## IMF Staff Concludes Staff Visit with Iraq

_IMF News, December 19, 2023_

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## Bibliographic details
- Published: December 19, 2023

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### Economic activity and inflation
- Non-oil GDP is expected to grow by 5 percent in 2023.
- Overall GDP growth is reduced in 2023 and 2024 due to lower oil production following the closure of the Iraq-Turkey pipeline and OPEC+ production cuts.
- Inflation has declined from its January peak and is projected to stabilize in the coming months—helped by:
  - the Central Bank of Iraq’s (CBI) tighter monetary policy,
  - passthrough from the exchange rate revaluation,
  - lower international food prices,
  - normalization of trade finance as compliance to the new anti-money laundering/combating the financing of terrorism (AML/CFT) framework improved.

### Fiscal outlook and risks
- The three-year budget approved in June 2023 marked a shift in Iraq’s budgeting practice and envisaged to improve fiscal planning and continue important development projects over the medium term.
- Despite a late start of budget implementation, the fiscal balance is expected to shift from a large surplus in 2022 to a deficit in 2023.
- Staff projects that the deficit would widen further in 2024 reflecting the full year impact of recent measures.
- The large fiscal expansion, including a substantial increase in public hiring and pensions, creates permanent spending that will put pressure on public finances over the medium term.
- The large fiscal expansion in the three-year budget law poses significant risks to fiscal and external sustainability over the medium term.

### Fiscal policy recommendations
- Gradually tighten the fiscal policy stance while safeguarding critical infrastructure and social spending needs.
- Mobilize additional non-oil revenues.
- Contain the large government wage bill.
- Reform the pension system.
- Move toward a more targeted social safety net that better protects the vulnerable.
- Adhere to the framework for managing government guarantees.

### Public financial management
- Mission welcomed the government’s plans to strengthen public financial management, including steps towards the establishment of the Treasury Single Account.

### Monetary policy and central bank actions
- The CBI has appropriately tightened its monetary policy, including by increasing its policy rate and reserve requirement.
- Mission welcomed progress in strengthening the domestic liquidity management framework.
- Mission encouraged continued efforts to mop up excess liquidity and develop an interbank market to strengthen monetary policy transmission.

### Structural reforms and growth strategy
- Structural reforms to spur private sector–led economic diversification and job creation remain pivotal for sustainable and inclusive growth.
- Priorities identified:
  - Creating a level playing field for the private sector through banking and electricity sector reforms.
  - Reducing distortions in the labor market.
  - Continuing efforts to enhance governance and reduce corruption.

### Mission details and statement
- A staff team of the International Monetary Fund (IMF) led by Jean-Guillaume Poulain met with the Iraqi authorities in Amman, Jordan during Dec 12-17 to discuss recent economic developments and outlook as well as policy plans.
- End-of-Mission press releases convey preliminary findings after a visit; views expressed are those of IMF staff and do not necessarily represent the views of the IMF’s Executive Board.
- IMF Communications Department — MEDIA RELATIONS — PRESS OFFICER: Mayada Ghazala — Phone: +1 202 623-7100 — Email: MEDIA@IMF.org — @IMFSpokesperson
- “The IMF staff team stands ready to support the authorities in their reform efforts and would like to thank them for candid and productive discussions during this mission.”

*IMF Staff Concludes Staff Visit with Iraq — Press Release No. 23/462, December 19, 2023.*

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## References

- [Iraq and the IMF](http://www.imf.org/external/country/IRQ/index.htm)
- [Jordan and the IMF](http://www.imf.org/external/country/JOR/index.htm)
- [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/2023/12/18/pr23462-iraq-imf-staff-concludes-staff-visit_