IMF completes Article IV consultations on Iraq

IMF completes Article IV consultations on Iraq

07 May 2019 12:22 PM

IMF completes Article IV consultations on IraqA team from the International Monetary Fund, headed by Gavin Gray , visited the Jordanian capital of Amman from 25 April to 2 May, with the aim of holding discussions with the Iraqi authorities in the context of Article IV consultations , For 2019.

At the end of the visit, according to a statement by the IMF, Gray said the end of the war on a buoyant organization and the resurgence of oil prices offer an opportunity to rebuild Iraq and overcome long-standing socio-economic problems.

“But the challenges to achieving these goals are enormous, the pace of economic recovery is still slow, reconstruction is very limited after the war is over, and the large current spending increases risk, putting public funds and central bank reserves on track Its continuity can not be sustained.

Anti-corruption was very important to enhance the effectiveness of public institutions, to support investment efforts and to create employment by the private sector .

“In the short term, the short-term weakness is reversed in 2018, with a surplus in the budget and a build-up in the central bank’s reserves,” he said.

Non-oil growth is expected to rise to 5.4 percent in 2019 on the back of increased investment spending; however, fiscal deficits are expected to rise in the medium term, requiring funding that could squeeze the private sector or erode the central bank’s reserves.

Under these conditions, capital spending may be difficult to sustain, and growth will likely slow considerably .

” Therefore, policy changes and structural reforms – including improved governance – are essential to sustain medium-term economic sustainability and to lay the foundations for inclusive growth,” he said .

“The fiscal policy should be based on the gradual expansion of public investment, while at the same time building safety margins,” said the head of the mission.

“To find the required space, IFAD staff recommends budget savings of about 9 percent of GDP over the medium term by tightening control over current spending, especially on public sector wages, and taking phased measures to boost revenue Non-oil.

He explained that setting ceilings for current budget spending, starting with the 2020 budget onwards, would enhance the fiscal framework’s ability to support a higher volume of investment and adapt to the shocks in oil prices. Major reforms should include :

The containment of public sector wages; short-term spending pressures could be suppressed through compensatory measures, such as a ceiling on allowances, emoluments and other non-wage payments, combined with the enforcement of natural decline in public sector staffing.

Structural measures in the medium term, based on a functional workforce review and deeper reforms in the civil service system, will be necessary once new human resources and information management systems are put in place .

Gray said reforms in the electricity sector were key to addressing poor service quality and cutting high electricity costs in the budget because of low tariff rates, chronic non-payment of electricity bills and poor maintenance .

On the support of public finance management, strengthening the legal framework, improving compliance and other control systems were key factors aimed at minimizing the misuse of public resources and restoring discipline in the budget .

In the financial sector, a strong plan to restructure large-scale public sector banks and the strengthening of bank controls was necessary to ensure financial stability and would help promote financial development and financial coverage.

The strengthening of AML / CFT controls and the strengthening of supervision would help Iraq prevent the misuse of the Iraqi financial sector for the purpose of harvesting criminal proceeds from money laundering and terrorist financing .

He called on the IMF to address the weakness of governance and vulnerabilities that spread through corruption, which he considered a very important factor in achieving the goals described in the policies.

The Fund called for ensuring the independence and integrity of anti-corruption bodies, and the AML / CFT system should be activated to support anti-corruption efforts .

The IMF team will prepare a report, subject to approval by the Administration, and is tentatively scheduled for consideration by the Executive Board of the Fund in July 2019 .