IMF Executive Board Reviews Iraq Misreporting, Remedial Steps

IMF News, March 4, 2021

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The Executive Board reviewed a non-complying purchase by Iraq of SDR 584.2 million following completion of the second review under the 36-month Stand-By Arrangement (SBA) on August 1, 2017.
The SBA was approved on July 6, 2016 for a total amount of SDR 3.831 billion (230 percent of quota) and expired on July 7, 2019.
At the time of the second program review under the SBA, the authorities requested a waiver of applicability for end-June 2017 performance criteria (PCs) on public debt and the non-oil primary balance because information was not available.
The waiver of applicability was granted on the condition that the information provided on Iraq’s performance under these criteria at end-December 2016 was accurate.

The non-complying disbursement arose from nonobservance of the condition of accuracy for the waivers of applicability of the PCs on public debt and the non-oil primary balance.
After the second review, it was revealed that:
- end-2016 government-guaranteed debt was under-reported by 1.3 percent of GDP; and
- the non-oil primary fiscal balance was over-reported by 0.1 percent of GDP.
The Executive Board found that the inaccurate reporting on the observance of the end-2016 PCs 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 necessary to assess observance of PCs.

Authorities collaborated with IMF staff to remedy the situation and strengthen control of government guarantees.
Specific measures undertaken:
- A detailed exercise to verify the end-2016 stock of government guarantees, certified by a decision of the Council of Ministers.
- Enactment in 2019 of a new Public Financial Management (PFM) law requiring all government guarantees to be approved by Parliament as part of the annual budget process.
- Approval by Iraq’s Council of Ministers of a regulatory framework for vetting and issuance of government guarantees that:
- envisages establishing a database of government guarantees; and
- envisages reconstituting a Guarantee Committee as the primary body responsible for vetting government guarantees.
The statement notes that the complexity of these measures and political events in Iraq explain the time required to bring the case to a conclusion.

In view of the authorities’ corrective measures, the Executive Board granted waivers of nonobservance of the condition of accuracy of the information reported on the end-2016 PCs on public debt and the non-oil primary balance.
Given the corrective measures implemented by Iraq, the Executive Board decided not to require any further remedial action in connection with the breach of obligations under Article VIII, Section 5.

IMF Press Release No. 21/60, March 4, 2021.