WASHINGTON (Thomson Financial) - Iraq's economy is not growing as quickly as expected, as the anticipated expansion in oil production within the country "has not materialised," the International Monetary Fund said in a report released today.
The IMF report, released after consultations with Iraqi officials in August, said Iraqi oil production has remained steady at about 2.0 mln barrels per day, virtually unchanged since 2004. The value of Iraq's oil exports are expected to rise to 28.6 bln usd from about 27.2 bln last year, despite a drop in crude oil prices.
The IMF report said part of the problem with oil production in Iraq is a failure to focus more on reconstruction projects, particularly in the oil sector. The report said fiscal surpluses in 2005 and 2006 reflect this underspending on oil facilities.
Oil revenue is critical to funding Iraq's government, as it is the source of a majority of government revenue.
In the meantime, inflation jumped from 31.6 pct in 2005 to an estimated 64.8 pct in 2006. The IMF projected Iraq's inflation rate to fall to about 30.0 pct this year, but said inflation remains too high despite this drop.
The IMF estimated real gross domestic product in Iraq rose 6.2 pct last year, and said it should rise again by 6.3 pct this year.
Overall, the IMF said while Iraq has taken steps to keep its economy on track, "Iraq's economic prospects hinge critically on an improvement in the security situation."
IMF directors encouraged Iraq to step up reconstruction efforts, particularly in the oil sector, and said steps need to be taken to protect oil installations.
Elsewhere, the IMF welcomed steps taken to strengthen financial safeguards at the central bank, and Iraq's intention to maintain an open trade and investment regime. pete.kasperowicz@thomson.com pik/wash/ms1