IMF Executive Board Concludes 2024 Article IV Consultation with Iraq
IMF News, May 15, 2024
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- Published: May 15, 2024
Recent developments and macroeconomic context
- Domestic stability improved since the new government took office in October 2022, facilitating the passage of Iraq’s first three-year budget, which entailed a large fiscal expansion starting in 2023.
- The fiscal expansion supported a strong recovery in Iraq’s non-oil economy after a contraction in 2022.
- Iraq was largely unaffected by the ongoing conflict in the region.
- Domestic inflation declined to 4 percent by end-2023, reflecting lower international food prices, the currency revaluation as of February 2023, and the normalization in trade finance.
- Imbalances have worsened due to the large fiscal expansion and lower oil prices.
Outlook and risks
- The ongoing fiscal expansion is expected to boost growth in 2024, at the expense of a further deterioration of fiscal and external accounts and increased vulnerability to oil price fluctuations.
- Without policy adjustment, the risk of medium-term sovereign debt stress is high and external stability risks could emerge.
- Key downside risks include much lower oil prices or a spread of the conflict in Gaza and Israel.
Executive Board assessment — findings and priorities
- Directors welcomed the strong economic rebound, declining inflation, and the implementation of the first-ever three-year budget.
- Directors noted risks are tilted to the downside given regional conflicts and large dependence on volatile oil prices.
- Directors underscored the need for sound macroeconomic policies and structural reforms to:
- Secure fiscal and debt sustainability.
- Advance economic diversification.
- Achieve sustainable, inclusive, and private sector-led growth.
Policy recommendations (summarized)
- Fiscal policy
- Implement a gradual, yet sizeable fiscal adjustment to stabilize debt in the medium term and rebuild fiscal buffers.
- Focus on controlling the public wage bill and phasing out mandatory hiring policies.
- Mobilize non-oil revenues and better target social assistance.
- Promptly implement customs and revenue administration reforms.
- Fully implement the Treasury Single Account.
- Strictly control and limit the use of extrabudgetary funds and government guarantees.
- Limit monetary financing.
- Reform the pension system.
- Monetary and financial sector policy
- Continue tightening monetary policy and enhance the liquidity management framework.
- Improve coordination between fiscal and monetary operations to absorb excess liquidity and enhance monetary policy transmission.
- Accelerate restructuring of large state-owned banks.
- Further modernize the private banking sector, including facilitating correspondent banking relationships, reducing regulatory uncertainties, and promoting efficiency and competitiveness of private banks.
- Structural and governance reforms
- Level the playing field between public and private jobs.
- Boost female labor force participation.
- Reform education and labor laws.
- Improve governance and combat corruption.
- Strengthen the AML-CFT framework.
- Enhance public procurement and business regulations.
- Address electricity sector inefficiencies.
- Continue efforts toward WTO accession.
- Improve the coverage and timeliness of statistics.
- Engagement with IMF
- Close engagement with the Fund, including through continued technical assistance, would be useful.
- Directors welcomed the authorities’ request for a Policy Coordination Instrument.
Key economic indicators (2023–25, selected)
- Population: 455 million (2023 est.)
- Per capita GDP: US$ 5,591(2023)
- Quota: SDR 1,663.8 million
- Poverty rate: 23 percent (2014)
- Main products and exports: Crude oil
- Key export markets: United States, India, China, South Korea
- Output
- Real GDP (% change): 2023 Est. -2.2; 2024 Proj. 1.4; 2025 Proj. 5.3
- Non-oil real GDP (% change): 2023 Est. 6.0; 2024 Proj. 3.5; 2025 Proj. 3.3
- Prices
- Inflation, end of period (%): 2023 Est. 4.0; 2024 Proj. (not separately listed)
- Central Government Finances (% of GDP)
- Revenues and grants: 2023 Est. 42.6; 2024 Proj. 40.1; 2025 Proj. 38.4
- Oil revenue: 2023 Est. 38.8; 2024 Proj. 36.7; 2025 Proj. 34.9
- Expenditure and net lending: 2023 Est. 43.9; 2024 Proj. 47.7; 2025 Proj. 47.2
- Wages and pensions: 2023 Est. 20.2; 2024 Proj. 23.6; 2025 Proj. 23.4
- Fiscal balance: 2023 Est. -1.3; 2024 Proj. -7.6; 2025 Proj. -8.8
- Total government debt: 2023 Est. 44.2; 2024 Proj. 48.2; 2025 Proj. 54.6
- Money and Credit
- Broad money (% change): 2023 Est. 7.5; 2024 Proj. 8.9; 2025 Proj. 9.1
- Credit to the private sector (% change): 2023 Est. 17.0; 2024 Proj. 10.9; 2025 Proj. 9.3
- Balance of Payments
- Current account (% of GDP): 2023 Est. 2.6; 2024 Proj. -3.6; 2025 Proj. -5.1
- Foreign direct investment (% of GDP): 2023 Est. 3.2; 2024 Proj. 2.9
- Gross reserves (US$ billions): 2023 Est. 112.0; 2024 Proj. 100.5; 2025 Proj. 93.4
- In months of imports: 2023 Est. 11.4; 2024 Proj. 9.7; 2025 Proj. 8.7
- Total external debt (% of GDP): 2023 Est. 23.1; 2024 Proj. 21.3; 2025 Proj. 19.8
- Exchange Rate
- Exchange rate (dinar per US$; period average): 2023 Est. 1316; 2024 Proj. 1300
- REER (% change, end of period)1/: 2023 Est. 10.0
- Oil and Gas Sector
- Crude oil production (millions of barrels/day): 2023 Est. 4.1; 2024 Proj. 4.4
- Crude oil exports (millions of barrels/day): 2023 Est. 3.4; 2024 Proj. 3.7
- Average crude oil export price (US$/barrel): 2023 Est. 79.2; 2024 Proj. 77.2; 2025 Proj. 72.3
- Crude oil exports (US$ billions): 2023 Est. 100.2; 2024 Proj. 97.0; 2025 Proj. 97.9
Source: IMF Executive Board Concludes 2024 Article IV Consultation with Iraq (Press Release No. 24/165), May 15, 2024.