The Monetary Fund: “Internal Stability Has Improved Since The New Government Took Office In October 2022.”
Reports Washington, DC - On May 13, 2024, the Executive Board of the International Monetary Fund (IMF) concluded Article IV consultations with Iraq and considered and approved the staff assessment.
Internal stability has improved since the new government took office in October 2022, facilitating the passage of Iraq's first three-year budget, which entailed a major fiscal expansion starting in 2023, supporting a strong recovery in Iraq's non-oil economy after a contraction in 2023. 2022.
Iraq has been largely unaffected by the conflict in the region, and domestic inflation fell to 4% by the end of 2023, reflecting lower international food prices, a revaluation of the currency from February 2023, and a return to normalization of trade finance.
Continued fiscal expansion is expected to boost growth in 2024.
*Executive Council evaluation*: Executive Directors agreed with the thrust of the staff assessment, and welcomed the strong economic recovery, low inflation, and improving domestic conditions that led to the implementation of the first-ever three-year budget.
Directors agreed that the immediate implementation of Customs and Revenue Administration reforms, full implementation of the Single Treasury Account, and strict oversight and limitation of the use of extra-budgetary funds and government guarantees are essential to support fiscal consolidation.
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 was essential. They support the modernization of the private banking sector, by facilitating the establishment of correspondent banking relationships, reducing regulatory uncertainties, and enhancing the efficiency and competitiveness of private banks.
Directors agreed that improving governance and combating corruption were also key, and encouraged further strengthening of the AML/CFT 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 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.
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