{
  "title": "IMF Executive Board Concludes 2020 Article IV Consultation with Iraq",
  "publication": "IMF News, February 11, 2021",
  "sourceUrl": "https://www.imf.org/en/news/articles/2021/02/11/pr2137-iraq-imf-executive-board-concludes-2020-article-iv-consultation",
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  "summary": "Real GDP contracted by an estimated 11 percent in 2020, reflecting a slowdown in non-oil activity and cutbacks in oil output as a result of OPEC+ decisions.",
  "publishDate": "2021-02-11",
  "sections": [
    {
      "heading": "Overview and immediate impacts",
      "content": "- Real GDP contracted by an estimated 11 percent in 2020, reflecting a slowdown in non-oil activity and cutbacks in oil output as a result of OPEC+ decisions.\n- The COVID-19 pandemic and a sharp decline in oil revenues exacerbated Iraq’s longstanding economic vulnerabilities.\n- Large fiscal and external current account deficits of 20 and 16 percent of GDP, respectively, constrained the government’s ability to mount an effective fiscal response to the crisis.\n- Authorities’ recent measures include a devaluation of the exchange rate by the Central Bank of Iraq and submission of the draft 2021 budget to Parliament, aiming to contain wage and pension bills, raise non-oil revenues, and boost targeted assistance to protect the vulnerable.\n- Authorities set aside sizable resources for COVID-19 response, including acquisition and distribution of a vaccine."
    },
    {
      "heading": "Economic outlook and projections",
      "content": "- Real GDP is projected to return to its pre-pandemic level by 2024.\n- The fiscal and external current account deficits are projected to decline over the medium term.\n- Government debt is expected to peak in 2023 and decline gradually thereafter.\n- The outlook is contingent on strong implementation of reforms and faces significant downside risks from political constraints ahead of parliamentary elections, renewed social unrest, security risks, pandemic-related risks, and oil market uncertainties."
    },
    {
      "heading": "Executive Board assessment and policy priorities",
      "content": "- Directors agreed with the staff appraisal and emphasized that implementing strong policies and structural reforms is essential to ensure macroeconomic stability and achieve sustainable and inclusive growth.\n- Reducing fiscal imbalances is critical to fiscal and debt sustainability:\n  - Welcome for planned fiscal reforms in the “White Paper” with encouragement for careful prioritization and swift implementation while minimizing impact on the vulnerable.\n  - Call for a comprehensive civil service reform to contain the public wage bill and recalibration of the pension system.\n  - Priority on increasing non-oil revenues and strengthening public financial management to reduce fiscal risks from off-budget expenditures and government guarantees.\n- External and monetary policy:\n  - Directors concurred the recent exchange rate adjustment would help reduce external imbalances and preserve foreign exchange reserves.\n  - Emphasized a strong fiscal framework to ensure credibility of the new exchange rate peg and minimize future monetary financing of the budget.\n  - Saw need for further monetary policy measures by the central bank to contain inflation.\n- Structural reforms:\n  - Urgent need to stem financial losses in the electricity sector through governance improvements, better collection, and gradual tariff adjustment to increase cost recovery and reduce arrears.\n  - Emphasized reducing corruption in key public institutions, continued improvement and effective implementation of the AML/CFT framework, restructuring of large state-owned banks to foster financial stability, and developing the private sector.\n- Financing:\n  - Directors noted the authorities’ interest in emergency financing with the Fund, with some Directors encouraging a longer-term arrangement to address structural challenges.\n- Timing:\n  - Next Article IV consultation expected on the standard 12-month cycle."
    },
    {
      "heading": "Key statistics and selected projections (highlights from Iraq: Selected Economic and Financial Indicators, 2019–26)",
      "content": "- Real GDP (percentage change): 2019: 4.5; 2020: -10.9; 2021: 1.2; 2022: 3.9; 2023: 5.7; 2024: 4.1; 2025: 3.1; 2026: 3.4.\n- Non-oil real GDP (percentage change): 2019: -8.0; 2020: 5.0; 2021: 1.1; 2022: 2.5; 2023: 2.7; 2024: 3.6.\n- GDP per capita (US$): 2019: 5,687; 2020: 4,286; 2021: 4,287; 2022: 4,498; 2023: 4,705; 2024: 4,865; 2025: 5,020; 2026: 5,203.\n- GDP (in ID trillion): 2019: 262.9; 2020: 204.8; 2021: 255.9; 2022: 275.5; 2023: 295.7; 2024: 313.7; 2025: 332.1; 2026: 353.2.\n- GDP (in US$ billion) 1/: 2019: 222.4; 2020: 172.0; 2021: 176.5; 2022: 190.0; 2023: 203.9; 2024: 216.4; 2025: 229.1; 2026: 243.6.\n- Oil production (mbpd): 2019: 4.58; 2020: 4.00; 2021: 3.95; 2022: 4.18; 2023: 4.50; 2024: 4.73; 2025: 4.87; 2026: 5.01.\n- Oil exports (mbpd): 2019: 3.97; 2020: 3.43; 2021: 3.39; 2022: 3.59; 2023: 3.86; 2024: 4.06; 2025: 4.30.\n- Iraq oil export prices (US$ pb) 2/: 2019: 59.7; 2020: 38.2; 2021: 47.0; 2022: 45.8; 2023: 45.2; 2024: 44.8; 2025: 44.7.\n- Consumer price inflation (percentage change; end of period): 2019: 0.1; 2020: 1.0; 2021: 11.5; 2022: 4.6; 2023: 2.0.\n- National Accounts (in percent of GDP) highlights:\n  - Gross domestic investment: 2019: 15.1; 2020: 17.2; 2021: 19.1; 2022: 16.8.\n  - Gross domestic consumption: 2019: 83.0; 2020: 96.0; 2021: 82.9; 2022: 84.5.\n  - Gross national savings: 2019: 15.6; 2020: 15.0; 2021: 13.4; 2022: 13.6.\n- Public Finance (in percent of GDP) highlights:\n  - Government revenue and grants: 2019: 37.8; 2020: 30.0; 2021: 40.8; 2022: 40.5.\n  - Government oil revenue: 2019: 27.0; 2020: 34.3; 2021: 33.4; 2022: 33.3.\n  - Overall fiscal balance (including grants): 2019: 0.9; 2020: -20.3; 2021: -16.2; 2022: -12.4; 2023: -4.9; 2024: -3.2.\n  - Non-oil primary fiscal balance, accrual basis (percent of non-oil GDP): 2019: -48.8; 2020: -59.4; 2021: -68.8; 2022: -57.9; 2023: -52.4; 2024: -46.8; 2025: -42.5; 2026: -39.7.\n- Memorandum items:\n  - Total government debt (in percent of GDP) 5/: 2019: 48.5; 2020: 83.1; 2021: 89.7; 2022: 91.6; 2023: 91.3; 2024: 89.9; 2025: 87.7.\n  - Total government debt (in US$ billion) 6/: 2019: 107.9; 2020: 117.4; 2021: 146.6; 2022: 170.5; 2023: 186.8; 2024: 197.5; 2025: 205.9; 2026: 213.7.\n  - External government debt (in percent of GDP): 2019: 31.4; 2020: 49.6; 2021: 37.9; 2022: 33.0; 2023: 28.8; 2024: 26.1; 2025: 23.7; 2026: 21.7.\n  - External government debt (in US$ billion): 2019: 69.8; 2020: 70.0; 2021: 67.0; 2022: 62.7; 2023: 58.6; 2024: 56.5; 2025: 54.3; 2026: 52.8.\n- Monetary indicators (percentage change): Growth in reserve money: 2019: 15.8; 2020: 38.3; 2021: 23.3; 2022: 6.9; 2023: 4.8. Growth in broad money: 2019: 8.4; 2020: 27.3; 2021: 19.9; 2022: 5.5; 2023: 5.4.\n- External sector (in percent of GDP) highlights:\n  - Current account: 2019: 0.8; 2020: -8.8; 2021: -2.1; 2022: -2.6; 2023: -1.5; 2024: -1.3; 2025: -0.6.\n  - Exports of goods: 2019: 40.3; 2020: 29.0; 2021: 32.8; 2022: 32.3; 2023: 31.6; 2024: 30.7.\n  - Imports of goods: 2019: -30.0; 2020: -35.6; 2021: -30.7; 2022: -29.2; 2023: -29.1; 2024: -28.8; 2025: -28.0; 2026: -27.2.\n  - Gross reserves (in US$ billion): 2019: 68.0; 2020: 54.1; 2021: 47.4; 2022: 33.2; 2023: 27.1; 2024: 25.6.\n  - Total GIR (in months of imports of goods and services): 2019: 10.7; 2020: 9.4; 2021: 9.2; 2022: 6.7; 2023: 4.3.\n  - Exchange rate (dinar per US$; period average): 2019: 1,182; 2020: 1,191; 2021: 1,450.\n- Notes and specific technical points:\n  - 1/ Converted from GDP in local currency using the period-average exchange rate (1191 in 2020).\n  - 2/ Negative price differential of about $2.9 per barrel compared to the average petroleum spot price (average of Brent, West Texas and Dubai oil prices) in 2020 - 2025.\n  - 5/ Includes arrears. The debt stock includes legacy arrears to non-Paris Club creditors on which the authorities have requested (but not yet obtained) Paris-Club comparable relief. Implementing comparable terms will substantially reduce debt (e.g. by 15 percent of GDP in 2017). The 14 percentage points increase in 2020 is partly attributed to a devaluation in mid-December 2020 which led to an upward revision of external debt.\n  - 6/ Converted from the total government debt in local currency using the end-of-period exchange rate (1450 in 2020).\n  - 7/ Positive means appreciation.\n\nIMF Communications Department — Press Release No. 21/37 (February 11, 2021).\n\n---\n\n\n References\n\n- https://www.imf.org/-/media/images/imf/bios/imfboard.jpg\n- The Executive Board\n- Iraq and the IMF\n- IMF Policy Advice -- A Factsheet\n- Press Releases\n- PRESS CENTER\n- http://www.IMF.org/external/np/sec/misc/qualifiers.htm\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2021/02/11/pr2137-iraq-imf-executive-board-concludes-2020-article-iv-consultation"
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    "Published: February 11, 2021",
    "Real GDP contracted by an estimated 11 percent in 2020, reflecting a slowdown in non-oil activity and cutbacks in oil output as a result of OPEC+ decisions.",
    "The COVID-19 pandemic and a sharp decline in oil revenues exacerbated Iraq’s longstanding economic vulnerabilities.",
    "Large fiscal and external current account deficits of 20 and 16 percent of GDP, respectively, constrained the government’s ability to mount an effective fiscal response to the crisis.",
    "Authorities’ recent measures include a devaluation of the exchange rate by the Central Bank of Iraq and submission of the draft 2021 budget to Parliament, aiming to contain wage and pension bills, raise non-oil revenues, and boost targeted assistance to protect the vulnerable.",
    "Authorities set aside sizable resources for COVID-19 response, including acquisition and distribution of a vaccine.",
    "Real GDP is projected to return to its pre-pandemic level by 2024.",
    "The fiscal and external current account deficits are projected to decline over the medium term.",
    "Government debt is expected to peak in 2023 and decline gradually thereafter.",
    "The outlook is contingent on strong implementation of reforms and faces significant downside risks from political constraints ahead of parliamentary elections, renewed social unrest, security risks, pandemic-related risks, and oil market uncertainties.",
    "Directors agreed with the staff appraisal and emphasized that implementing strong policies and structural reforms is essential to ensure macroeconomic stability and achieve sustainable and inclusive growth.",
    "Reducing fiscal imbalances is critical to fiscal and debt sustainability:",
    "External and monetary policy:",
    "Structural reforms:",
    "Financing:",
    "Timing:",
    "Real GDP (percentage change): 2019: 4.5; 2020: -10.9; 2021: 1.2; 2022: 3.9; 2023: 5.7; 2024: 4.1; 2025: 3.1; 2026: 3.4.",
    "Non-oil real GDP (percentage change): 2019: -8.0; 2020: 5.0; 2021: 1.1; 2022: 2.5; 2023: 2.7; 2024: 3.6.",
    "GDP per capita (US$): 2019: 5,687; 2020: 4,286; 2021: 4,287; 2022: 4,498; 2023: 4,705; 2024: 4,865; 2025: 5,020; 2026: 5,203.",
    "GDP (in ID trillion): 2019: 262.9; 2020: 204.8; 2021: 255.9; 2022: 275.5; 2023: 295.7; 2024: 313.7; 2025: 332.1; 2026: 353.2.",
    "GDP (in US$ billion) 1/: 2019: 222.4; 2020: 172.0; 2021: 176.5; 2022: 190.0; 2023: 203.9; 2024: 216.4; 2025: 229.1; 2026: 243.6.",
    "Oil production (mbpd): 2019: 4.58; 2020: 4.00; 2021: 3.95; 2022: 4.18; 2023: 4.50; 2024: 4.73; 2025: 4.87; 2026: 5.01.",
    "Oil exports (mbpd): 2019: 3.97; 2020: 3.43; 2021: 3.39; 2022: 3.59; 2023: 3.86; 2024: 4.06; 2025: 4.30.",
    "Iraq oil export prices (US$ pb) 2/: 2019: 59.7; 2020: 38.2; 2021: 47.0; 2022: 45.8; 2023: 45.2; 2024: 44.8; 2025: 44.7.",
    "Consumer price inflation (percentage change; end of period): 2019: 0.1; 2020: 1.0; 2021: 11.5; 2022: 4.6; 2023: 2.0.",
    "National Accounts (in percent of GDP) highlights:",
    "Public Finance (in percent of GDP) highlights:",
    "Memorandum items:",
    "Monetary indicators (percentage change): Growth in reserve money: 2019: 15.8; 2020: 38.3; 2021: 23.3; 2022: 6.9; 2023: 4.8. Growth in broad money: 2019: 8.4; 2020: 27.3; 2021: 19.9; 2022: 5.5; 2023: 5.4.",
    "External sector (in percent of GDP) highlights:",
    "Notes and specific technical points:",
    "[https://www.imf.org/-/media/images/imf/bios/imfboard.jpg](https://www.imf.org/-/media/images/imf/bios/imfboard.jpg)",
    "[The Executive Board](https://www.imf.org/external/np/sec/memdir/eds.aspx)",
    "[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)",
    "[Press Releases](https://www.imf.org/en/news/searchnews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[http://www.IMF.org/external/np/sec/misc/qualifiers.htm](http://www.imf.org/external/np/sec/misc/qualifiers.htm)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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