DINAR REVALUATION REPORT: IMF Article IV Consultation with Iraq: 2024 Findings and Recommendations, 14 SEPT

 IMF Article IV Consultation with Iraq: 2024 Findings and Recommendations

The International Monetary Fund (IMF) conducted its 2024 Article IV consultation with Iraq, concluding with a comprehensive report and a series of recommendations for the country's fiscal and economic policies. 1 The consultation aimed to assess Iraq's economic health, fiscal sustainability, and the potential for long-term growth, taking into account the country's reliance on oil revenues and the challenges it faces in diversifying its economy.

Key Findings

Economic Growth and Fiscal Expansion

The IMF noted that Iraq's economic growth is projected to continue, supported by a fiscal expansion that commenced in 2023. 1 However, the medium-term outlook is marred by increased vulnerability to oil price volatility, which has become a significant concern for the nation's fiscal stability.

Non-Oil Economy and Fiscal Adjustment

Iraq's non-oil economy, which had stalled in 2022, rebounded strongly in 2023, a trend expected to continue in 2024. 3 Despite this, the country faces the challenge of reducing oil dependence and ensuring fiscal sustainability. This will require a significant fiscal adjustment, focusing on controlling the public wage bill and increasing non-oil tax revenues.  1

Private Sector Development and Labor Market Reforms

To sustain higher economic growth and absorb the rapidly expanding labor force, Iraq needs to develop its private sector. 1 This includes implementing labor market reforms, modernizing the financial sector, restructuring state-owned banks, and reforming the pension and electricity sectors. 3

Recommendations

The IMF emphasized the need for sound macroeconomic policies and structural reforms to secure fiscal and debt sustainability. 3 Key recommendations include:Fiscal Policy Adjustment: Reducing public expenditure, particularly the wage bill, and increasing non-oil tax revenues to address fiscal imbalances. 1 Structural Reforms: Enhancing the private sector's role in the economy through labor market reforms, financial sector modernization, and state-owned enterprise restructuring. 3Diversification of the Economy: Reducing reliance on oil revenues by boosting non-oil exports and broadening the tax base. 1

Conclusion

The 2024 Article IV consultation underlined Iraq's economic resilience and the challenges it faces in achieving sustainable and diversified growth. The IMF's recommendations point to a path for Iraq to strengthen its fiscal position, develop its private sector, and reduce its dependence on oil revenues, all critical steps for long-term economic stability and prosperity.