IMF Executive Board Concludes 2025 Article IV Consultation with Iraq
IMF News, July 9, 2025
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- Published: July 9, 2025
Executive Board assessment and macroeconomic outlook
- The Executive Board concluded the Article IV consultation and endorsed the staff appraisal without a meeting on a lapse-of-time basis.
- Iraq upheld domestic stability despite regional turmoil and global uncertainty.
- The non-oil economy slowed from 13.8 percent in 2023 to an estimated 2.5 percent in 2024.
- Real GDP growth:
- 2024 (Est.): -2.3
- 2025 (Proj.): 3.1
- 2026 (Proj.): 1.4
- Non-oil real GDP growth:
- 2024 (Est.): 2.5
- 2025 (Proj.): 1.0
- 2026 (Proj.): 1.5
- Inflation, end of period (%):
- 2024 (Est.): 2.7
- 2025 (Proj.): 2.9
- Current account (% of GDP):
- 2024 (Est.): 2.0
- 2025 (Proj.): 0.2
- 2026 (Proj.): -1.9
- Major near-term risks: financing constraints, subdued investment, constrained growth potential, accumulation of arrears, and intensified preexisting fragilities.
Fiscal situation and recommendations
- Fiscal vulnerabilities have risen due to a large fiscal expansion and a decline in oil prices.
- The oil price required to balance the budget increased to around $84 in 2024, up from $54 in 2020.
- Fiscal projections and indicators:
- Revenues and grants (% of GDP): 2024: 39.3; 2025: 36.9; 2026: 34.6
- Oil revenue (% of GDP): 2024: 36.0; 2025: 33.3; 2026: 31.0
- Expenditure and net lending (% of GDP): 2024: 43.5; 2025: 44.4; 2026: 43.8
- Wages and pensions (% of GDP): 2024: 22.0; 2025: 24.0; 2026: 24.5
- Fiscal balance (% of GDP): 2024: -4.2; 2025: -7.5; 2026: -9.2
- Non-oil primary balance (% of non-oil GDP): 2024: -59.3; 2025: -54.2; 2026: -51.8
- Total government debt (% of GDP): 2024: 47.2; 2025: 62.3; 2026: (Proj.) 62.3 listed for 2025 and 2026 row shows increase to 62.3 in 2025 (table presents 2026 as 62.3 for 2025 then absent for 2026 — use table values)
- Policy recommendations:
- Immediate: review 2025 current and capital spending plans and limit or postpone all non-essential expenditure.
- Medium term: undertake a sizable fiscal adjustment to mitigate macro-fiscal risks, contain liquidity risks, and stabilize debt.
- Required consolidation: stabilizing debt would require an additional fiscal consolidation of 1–1.5 percent of non-oil GDP per year.
- Revenue-side options:
- Strengthen tax administration.
- Increase customs duties and excise taxes.
- Reform personal income tax including by limiting exemptions.
- Introduce a general sales tax in the medium term.
- Spending-side options:
- Comprehensive public wage bill reforms through limiting mandatory hiring and adopting an attrition rule.
- Further improve targeting of the public distribution system and eventually shift to cash-based social safety nets.
- Reform the public pension system by raising the retirement age and reducing both the accrual and replacement rates.
- Protect crucial non-oil capital expenditures to expand investment in trade and transportation infrastructure, modernize the electricity sector, and develop natural gas resources.
Monetary policy, liquidity, and financial sector recommendations
- Monetary and liquidity indicators:
- Broad money (% change): 2024: -4.3; 2025: 9.6; 2026: 4.9
- Credit to the private sector (% change): 2024: 14.3; 2025: 5.4; 2026: 8.4
- Gross reserves (US$ billions): 2024: 100.3; 2025: 91.0; 2026: 79.2
- Gross reserves in months of imports: 11.1 (2024)
- Total external debt (% of GDP): 2024: 20.6; 2025: 20.8; 2026: 21.0
- Exchange rate (dinar per US$; period average): 1300 (2024)
- Recommendations to absorb excess liquidity and improve monetary transmission:
- Increase issuance of CB-bills, focusing on short-term instruments piloted by the policy rate.
- Adjust bid size limits and refine liquidity forecasting tools.
- Financial sector reform priorities:
- Continue and accelerate efforts to strengthen the domestic financial system.
- Comprehensive restructuring plan for state-owned banks to address nonperforming loans and capital shortfalls, improve corporate governance and digital infrastructure.
- Explore reforms to strengthen the private banking sector: ownership structure, business model sustainability, regulatory requirements, and support measures such as a credit bureau and stronger deposit guarantee scheme.
- Address weaknesses in anti-money laundering and counter-terrorism financing.
Structural reforms to boost non-oil growth and governance
- Potential gains: estimates suggest reforms in the labor market, business regulation, financial sector, and governance could double non-oil potential GDP growth in the medium term.
- Key structural priorities:
- Enhance labor force participation, especially among women, by improving education and removing legal barriers.
- Reform public sector hiring to boost productivity.
- Improve vocational training to align skills with market needs.
- Simplify regulations and reduce bureaucratic obstacles to encourage formal economy participation and private sector development.
- Accelerate electricity sector reform: improve billing and collection; once collection improves, achieve cost recovery via electricity tariff increases with carefully calibrated subsidies targeted to low-income users.
- Improve procurement, public financial management, and address corruption to boost effectiveness of public investments.
- Governance and anti-corruption measures:
- Strengthen accountability in state-owned and private enterprises.
- Comply strictly with EITI standards.
- Enact a Law on Transparency and Access to Information.
- Align legal frameworks with international best practices.
- Enhance the independence of NAZAHA.
Data gaps and surveillance
- Major data deficiencies persist and can significantly undermine the robustness of IMF surveillance.
- Recommendation: build on the numerous CD Iraq has received and focus on the most pressing data gaps, incorporating pilot initiatives into disseminated data in a timely manner.
Selected economic indicators and country facts
- Population: 44.4 million (2024 est.)
- Per capita GDP: US$ 6,183 (2024)
- 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
- Oil and gas sector:
- Crude oil production (millions of barrels/day): 2024: 3.9; 2025: 4.1
- Crude oil exports (millions of barrels/day): 2024: 3.4; 2025: 3.5
- Average crude oil export price (US$/barrel): 2024: 80.6; 2025: 65.9; 2026: 62.0
- Crude oil exports (US$ billions): 2024: 99.2; 2025: 84.2
Source: IMF Press Release No. 25/243 — IMF Executive Board Concludes 2025 Article IV Consultation with Iraq