## IMF Staff Completes 2020 Article IV Mission with Iraq

_IMF News, December 13, 2020_

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**Canonical URL:** [IMF Staff Completes 2020 Article IV Mission with Iraq](https://www.imf.org/en/news/articles/2020/12/13/pr20372-imf-staff-completes-2020-article-iv-mission-with-iraq)

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## Bibliographic details
- Published: December 13, 2020

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### Mission summary
- IMF team led by Tokhir Mirzoev held a virtual mission with the Iraqi authorities from November 11 to December 10.
- End-of-mission press release issued December 12, 2020 (Press Release No. 20/372).
- Statement notes that views expressed are those of IMF staff and do not necessarily represent the views of the IMF’s Executive Board.
- Press officer: Wafa Amr. Phone: +1 202 623-7100. Email: MEDIA@IMF.org.

### Economic impact and key projections
- "The COVID-19 pandemic and the sharp decline in oil prices and output have aggravated Iraq’s economic vulnerabilities."
- Real GDP growth is expected at "-11 percent in 2020", reflecting a contraction of oil output and an interruption of non-oil economic activity.
- Sharp decline in oil revenue is expected to widen:
  - Fiscal deficit to "20 percent of GDP".
  - External current account deficit to "16 percent of GDP".
- Overcoming the health crisis is identified as "the highest priority," including acquiring and distributing a viable vaccine.

### Near-term policy recommendations
- A comprehensive package of near-term economic policies anchored in a credible fiscal strategy is needed to:
  - Overcome the health crisis.
  - Ensure economic stability.
  - Protect the vulnerable.
- Fiscal efforts in the 2021 budget should target key areas of fiscal vulnerability, notably:
  - Reversing the unsustainable expansion of wage and pension bills.
  - Reducing inefficient energy subsidies.
  - Raising non-oil revenues.
- Protecting the vulnerable requires:
  - Boosting significantly the targeted cash transfers and expanding their coverage.
  - Improving targeting of other parts of the social safety net.
- Additional fiscal resources will be required for the next phase of the pandemic, including vaccine-related costs, "supported by a strong governance framework."
- A comprehensive policy package is needed to reduce fiscal and external imbalances, relieve financing constraints, ensure debt sustainability, and safeguard international reserves.

### Medium-term structural reforms and fiscal sustainability
- Achieving durable and inclusive medium-term growth requires sustained implementation of wide-ranging structural reforms to:
  - Strengthen public finances to enable critical health and social expenditure needs.
  - Reform the electricity sector.
  - Fight corruption.
  - Expand institutional capacity.
- Specific measures highlighted:
  - Comprehensive civil service reform to strengthen public sector effectiveness while reducing fiscal costs.
  - Recalibration of the pension system to ensure sustainability.
  - Stemming the electricity sector’s mounting financial losses and reforming the sector to enhance service provision and ensure financial viability.
  - Overhauling tax and customs policy and administration to help diversify fiscal revenues.
  - Improvements in public financial management and reforms to minimize fiscal risks from government guarantees and other contingent liabilities.
- Uncertain medium-term oil market prospects and strong population growth increase the urgency of advancing the reform agenda.

### Governance, anti-corruption, and institutional measures
- Addressing governance weaknesses and reducing corruption are described as "vital for Iraq’s future economic development."
- Recommended actions:
  - Simplification, digitalization, and greater transparency of key public services and institutions to reduce corruption risks, especially in public procurement.
  - Strengthening audits and improving legal and regulatory frameworks in line with international standards and conventions.
  - Expanding capacity for risk-based supervision and enforcing compliance with AML/CFT rules to strengthen public trust and investor sentiment.

### Financial sector and state-owned banks
- A decisive strategy to reform the large state-owned banks and level the playing field in the financial sector is required to:
  - Enable private sector development.
  - Secure financial stability.
- Recommended actions for state-owned banks:
  - Strengthen control over these banks’ governance and enhance supervision.
  - Perform an international audit of the large state-owned banks to inform options for their restructuring.

### Stakeholder engagement during the mission
- The team exchanged views with:
  - Senior officials of the Central Bank of Iraq (CBI) and the Ministry of Finance.
  - Members of the Parliamentary Finance Committee.
  - Other ministries, government agencies, and representatives from civil society.
- The IMF team thanked the authorities for "candid and productive discussions during this mission."

*IMF Staff Completes 2020 Article IV Mission with Iraq — Press Release No. 20/372, December 12, 2020.*

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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)
- [Press Releases](https://www.imf.org/en/news/searchnews)
- [PRESS CENTER](http://presscenter.imf.org/)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2020/12/13/pr20372-imf-staff-completes-2020-article-iv-mission-with-iraq_