The IMF loan undermines the dollar’s value and warns Iraqis of a “heavy price to pay”.

The IMF loan undermines the dollar’s value and warns Iraqis of a “heavy price to pay”.

2026-10-18

Shafaq News – Baghdad
The debate is renewed in Iraq regarding the feasibility of resorting to external borrowing from the International Monetary Fund, in light of the financial challenges facing the country and the general budget’s heavy reliance on oil revenues, amid questions about the nature of the economic reforms that may accompany any borrowing program, and its potential repercussions on government spending, taxes, fees and support provided to citizens.

At a time when the importance of reforming public finances and diversifying revenue sources is highlighted, economic experts are raising questions about the nature of the relationship between the International Monetary Fund and borrowing countries, the extent to which financing is linked to reforming economic policies, as well as the need to direct loans towards investment projects capable of generating returns that ensure the sustainability of debt repayment.

Conditions that must be fulfilled

Financial expert Ali Daadoush told Shafaq News Agency that the International Monetary Fund only grants loans according to certain conditions it sets, believing that these conditions may include reducing the government spending bill and boosting non-oil revenues by imposing taxes or increasing fees on some government services provided to citizens, such as real estate registration fees, traffic fees, and others, as well as lifting government subsidies on energy or some items on the ration card.

Daadoush wonders whether Iraq has large or strategic investment projects that would prompt it to seek loans from abroad, noting that external borrowing should be used to finance income-generating or economically viable projects, ensuring the availability of sustainable resources to repay loan interest and principal.

He emphasizes that the importance of borrowing is not only about obtaining funds, but also about how they are used and the extent to which the funded projects can generate revenues that allow them to repay financial obligations, instead of loans becoming additional burdens on public finances without achieving sufficient economic returns.

reforms

For his part, financial expert Mahmoud Dagher, a former director at the Central Bank, believes that the International Monetary Fund has left the issue of conditionality in its traditional form, and loans are now granted on the basis of reforming economic policies, through a program agreed upon between the Fund and the country wishing to borrow.

Dagher explains to Shafaq News Agency that this model differs from traditional conditionality, as it is based on making macroeconomic policies a common goal for both parties. For the creditor, the goal is to ensure debt collection, while the debtor state seeks to develop its economy by taking advantage of the experience and capabilities that the International Monetary Fund possesses.

Between the two visions, the nature of the economic program that Iraq may agree upon with the Fund, and the reform priorities it includes, remain key factors in determining the impact of borrowing on the Iraqi economy, particularly with regard to reducing spending, developing non-oil revenues, protecting the groups most affected by any financial measures, as well as ensuring that funds are directed towards activities and projects that contribute to enhancing the economy’s ability to generate revenues and repay debts.

Fuel and electricity prices increased

Meanwhile, economist Nabil Al-Marsoumi points out in a Facebook post that IMF Managing Director Kristalina Georgieva spoke about Iraq’s request for a financing program to cover the deficit in the general budget, noting that the internal debt exceeded 109 trillion dinars, while the foreign reserves of the Central Bank of Iraq decreased to $75.6 billion.

According to Al-Marsoumi, Iraq’s outstanding external debt amounts to about $13 billion, after excluding the outstanding and unclaimed debts of the previous regime era, while the total recorded external debt, including its historical details, amounts to about $54 billion.

It shows that borrowing from the fund may be less costly than financing through the markets, but it may be linked to reform measures that include reducing the wage bill, rationing the food ration card, enhancing electricity collection, and diversifying the resources of the non-oil sector.

He points out that the agreement requires, in his estimation, the Prime Minister to sign an economic reform document that paves the way for discussions on budget preparation policies, debt management, exchange rate, expenditures, and employment.

The dollar’s justification has been dropped.

In contrast, economist Ziad al-Hashemi asserts that Iraq, after submitting a request for loans from the International Monetary Fund, has become the first country in the Middle East and North Africa to take this step, noting that negotiations between the two sides have already begun, amid expectations that the Fund will support Iraq in obtaining financing.

In a Facebook post, Al-Hashemi indicates that sources in the IMF have reported that negotiations have begun between Iraq and IMF officials, and that the latter will strongly support the country obtaining financial support.

He considered that the move towards borrowing raises questions about the government’s position on the decision to reduce the exchange rate of the dinar, noting that the Prime Minister had justified reducing the exchange rate by avoiding resorting to more painful measures, including external borrowing.

He pointed out that the cost of borrowing from the IMF may appear gradually after the government receives the first installment of funding, considering that the IMF recommendations that were put forward during the past period may turn, in the event of an agreement, into binding conditions for the government to implement during the next stage.

The Managing Director of the International Monetary Fund, Kristalina Georgieva, announced on Saturday that Iraq had requested to enter into a program with the Fund, a move that opens the door to financing and financial loans.

This trend comes at a time when the Iraqi economy is facing challenges related to its heavy reliance on oil revenues, public spending pressures, and the need to diversify income sources and boost non-oil revenues.

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