Monday, May 20, 2024

IMF: Fiscal Expansion to Boost Growth in Iraq (FULL REPORT), 20 MAY

IMF: Fiscal Expansion to Boost Growth in Iraq (FULL REPORT)

20th May 2024 in Iraq Industry & Trade NewsPolitics

By John Lee.

The International Monetary Fund (IMF) has issued a detailed report on the Iraqi economy.

The following key points were highlighted:

  1. Improved Domestic Stability: Since the new government took office in October 2022, Iraq has experienced improved domestic stability. This facilitated the passage of its first three-year budget, which led to a large fiscal expansion starting in 2023.
  2. Economic Recovery: The fiscal expansion supported a strong recovery in Iraq’s non-oil economy after a contraction in 2022. Despite regional conflicts, Iraq remained largely unaffected.
  3. Inflation Decline: Domestic inflation decreased to 4 percent by the end of 2023. This decline was attributed to lower international food prices, currency revaluation as of February 2023, and normalization in trade finance.
  4. Imbalances Worsened: Despite the positive aspects, imbalances worsened due to the large fiscal expansion and lower oil prices.
  5. Expected Growth in 2024: The ongoing fiscal expansion is anticipated to further boost growth in 2024. However, this expansion comes at the expense of a further deterioration of fiscal and external accounts, increasing Iraq’s vulnerability to oil price fluctuations.
  6. Medium-Term Sovereign Debt Stress:Without policy adjustment, there’s a high risk of medium-term sovereign debt stress, indicating potential fiscal challenges ahead.
  7. External Stability Risks: Iraq faces external stability risks, particularly concerning its vulnerability to fluctuations in oil prices. The ongoing conflict in Gaza and Israel also presents a potential downside risk.

In summary, while Iraq has experienced improvements in domestic stability and economic recovery, challenges remain regarding fiscal imbalances, external stability risks, and the potential impact of regional conflicts on its economy.

Click here to download the full 68-page report

Press release from IMF:

On May 13, 2024, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation[1] with Iraq and considered and endorsed the staff appraisal.

Domestic 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 large fiscal expansion starting in 2023. This supported the strong recovery in Iraq’s non-oil economy after a contraction in 2022, while Iraq was largely unaffected by the ongoing conflict in the region. Domestic inflation declined to 4 percent by end-2023, reflecting lower international food prices, the currency revaluation as of February 2023, and the normalization in trade finance. However, imbalances have worsened due to the large fiscal expansion and lower oil prices.

https://googleads.g.doubleclick.net/pagead/ads?gdpr=0&client=ca-pub-5857536523957589&output=html&h=312&adk=535495878&adf=2863362899&pi=t.aa~a.3645913990~i.17~rp.4&w=375&abgtt=6&lmt=1716163918&num_ads=1&rafmt=1&armr=3&sem=mc&pwprc=9030894133&ad_type=text_image&format=375×312&url=https%3A%2F%2Fwww.iraq-businessnews.com%2F2024%2F05%2F20%2Fimf-fiscal-expansion-to-boost-growth-in-iraq-full-report%2F&host=ca-host-pub-2644536267352236&fwr=1&pra=3&rh=280&rw=335&rpe=1&resp_fmts=3&sfro=1&wgl=1&fa=27&dt=1716163918000&bpp=1&bdt=1184&idt=-M&shv=r20240515&mjsv=m202405150101&ptt=9&saldr=aa&abxe=1&cookie=ID%3Db65c8d7c9748c095-22eef6dcb3e100b8%3AT%3D1687132628%3ART%3D1715477916%3AS%3DALNI_MaBUfMyjkN7_ubn0d9h91wk_tScGQ&gpic=UID%3D00000c515b4cd201%3AT%3D1687132628%3ART%3D1715477916%3AS%3DALNI_MZDwaUr5BVL3zwfKtKj4dOKLgzr9A&eo_id_str=ID%3D9770880a94c4b5ac%3AT%3D1709216204%3ART%3D1715477916%3AS%3DAA-Afjb-8jaJepKA8FNP2cZ8VnrH&prev_fmts=0x0&nras=2&correlator=3611023895194&frm=20&pv=1&ga_vid=1413347728.1687132628&ga_sid=1716163918&ga_hid=1246324662&ga_fc=1&u_tz=-300&u_his=1&u_h=812&u_w=375&u_ah=812&u_aw=375&u_cd=24&u_sd=3&adx=0&ady=2057&biw=375&bih=640&scr_x=0&scr_y=8&eid=44759875%2C44759926%2C44759837%2C31083587%2C31083589%2C31083637%2C31083638%2C44795922%2C95331983%2C31083816%2C95331711%2C95332416&oid=2&pvsid=3799787274749794&tmod=2077992498&uas=0&nvt=1&ref=https%3A%2F%2Ft.co%2F&fc=1408&brdim=0%2C0%2C0%2C0%2C375%2C0%2C375%2C812%2C375%2C653&vis=1&rsz=%7C%7Cs%7C&abl=NS&fu=128&bc=31&bz=1&ifi=5&uci=a!5&btvi=1&fsb=1&dtd=63

The ongoing fiscal expansion is expected to boost growth in 2024, at the expense of a further deterioration of fiscal and external accounts and Iraq’s vulnerability to oil price fluctuations. Without policy adjustment, the risk of medium-term sovereign debt stress is high and external stability risks could emerge. Key downside risks include much lower oil prices or a spread of the conflict in Gaza and Israel.

Executive Board Assessment[2]

Executive Directors agreed with the thrust of the staff appraisal. They welcomed the strong economic rebound, declining inflation, and the improved domestic conditions which have resulted in the implementation of the first-ever three-year budget. Noting that risks are tilted to the downside, given regional conflicts and large dependence on volatile oil prices, and that the large fiscal expansion could result in fiscal and external imbalances, Directors underscored the need for sound macroeconomic policies and structural reforms to secure fiscal and debt sustainability, advance economic diversification, and achieve sustainable, inclusive, and private sector-led growth.

Directors emphasized that a gradual, yet sizeable fiscal adjustment is needed to stabilize debt in the medium term and rebuild fiscal buffers. They encouraged the authorities to focus on controlling the public wage bill, phasing out mandatory hiring policies, and mobilizing non-oil revenues, while better targeting social assistance. Directors agreed that prompt implementation of customs and revenue administration reforms, a full implementation of the Treasury Single Account, and a strict control and limit of the use of extrabudgetary funds and government guarantees are key to support fiscal consolidation. Limiting monetary financing and reforming the pension system are also important.

Directors commended the central bank’s efforts to tighten monetary policy and enhance its liquidity management framework. Improving coordination between fiscal and monetary operations would help absorb excess liquidity and enhance monetary policy transmission. Directors concurred that accelerating the restructuring of the large state-owned banks is also essential. They encouraged further modernizing the private banking sector, including by facilitating the establishment of correspondent banking relationships, reducing regulatory uncertainties, and promoting efficiency and competitiveness of private banks.

https://googleads.g.doubleclick.net/pagead/ads?gdpr=0&client=ca-pub-5857536523957589&output=html&h=312&adk=535495878&adf=739662041&pi=t.aa~a.3645913990~i.27~rp.4&w=375&abgtt=6&lmt=1716163918&num_ads=1&rafmt=1&armr=3&sem=mc&pwprc=9030894133&ad_type=text_image&format=375×312&url=https%3A%2F%2Fwww.iraq-businessnews.com%2F2024%2F05%2F20%2Fimf-fiscal-expansion-to-boost-growth-in-iraq-full-report%2F&host=ca-host-pub-2644536267352236&fwr=1&pra=3&rh=280&rw=335&rpe=1&resp_fmts=3&sfro=1&wgl=1&fa=27&dt=1716163918000&bpp=1&bdt=1184&idt=-M&shv=r20240515&mjsv=m202405150101&ptt=9&saldr=aa&abxe=1&cookie=ID%3Db65c8d7c9748c095-22eef6dcb3e100b8%3AT%3D1687132628%3ART%3D1715477916%3AS%3DALNI_MaBUfMyjkN7_ubn0d9h91wk_tScGQ&gpic=UID%3D00000c515b4cd201%3AT%3D1687132628%3ART%3D1715477916%3AS%3DALNI_MZDwaUr5BVL3zwfKtKj4dOKLgzr9A&eo_id_str=ID%3D9770880a94c4b5ac%3AT%3D1709216204%3ART%3D1715477916%3AS%3DAA-Afjb-8jaJepKA8FNP2cZ8VnrH&prev_fmts=0x0%2C375x312&nras=3&correlator=3611023895194&frm=20&pv=1&ga_vid=1413347728.1687132628&ga_sid=1716163918&ga_hid=1246324662&ga_fc=1&u_tz=-300&u_his=1&u_h=812&u_w=375&u_ah=812&u_aw=375&u_cd=24&u_sd=3&adx=0&ady=3691&biw=375&bih=640&scr_x=0&scr_y=8&eid=44759875%2C44759926%2C44759837%2C31083587%2C31083589%2C31083637%2C31083638%2C44795922%2C95331983%2C31083816%2C95331711%2C95332416&oid=2&pvsid=3799787274749794&tmod=2077992498&uas=0&nvt=1&ref=https%3A%2F%2Ft.co%2F&fc=1408&brdim=0%2C0%2C0%2C0%2C375%2C0%2C375%2C812%2C375%2C653&vis=1&rsz=%7C%7Cs%7C&abl=NS&fu=128&bc=31&bz=1&ifi=6&uci=a!6&btvi=2&fsb=1&dtd=69

Directors emphasized the need for structural reforms to unlock private sector development. They encouraged leveling the playing field between public and private jobs, boosting female labor force participation, and reforming education and labor laws. Directors agreed that improving governance and combatting corruption are also key and encouraged further strengthening the AML-CFT framework, enhancing public procurement and business regulations, and addressing electricity sector inefficiencies. Directors welcomed the renewed efforts toward WTO accession. They also encouraged the authorities to improve the coverage and timeliness of statistics.

Directors concurred that close engagement with the Fund, including through continued technical assistance, would be useful, and welcomed the authorities’ request for a Policy Coordination Instrument.

It is expected that the next Article IV consultation with Iraq will be held on the standard 12-month cycle.

[1] Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country’s economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.

[2] At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country’s authorities. An explanation of any qualifiers used in summings up can be found here:

 http://www.IMF.org/external/np/sec/misc/qualifiers.htm.

"RV UPDATE" BY MILITIAMAN, 20 MAY

 Militia Man

  The United States of America said they supported Iraq having accession to the WTO...Saudi Arabia...did 15 years worth of work, in a year, to help Iraq...All the requirements for joining were completed...Now the IMF directors welcomed renewed efforts towards WTO accession..

Saleh says if you do a float it's dangerous, it's going to turn out to be unruly...He also said he's going to have a mixed or managed float, which is going be stabilizing...They had about 4 articles about that...Why are  they saying it and giving one specific option?  Because that's what they're going to do...All the different ways of doing it were  negative but the one [positive one] was a managed float.  That's a mix between a floating currency and a fixed.  They manage it and  that's the most stable...  

  Article:  "The Finance Committee 'knows nothing' about the budget tables"  Al-Sudani has been holding his cards so ever close to the chest.

 The looks of it now is that he will not expose the 2024 schedule data until after there is an exchange rate change that will reduce the deficit Will that be after the vote for the Speaker of the House of Representatives in the HoR and or before extraordinary session for Sunday by the Prime Minister of Iraq, Al-Sudani.. Time will tell. But, since the CoM nor the HoR have yet to receive the 2024 Budget schedules we can deduce, it is going to be a very tight window for events to occur.

$1.3 Billion Sales Central Bank Of iraq Today Auction Result 2024🔥iraqi ...

Sunday, May 19, 2024

Next month. A large conference to announce 8 cities as investment opportunities, 20 MAY

 Next month. A large conference to announce 8 cities as investment opportunities

{Economic: Al-Furat News} The New Cities Authority at the Ministry of Construction, Housing and Public Municipalities announced the imminent announcement of the second batch of cities as investment opportunities for companies and real estate developers.

The director of the authority, Hamed Abdel Hamad, said in a press statement that "the procedures have been completed, to reveal 8 new cities as investment opportunities within a second batch of residential cities in the government program for housing, as well as work to complete the procedures to announce three other cities soon," noting that "cities will be available for investment in front of Arab and international companies, and local investors wishing to invest in this vital sector."

Hamad explained that: "The beginning of next month will witness a large conference to announce investment opportunities, in the presence of international, Arab and Gulf companies," noting that "the headquarters of the authority witnessed the visit of dozens of companies to see investment opportunities in these cities, and we sensed a real desire to invest in this sector. "
The director of the authority added that "five new cities have already been referred, including [Ali Al-Wardi] by signing the initial contract, while work began after the issuance of the investment license in the cities of {Al-Jawahiri} in Baghdad and {Al-Ghazlani} in Nineveh," pointing out that "the Chinese and Iraqi companies implementing the installation of concrete factories units, administrative buildings and soil leveling works in Al-Ghazlani, provided that the actual start of them will begin within the next three months."

"The other city is the [banks of Karbala], which is distributed among three experienced investors and previous similar businesses, including a Malaysian company, and is in the process of issuing the investment license and starting work next month after handing over the site, while the {gardens} in Babylon are in the process of preparing plans, handing over the land and issuing the license," he said.

Regarding construction operations, he explained that "all cities have been directed to be at the level of smart and sustainable cities in all its details, including electronic transactions and the use of technology in the daily movement of residents."

Regarding the marketing of housing units in the new cities, he said: "Directives will be issued to investing companies to announce the prices of the units through their websites, so that the citizen can enter and register directly," calling on citizens to "stay away from fake parties that claim to be related to the new cities and promote unrealistic things regarding prices or marketing housing units, and citizens can view the authority's website to answer all their inquiries and questions about this or go to the company directly instead of taking other methods that may not lead for the same purpose."

"RV UPDATE" BY CLARE, 20 MAY

 Clare

  Article Quote:  "Members of the Security Council support ending the mission of the UNAMI mission in Iraq"  

Quote:   "A number of members of the UN Security Council - including Russia and China - yesterday, Thursday, supported Baghdad’s request to end the mission of the United Nations Mission in Iraq (UNAMI) by next year, but Washington did not immediately provide its support for this step ."

Article "Adjourning the session to elect the Speaker of Parliament until further notice"  

 Quote  "It is noteworthy that a quarrel and fistfight occurred between representatives Muthanna Al-Samarrai and Haibat Al-Halbousi inside the House of Representatives hall during the third round of electing the president, creating massive chaos, which prompted the postponement of the decision-making session until further notice."

Floating Iraqi Dinar And Fixed Exchange Rates Today 2024🔥iraqi dinar new...

The Governor of the Central Bank announces the start of the second phase of the banking sector restructuring plan, 20 may

 The Governor of the Central Bank announces the start of the second phase of the banking sector restructuring plan

Central Bank Governor, Ali Mohsen Al-Alaq, announced today, Sunday, the start of the second phase of the banking sector restructuring plan.

The media office of the Central Bank of Iraq said in a statement received by the Iraqi News Agency (INA): “Al-Alaq received a delegation from the World Bank headed by the Regional Director for Equitable Growth, Finance and Institutions for the Middle East and North Africa region, Nader Muhammad,” noting that “during the meeting, strengthening relations was discussed.”

The bilateral relationship between the Central Bank of Iraq and the World Bank, especially the restructuring of government banks, the launch of the Riyada Bank project and its economic and social importance, and the two parties also discussed the experiences of neighboring countries in confronting climate change and its impact on the national and regional economy.”

He added, "The meeting discussed small and medium enterprises and their support by the Central Bank, and the development of the financial and banking sector, non-banking financial institutions, financial markets and the insurance sector, as well as benefiting from the World Bank's experiences in digital transformation, financial inclusion, and digital banks," noting that "the governor reviewed during the meeting , The Central Bank of Iraq’s plan to restructure the banking sector,” noting that “this bank has completed the first phase of the plan, and has begun the second phase.”

Al-Alaq stated - according to the statement - that “the Board of Directors of the Central Bank licensed the Green Bank, which will be the nucleus of renewable energy and sustainable financing initiatives,” revealing “the Central Bank of Iraq’s intention to license a number of digital banks.”  link