The International Monetary Fund recommends that Iraq control public wages and gradually abolish compulsory employment
The International Monetary Fund recommends that Iraq control public wages and gradually abolish compulsory employment
05-17-2024
Thursday, the Executive Board of the International Monetary Fund (IMF) concluded Article IV consultations with Iraq and studied and approved the employee evaluation, while recommending the control of public wages and the gradual abolition of compulsory employment.
A World Bank report was published, which reads as follows: “Internal stability has improved since the new government took office in October 2022, which facilitated the approval of Iraq’s first three-year budget, which required a major fiscal expansion starting in 2023, and this has supported Strong recovery in Iraq’s non-oil economy after a contraction in 2023. 2022, while Iraq was largely unaffected by the ongoing conflict in the region and domestic inflation fell to 4% by the end of 2023, reflecting lower international food prices, and a reassessment currency as of February 2023, and trade finance has returned to normal. However, imbalances have been exacerbated by significant fiscal expansion and lower oil prices.”
The report added, “It is expected that the continued fiscal expansion will enhance growth in 2024, at the expense of further deterioration in financial and external accounts and Iraq’s vulnerability to oil price fluctuations. Without policy adjustment, the risks of medium-term sovereign debt pressures are high and risks could arise.” “The main downside risks include a significant decline in oil prices or the spread of conflict in Gaza and Israel.”
The executive directors agreed, according to the report, “with the thrust of the staff assessment, and welcomed the strong economic recovery, low inflation, and improved domestic conditions that led to the implementation of the first-ever three-year budget. They noted that the risks were tilted towards the downside, given regional disputes and high dependence.” on the volatile oil prices, and that a major financial expansion could lead to financial and external imbalances.”
The Directors stressed “the need for sound macroeconomic policies and structural reforms to secure public finances and debt, sustainability, promote economic diversification, and achieve sustainable and inclusive private sector-led growth.”
The Directors stressed that “a gradual but significant fiscal adjustment is needed to stabilize debt in the medium term and rebuild fiscal safety margins.” They encouraged the authorities to focus on controlling public wage rolls, phasing out compulsory employment policies, and mobilizing non-oil revenues, with Better targeting of social assistance.
They agreed that “immediate implementation of Customs and Revenue Administration reforms, full implementation of the Single Treasury Account, strict supervision and limiting the use of extra-budgetary funds and government guarantees are essential to support fiscal consolidation. Reducing monetary financing and reforming the pension system are also important.”
The Directors praised the Central Bank’s efforts to tighten monetary policy and strengthen the liquidity management framework. Improving coordination between fiscal and monetary operations would help absorb excess liquidity and enhance monetary policy transmission. The Directors agreed that accelerating the restructuring process of large state-owned banks is also essential. They encouraged “To continue modernizing the private banking sector, including by facilitating the establishment of correspondent banking relationships, reducing regulatory uncertainties, and enhancing the efficiency and competitiveness of private banks.”
The Directors stressed the need for structural reforms to unleash private sector development. They encouraged equal opportunities between public and private jobs, enhancing women’s participation in the labor force, and reforming education and labor laws. The Directors agreed that improving governance and combating corruption are also essential, and encouraged Further strengthening the anti-money laundering and terrorist financing framework, strengthening public procurement and business systems, and addressing deficiencies in the electricity sector. Directors welcomed renewed efforts towards accession to the World Trade Organization and encouraged the authorities to improve the coverage and timeliness of statistics.
Directors agreed that “close engagement with the Fund, including through ongoing technical assistance, would be beneficial, and welcomed the authorities’ request to establish a policy coordination instrument.”
The next Article IV consultations with Iraq are expected to be held in the standard 12-month cycle.
burathanews.com
