Tuesday, Iraqi officials agreed to allow the International Monetary Fund (IMF) to monitor its economic policies in order to pave the way for possible funding in 2016. The IMF’s Mission Chief, Christian Josz, said the program would require staff-monitoring and would be targeted at reigning in spending in order to reduce Iraq’s overall budget deficit.
The deficit in Iraq, while miniscule compared to the US, expects to approach 12 percent of economic activity next year, according to a report by Reuters. Allowing the IMF to monitor Iraq’s economic policies would help the embattled Middle Eastern nation to demonstrate a track record of responsible financial policies that would enhance its ability to obtain future financing.
As far as international interests go, many nations support the move, citing to the ways that an IMF loan would help the oil-producing nation to stabilize its financial picture as it copes with the lowered oil prices that have stricken the industry for the last year, as well as the continuing battle against ISIS and other militant insurgent groups.
A senior IMF official with knowledge of the loan discussions told Reuters that the new loan would probably be a “multiple” of the $1.24 billion emergency fund the IMF agreed to give Iraq in July. Financial problems in Iraq grew so severe that Baghdad stepped back from a plan to issue $2 billion in international bonds last month. The nation feared investors demands for yields were simply becoming too high for it to cope. Thus, a large new loan from the IMF may be the only way that Iraq can meet many of its policy goals due to the limited number of other available options.
Of course, new financing from the IMF would come to the nation with a number of conditions. These would likely include requirements that Baghdad reduce energy price subsidies and reform state-owned enterprises. Although necessary, most analysts agree these types of changes would be very difficult. As a result, this could halt the provision of additional funding.
Prime Minister Haider al-Abadi has already demonstrated that he and his government struggle to obtain and maintain the necessary political support for the types of reforms the IMF would be likely to require. For example, the Prime Minister had announced in August a number of reforms aimed at reducing corruption and waste, yet these policies have been slow to take effect.
original source: http://www.economywatch.com/news/IMF-to-Monitor-Iraq-as-Precondition-for-Loan1111.html