## IMF Staff Completes 2019 Article IV Mission on Iraq

_IMF News, May 6, 2019_

## Source details

**Canonical URL:** [IMF Staff Completes 2019 Article IV Mission on Iraq](https://www.imf.org/en/news/articles/2019/05/06/pr19142-iraq-imf-staff-completes-2019-article-iv-mission)

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## Bibliographic details
- Published: May 6, 2019

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### Overview
- Mission led by Gavin Gray visited Amman from April 26 to May 2, to hold discussions with the Iraqi authorities in the context of the 2019 Article IV Consultation.
- End-of-Mission press release conveys preliminary findings of IMF staff; the team will prepare a report that, subject to management approval, is tentatively scheduled to be considered by the IMF’s Executive Board in July 2019.
- The views expressed are those of IMF staff and do not necessarily represent the views of the IMF’s Executive Board.

### Key findings
- Near-term vulnerabilities subsided in 2018, with the budget in surplus and a build-up in central bank reserves.
- Post-war reconstruction has been limited so far.
- Non-oil growth is expected to increase to 5.4 percent in 2019 on the back of higher investment spending.
- Fiscal deficits are projected to rise over the medium term, absent policy changes.
- It will be hard to sustain capital spending if current trajectories continue, and growth is likely to slow markedly.
- Financing needs implied by rising deficits may crowd out the private sector or erode central bank reserves.

### Economic projections & risks
- Non-oil growth: 5.4 percent in 2019.
- Medium-term fiscal outlook: fiscal deficits projected to rise absent policy changes, making it difficult to sustain capital spending and risking a marked slowdown in growth.
- Near-term improvement: 2018 saw a budget surplus and a build-up in central bank reserves, reducing immediate vulnerabilities.

### Fiscal policy recommendations
- Scale up public investment gradually while building fiscal buffers.
- Budgetary savings recommended: around 9 percent of GDP over the medium term through:
  - Tight control of current spending, particularly public-sector wages.
  - Phased measures to boost non-oil revenue.
- Set ceilings on current expenditure in the 2020 budget onwards to:
  - Strengthen the fiscal framework’s capacity to support higher capital spending.
  - Improve adaptability to oil price shocks.

### Specific measures to contain spending and boost efficiency
- Containing public-sector wages:
  - Short-run compensation measures: capping allowances, bonuses and other non‑base wage payments, and not fully replacing retirees.
  - Medium-term structural measures: undertake a functional workforce review and deeper civil service reform once new HR management and information systems are in place.
- Electricity reforms:
  - Address weak quality of service and high budgetary costs driven by modest tariff rates, chronic non-payment of electricity bills, poor maintenance, over-reliance on expensive generation sources, and losses throughout the generation, transmission, and distribution process.
  - Ensure protection of the poor and most vulnerable throughout reform.
- Bolstering public financial management:
  - Enhance the legal framework and improve commitment and other control systems to minimize misuse of public resources and restore budgetary discipline.

### Financial sector and governance recommendations
- Financial sector:
  - Implement a robust plan to restructure the large public banks.
  - Enhance supervision to secure financial stability and promote financial development and inclusion.
  - Strengthen anti-money laundering and countering financing of terrorism (AML/CFT) controls and oversight to prevent misuse of the financial sector for laundering of criminal proceeds and terrorist financing.
- Governance and anti-corruption:
  - Develop a comprehensive understanding of corruption risks and implement coherent, coordinated policies to tackle these risks.
  - Strengthen the legislative framework to prevent officials from abusing their position or misusing state resources.
  - Rapidly adopt laws strengthening the asset declaration regime and criminalizing illicit gains.
  - Ensure the independence and integrity of bodies involved in combatting corruption.
  - Mobilize the AML/CFT regime to support anti-corruption efforts.

### Next steps and administrative details
- The IMF team will prepare a report based on the mission’s preliminary findings; the report is tentatively scheduled for consideration by the IMF’s Executive Board in July 2019.
- The IMF team thanked the authorities for candid and constructive discussions during the visit.

*IMF Staff Completes 2019 Article IV Mission on Iraq — Press Release No. 19/142, May 6, 2019.*

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## References

- [Iraq and the IMF](http://www.imf.org/external/country/IRQ/index.htm)
- [IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)
- [The IMF and Good Governance -- A Factsheet](https://www.imf.org/en/about/factsheets/sheets/2023/the-imf-and-good-governance)
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- [PRESS CENTER](http://presscenter.imf.org/)
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_Source: https://www.imf.org/en/news/articles/2019/05/06/pr19142-iraq-imf-staff-completes-2019-article-iv-mission_