Iraq will require the support of the international community to implement the program policies.
- Key implementation priorities noted:
- Improve composition of fiscal adjustment to allow more efficient investment.
- Overhaul public financial management and implement budget-sharing arrangements with the Kurdistan Regional Government.
- Verify, pay down, and control the accumulation of external and domestic arrears.
- Strengthen Central Bank legal framework, restructure state-owned banks, remove exchange restrictions gradually, and implement AML-CFT and anti-corruption measures.
Press Release No. 16/321 — IMF Communications Department, July 7, 2016.
Content in this bundle
- Iraq and the IMF Infographic; July 2016