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IMF Steps in for Iraq Program


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This released by the IMF a little while ago:

 

IMF Managing Director Approves a Staff-Monitored Program for Iraq
Press Release No. 16/04
January 12, 2016
The Managing Director of the International Monetary Fund (IMF) approved a Staff-Monitored Program (SMP) 1for Iraq covering the period of November 2015-December, 2016, on which the authorities and staff had reached ad-referendum agreement in November 2015 (see Press Release No. 15/509).
Iraq is facing a double shock arising from ISIS attacks and the sharp drop in global oil prices. The conflict is hurting the non-oil economy through destruction of infrastructure and assets, disruptions in trade, and deterioration of investor confidence. The impact of the oil price decline—already felt in 2014—intensified in 2015, affecting the budget, the external sector, and medium-term growth potential. The authorities are responding to the crisis with a mix of fiscal adjustment and financing.
To help address the present and urgent balance of payments and budget needs triggered by the ISIS attacks and the collapse in oil prices, the authorities have also requested an SMP to establish a track record of policy credibility to pave the way to a possible Fund financing arrangement. Under the SMP, the authorities will implement fiscal consolidation that will contain public expenditure in line with available revenue and financing, and aim to reduce the non-oil primary deficit by US$20 billion or 12 percent of non-oil GDP between 2013 and 2016. Under the SMP, agreement has also been reached on measures to strengthen public financial management, anti-money laundering and countering the financing of terrorism (AML/CFT), and financial sector stability.
The IMF has assisted Iraq in strengthening economic institutions and in providing advice to the government on economic policies and reforms for more than a decade. IMF staff will work closely with the authorities to monitor progress in the implementation of their economic program. In addition, the IMF will continue to provide technical assistance to support Iraq’s capacity-building efforts and its reform program.
1 An SMP is an informal agreement between country authorities and Fund staff to monitor the implementation of the authorities’ economic program. SMPs do not entail financial assistance or endorsement by the IMF Executive Board.

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Looks like good news to me!  Now why would there be a need for SMPs at this point?  Hopefully the SMPs can forward any CBI or other corruption attempts to the appropriate corruption exterminating authority and we get the event we have been waiting for!

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Iraq: Letter of Intent, Memorandum of Economic and Financial Policies, and Technical Memorandum of Understanding
December 22, 2015

The following item is a Letter of Intent and a Memorandum of Economic Policies of the government of Iraq. It is being made available on the IMF website by agreement with the member as a service to users of the IMF website. This memorandum describes the policies that Iraq is implementing in the framework
of a staff-monitored program. A members's staff-monitored program is an informal and flexible instrument for dialogue between the IMF staff and a member on its economic policies. A staff-monitored program is not supported by
the use of the Fund's financial resources; nor is it subject to the endorsement of
the Executive Board of the IMF.


Letter of Intent 
Baghdad, December 22, 2015

Ms. Christine Lagarde 
Managing Director
International Monetary Fund
700 19th Street, N.W. 
Washington, DC 20431, USA 

Dear Ms. Lagarde,

1. The attacks by the so-called Islamic State in Iraq and Syria (ISIS) have put Iraq in great
danger. Iraqi security forces have made notable progress in the fight against ISIS, with the help of
our international partners. In fact, a significant portion of the territory captured by ISIS after its
invasion has already been retaken. However, the war is not likely to end soon and will continue to
affect the lives of Iraqis as well as the national economy.

2. The attacks has resulted in the loss of thousands of lives and caused a dramatic
humanitarian crisis. More than 4 million people have been displaced in the northern regions since
June 2014, in addition to 250 thousand Syrian refugees whom Iraq has been sheltering since the civil war in neighboring Syria. Nearly half of the internally displaced persons are children, forced to live in difficult conditions and to face serious health risks. The refugee crisis is also putting great pressure on Iraq’s infrastructure system and public services. Furthermore, the war has destroyed public and private assets and infrastructure, is seriously hampering economic activity in the non-oil sector, and has undermined domestic and external trade.

3. As the ISIS threat expanded, world oil prices fell by 50 percent in the space of a few months,
causing a huge external shock to our balance of payments and our budget revenue, which depends predominantly on oil export receipts. The shock has caused a strong deterioration of the current account balance, drained our international foreign exchange reserves, and boosted the Iraqi
government budget deficit.

4. Against this background, the government commits to implement the economic and financial policies described in the attached Memorandum on Economic and Financial Policies (MEFP) as part of a Staff-Monitored Programin order to demonstrate good performance and move to a possible IMF financing arrangement as soon as possible.The MEFP describes the large fiscal consolidation that the government has already implemented in 2015 and plans to continue to implement in 2016.
The MEFP describes also the foreign exchange policy, public financial management and banking supervision reforms that the government commits to implement during the remainder of 2015 and in 2016.

5. The government believes that the measures and policies set out in the attached MEFP are
appropriate for attaining the objectives of this program and will take any further steps that might be necessary to that end. It will consult with the IMF staff on the adoption of such measures prior to any revision of the policies described in the attached MEFP.

6. The government will provide IMF staff with any relevant information referred to in the
attached Technical Memorandum of Understanding (TMU) concerning progress made under the
program.

7. The government intends to make public the content of the IMF staff report, including this
letter, the attached MEFP, the TMU, and the informational annex of the staff report. It therefore authorizes the IMF staff to publish these documents on its website once you have approved this
Staff-Monitored Program.

Sincerely yours,


Hoshyar Mahmoud Zebari 
Minister of Finance of Iraq


Ali Mohsen Ismail Al Allaq
Acting Governor of the Central Bank of Iraq

Attachments:

1. Memorandum of Economic and Financial Policies
2. Technical Memorandum of Understanding


Attachment I. Memorandum on Economic and Financial Policies

1. This Memorandum on Economic and Financial Policies (MEFP) sets out recent economic
developments, outlook and economic and financial policies in 2015-16 in regard to Iraq’s StaffMonitored-Program
with the International Monetary Fund (IMF).
Background and Recent Economic Developments

A. Background

2. The attacks by the so-called Islamic State in Iraq and Syria (ISIS) have put Iraq in great
danger. The Iraqi security forces have made notable progress in the fight against ISIS, with the help of our international partners. In fact, a significant portion of the territory captured by ISIS after its invasion has already been retaken. However, the war is not likely to end soon and will continue to affect the lives of Iraqis as well as the national economy.

3. The ISIS attacks has boosted the number of internally displaced persons—estimated at
4 million people at end June 2015. Close to 10 million Iraqis (or almost one third of the
population) need humanitarian assistance. With 250,000 Syrian refugees, Iraq is the fourth largest hosting country in the region for people fleeing Syria. Refugees—60 percent of whom are
women and children—mostly reside in the north, including the Kurdistan Regional Government
(KRG) where they have been granted residency status including rights to work. This refugee
inflow is adding to the already difficult internal humanitarian situation faced by the Iraqi
government.

4. In response to escalating protests across the country fueled by massive electricity
outages, the Prime Minister proposed a series of significant administrative reforms in August.
Parliament approved a number of these measures, including reducing cabinet from 33 to 22 members, eliminating three vice-president and three deputy prime minister positions, addressing
tax evasion, implementing customs at border points including within KRG, 
reducing security
budgets and lowering pension ceilings and salaries for officials.

B. Recent Economic Developments

5. Oil production, located in areas under control of the Iraqi government and the KRG, is
holding well: for the first 11 months of 2015, it increased by 14 percent compared to last year
and oil exports increased by 23 percent. Northern oil exports accelerated in line with the oil
revenue sharing agreement between the Iraqi government and KRG until June, when the KRG
drastically reduced oil supply to the State Oil Marketing Organization (SOMO) and increased its
independent sales to repay the debt to oil companies incurred in 2014 as the oil and budget
agreement with Baghdad stumbled. 

6. Non-oil activity in the part of the country that is not occupied by ISIS dropped by 8 percent
year-on-year during the first semester of 2015. The government has no information on economic
activity in the ISIS-controlled territories.

7. At end-October 2015, y-o-y consumer price inflation (CPI) was low at 1.6 percent, but is
likely underestimated because CPI coverage excludes areas occupied by ISIS.

8. Broad money stayed flat at end June year-on-year and reserve money contracted by
13 percent at end-September likely reflecting lower government spending and weakening nonoil
economic activity.

9. Gross foreign exchange reserves of the Central Bank of Iraq (CBI) stood at $59 billion at
end-October compared to $67 billion at end-2014.

10. As part of the preparation to issue Eurobonds to help finance the large fiscal deficit, the
Fitch Ratings agency gave a sovereign rating of B- to Iraq. In light of the adverse market
conditions, the government has decided to postpone the issuance of $2 billion in Eurobonds
from 2015 to 2016 (¶26).

11. The Iraqi stock exchange index lost about 16 percent between June and September.

12. The spread between the official and the parallel foreign exchange market rate receded to around 2 percentage points since August from as high as 16 percentage points in June, as a result of the elimination of the obligation to prove custom duty and income tax payments before buying foreign exchange.

13. During the first eight months of the year, public expenditures were compressed owing to
the tight financing constraints. Oil revenue amounted to ID 39 trillion, non-oil revenue amounted to ID 5 trillion, and total spending amounted to ID 54 trillion, out of which ID 41 trillion in current expenditures and ID 13 trillion in investment expenditure. Total spending was about ID 23 trillion lower than the path assumed in the budget. The resulting deficit of ID 11 trillion, or 5 percent of GDP, was financed mostly by the issuance of T-bills subscribed by the state-owned banks Rasheed and Rafidain, of which 4 trillion was refinanced at the discount window of the Central
Bank of Iraq (CBI). The deficit was also financed by the accumulation of domestic arrears
estimated at ID 5 trillion at end-April 2015. The government paid all the arrears it owed to the
international companies (IOCs) in an amount of $3.5 billion. The deficit was also financed by a
loan of $1.2 billion by the IMF under the Rapid Financing Instrument (RFI) approved by the IMF
Executive Board on July 29, 2015.

Economic and Financial Policies for the End of 2015 and 2016

14. The external outlook has worsened since the latest Article IV consultation assessment
(May-June)1 mainly owing to a further weakening of global oil prices. Lower capital spending on
the back of falling oil revenue is expected to contract non-oil economic activity by 8 percent in
2015, after a contraction of close to 9 percent in 2014. Overall real GDP should nonetheless grow
by 1.5 percent thanks to an increase of oil production by 10 percent. In 2016, real GDP growth
should increase to 10.6 percent thanks to the projected 20 percent increase in oil production,
despite flat non-oil GDP.

15. The fall in oil prices since mid-2014 is expected to shift the current account balance from a surplus of 1 percent of GDP in 2014 to a deficit of 7 percent of GDP in 2015 and 6 percent of GDP in 2016. The overall balance of payments deficit will reach $14 billion in 2015 and $11 billion in 2016, which will be financed mostly by a large draw down of official foreign exchange reserves.
Official gross foreign exchange reserves held by the CBI would fall from $67 billion (13 months of
imports of goods and services) in 2014 to $51 billion (9 months) in 2015, and $43 billion (7
months) in 2016. Reserves should resume their rising trend in 2017 and beyond owing to rising
oil revenue: they should gradually increase from $48 billion (7 months) in 2017 to $88 billion (10
months) in 2020.

16. The fall in oil prices is also causing a sharp deterioration of the fiscal position with the
budget deficit increasing from 6 percent of GDP in 2014 to 15 percent of GDP in 2015 and 10
percent of GDP in 2016 (provided measures discussed below are taken), and the total public debt increasing from 39 percent of GDP in 2014 to 62 percent of GDP in 2015 and 66 percent of GDP in 2016 as result of a sharp increase of mostly domestic borrowing to finance the deficit.

17. In the medium term, the outlook should improve as oil production expands further, oil
prices recover somewhat, structural reforms are implemented, and progress is made to retake
territories controlled by ISIS.

C. Foreign Exchange Policy

18. The government will maintain the peg with the U.S. dollar. The peg provides a key
nominal anchor in a highly uncertain environment with policy capacity weakened by the conflict
with ISIS.


19. The government will gradually remove remaining exchange restrictions and multiple currency practice (MCP) with a view to eliminating exchange rate distortions. Such a move towards acceptance of the obligations under Article VIII of the IMF’s Articles of Agreement will send a positive signal to the investment community that Iraq is committed to maintain an exchange system that is free of restrictions and MCPs for current international transactions and thus facilitate creation of a favorable business climate. As a first step, the government will, by end-February 2016, amend the Investment Law, or issue clarifying implementing regulations, to remove the limitation on transfer of investment proceeds that gives rise to an exchange restriction, as recommended by a recent technical assistance mission of the IMF.

20. The government will implement reforms on anti-money laundering and combating the
financing of terrorism (AML/CFT). This will improve the integration of the domestic financial
system into the global economy and lower transaction costs, improve governance, and reduce the size of the informal sector. As a first step, the government will, by end-February 2016, draft, with the help of IMF technical assistance, and adopt a by-law to set up a mechanism to comply with the relevant United Nations Security Council resolutions related to terrorism financing and Recommendation 6 of the Financial Action Task Force on Money Laundering (FATF).


D. Fiscal Policy

21. In order to maintain macroeconomic stability, the government commits to implement a
large fiscal consolidation to bring spending into line with available resources in 2015 and 2016.
This will require: (i) a sizable reduction in the non-oil primary balance2 (quantitative targets, Table 1), of about 12 percent of non-oil GDP (ID 24 trillion, or $20 billion) over 2013–16;3
and (ii) a large increase in mostly domestic but also external financing over the short run that will remain compatible with debt sustainability in the medium run. In order to minimize the impact of the fiscal consolidation on the population, the government will protect social spending, i.e. spending on health, education, and transfers in support of the social safety net, the internally displaced and the refugees (quantitative targets, Tables 1 and 3).
Fiscal Program in 2015

22. In 2015, the government commits to contain the non-oil primary deficit to no more than
ID 69 trillion (52 percent of non-oil GDP), compared to ID 84 trillion (60 percent of non-oil GDP)
in 2014. This will be achieved through the implementation of the following measures:
 collect at least ID 6.5 trillion (4.9 percent of non-oil GDP) in non-oil revenue, compared to
ID 5.9 trillion (4.2 percent of non-oil GDP) in 2014; and

2
The non-oil primary fiscal balance is defined as the difference between non-oil revenue and non-oil primary expenditure, i.e. excluding interest payment, see Technical Memorandum of Understanding (TMU), ¶7.
3
2013 is the appropriate reference year to measure the fiscal consolidation since it is the last year that fully included revenue and expenditure of KRG in the federal government fiscal tables; 2014 includes only 2 months of KRG’s revenue and expenditure and 2015 only 6 months owing to disagreements between KRG and the federal government over their oil revenue sharing agreement.The 2016 budget fully incorporate oil revenue exported by KRG and transfers of the federal government to KRG. 

 contain non-oil primary expenditure to ID 75 trillion (57 percent of non-oil GDP) compared
to ID 90 trillion (64 percent of non-oil GDP) in 2014; this reduction will be borne mostly by a
reduction of non-oil investment expenditure (by ID 15 trillion, or 10 percent of non-oil GDP),
goods and services (ID 3.7 trillion, or 2.4 percent of non-oil GDP) and transfers (by ID 1.3
trillion, or 0.5 percent of non-oil GDP), making room for higher wages for security forces
fighting ISIS and for higher pensions; the reduction in non-oil investment expenditure has
been achieved by cancelling non-priority projects and delaying other ones to outer years.

23. In order to finance the non-oil primary fiscal deficit, the oil investment expenditure and
the debt service, the government will have recourse to oil revenue (ID 55 trillion), domestic
financing (ID 33 trillion) and external financing (ID 2 trillion). The domestic financing will be
covered by the issuance of Treasury bills, out of which up to ID 15 trillion will be refinanced by
commercial banks at the discount window of the CBI. The external financing will be covered by
the loan from the IMF under the RFI ($1.2 billion, ¶13), a Development Policy Loan by the World
Bank ($1.2 billion) to be disbursed in December 2015, and project loans by the World Bank ($35
million), the Japan International Corporation Agency (JICA, $307 million), and Italy ($40 million).

24. To ease the cash constraint in 2015-16, the government of Kuwait has agreed to the
postponement of the payment of the balance of war reparations ($4.6 billion, or 4 percent of
non-oil GDP) by the Iraqi government to 2017.

Fiscal Program in 2016

25. On October 18, 2015, the government approved a draft budget for 2016 with a non-oil
primary deficit of ID 78 trillion (57 percent of non-oil GDP) with a large amount of foreign
financing. In light of the adverse market conditions (¶10), the government decided to reduce its foreign financing forecast and introduced amendments to the 2016 draft budget to parliament on December 2, 2015 that target a slightly lower non-oil primary fiscal deficit of up to ID 77
trillion (56 percent of non-oil GDP; prior action for management approval, Table 2) with financing
tilted towards domestic sources. This will be achieved through the implementation of the
following measures:
 collect at least ID 8.8 trillion (6.5 percent of non-oil GDP) in non-oil revenue, out of which
ID 1 trillion from an increase in wage taxation; and
 contain non-oil primary expenditure to ID 86 trillion (63 percent of non-oil GDP). This
containment of non-oil primary expenditure at a level slightly higher than the low level
programmed in 2015 will be obtained again mostly by the postponement of lower-priority
non-oil investment projects to later years.

26. In order to finance the non-oil primary fiscal deficit, oil investment expenditure and debt
service, the government will have recourse to oil revenue (ID 73 trillion), domestic financing
(ID 20 trillion) and external financing (ID 4 trillion). The domestic financing will be covered by the issuance of Treasury bills, out of which up to ID 7 trillion will be refinanced by commercial banks at the discount window of the CBI, the issuance of national bonds for the general public in an
amount of ID 5 trillion, and the drawdown of government deposits in the banking sector in an
amount of ID 4 trillion. The amount of central bank indirect monetary financing will be revisited
on the occasion of the first review in light of the inventory of government cash holdings in bank
accounts to be completed by end-February 2016 (¶27). The external financing will be covered by the planned issuance of Eurobonds ($2 billion), a loan from the Islamic Development Bank ($500
million) and project loans by the World Bank ($50 million), JICA ($502 million), and Italy ($40
million). The government will not resort to the accumulation of arrears to finance the deficit. It
commits to a zero ceiling on external arrears (continuous quantitative target, Table 1) and regular inventories of domestic arrears with a view to ensuring that new arrears do not accumulate and
to paying them down after proper audit, as will be done for the existing stock of domestic arrears
(¶27, second bullet).

E. Public Financial Management Reforms

27. In order to strengthen fiscal discipline, the government will implement the following
measures:

 The Minister of Finance will approve a new draft of the Financial Management law in line with
World Bank and IMF comments on the last draft submitted to the Shura Council (structural
benchmark for the second review, Table 2).

 Survey, audit and pay domestic arrears. As a first step, the Ministry of Planning will complete,
by end-February 2016, a survey of domestic arrears on investment spending accumulated by
all ministries as of end-September 2015 (structural benchmark, Table 2) and the Ministry of Finance will complete a survey, also by end-February, on current spending arrears
accumulated by the same units as of end-September; in addition, similar surveys of arrears as of end-December 2015 by end-March 2016, and as of end-March 2016 by end-May 2016 will be completed. On the basis of each of these surveys, the government will prepare plans for
the orderly payment of the arrears, which will include an independent audit of the arrears
and a repayment schedule in line with the government’s financing capacity. As of end-April 2015, the government identified ID 7.3 trillion in domestic arrears, out of which ID 5 trillion accumulated in 2015 (¶13); the Board of Supreme Audit will audit these arrears to check their validity by end-February 2016. So far, the government has included ID 2.4 trillion for the repayment of domestic arrears in its revised 2016 budget (¶25).

 Take steps to move to a Treasury Single Account (TSA); as a first step, the Ministry of Finance and the CBI will, by end-February 2016, compile a list of all bank accounts controlled by the Ministry of Finance and all spending units and sub spending units of the federal government,
in CBI, state-owned and commercial banks; details should include balances at end-December
2015, 
account number, title, location, purpose, authority, and signatories (structural
benchmark, Table 2). 


 Design and implement, with the IMF technical assistance, a commitment control system for
budget execution that is based on a comprehensive financial plan for budget execution.

 Design and implement an Integrated Financial Management Information System (IFMIS) with
the assistance of the World Bank; as a first step, adopt, by end-April 2016, a road map
detailing its core functional requirements, such as: the chart of accounts, multi-year
expenditure tracking; carry-over of resources from one year to the next; and management of
advances and cash management arrangements.

 Implement Public Investment Management (PIM) reform with the assistance of the World Bank.
On October 18, 2015, the Prime Minister issued a decree endorsing the Public Investment
Management Decision Process Framework in line with World Bank recommendations
covering investment selection, implementation, and ex-post evaluation. By end-April 2016,
the federal Ministry of Planning will set up a central PIM unit that will screen projects based
on feasibility studies and develop and manage the Integrated Bank of Projects (IBP) to be
operated as a sub-system of the existing Iraq Development Management System (IDMS).

 Implement the existing asset declaration procedures for high-level officials in order to improve governance and enhance anti-corruption efforts; the Public Integrity Commission will
continue to publish the names of those who fail to submit their annual declaration.

F. Banking Supervision

28. As of June 30, 2015, there were 56 banks operating in Iraq including 7 state-owned
banks (SOB) of which one is an Islamic bank, 32 Iraqi private banks, of which 6 Islamic banks, and
17 foreign branches, of which 5 are Islamic banks. The SOBs dominate the financial sector and account for the bulk of assets and credits. Three of the SOBs, Rafidain Bank, Rasheed Bank and Trade Bank of Iraq (TBI), cluster around 89 percent of the banking system’s assets. The financial positions of Rasheed Bank and Rafidain Bank are fragile following years of quasi-fiscal
operations. As a first step to restructure these banks, the Ministry of Finance will, by end February 2016, appoint international auditors to audit the latest financial statements of Rasheed Bank and Rafidain Bank according to international standards (structural benchmark, Table 2), in cooperation with the Executive Committee for the restructuring of these banks and the World Bank.

29. The CBI will continue to implement reform measures to enhance the stability of the
banking sector in Iraq which includes inter alia:


 Introducing the international bank account number (IBAN) system in Iraq;

 Increasing the capital requirement of banks to ID 250 billion ($214 million), a level to which
all private banks except one have increased their capital; 

 Contracting a consultant to assist the CBI in rating banks, whereby they rated 17 banks: three
banks were rated “satisfactory”, eight banks rated “fair” and six banks “marginal”;

 Contacting a consultant to assist the CBI in upgrading the prudential regulations on
“Liquidity” and “Capital Adequacy Ratio”;

 Working on reviewing and assessing CBI prudential regulations with the assistance of the IMF
Middle East Technical Assistance Center (METAC);

 Preparing a Deposit Insurance Scheme which stipulates the establishment of a corporation to
be licensed by the CBI, of which banks will have the opportunity to take a share in the
capital;

 Contracting a private firm to provide the CBI with a credit registry system for sharing
information among banks on their common existing and potential borrowers;

 Issuing a banking law for financial institutions offering Islamic services; and

 Penalizing financially and administratively banks and non-banks financial institutions for any
non-compliance with laws and regulations in force.

Program Monitoring

30. The program will have quarterly reviews and set quarterly quantitative targets on the
non-oil primary balance, the stock of net domestic assets of the CBI, official foreign exchange
reserves, social spending, and the absence of new external arrears, starting in December 2015
(Table 1). Each program review will set a few structural benchmarks in areas that are essential for
the success of the program (Table 2 contains the list for the first review). The first review should
be completed by end-May 2016. The government intends to demonstrate good performance
under this Staff-Monitored Program to move to a possible IMF financing arrangement as soon as
possible. 

Dec-15 Mar-16 Jun-16 Sep-16 Dec-16
Stock of gross international reserves of the CBI 51,100 43,064 38,945 37,849 42,517
(floor; eop stock, in millions of U.S. dollars)
Net domestic assets of the CBI 2/ 12,956 22,029 27,186 28,912 23,677
(ceiling; eop stock)
Cumulative flow from beginning of calendar year
Central government non-oil primary balance (floor) 3/ (68,801) (20,949) (39,365) (58,621) (76,705)
Social spending (floor) 3/4/ 17,456 4,355 8,710 13,829 18,949
New external arrears on existing / rescheduled debt and new borrowing (in
millions of U.S. dollars; ceiling) 5/ 00000
1/ The Technical Memorandum of Understanding (TMU) provides for precise definitions of all quantitative targets.
2/ Excluding other items net.
3/ End-March, end-June, end-September and end-December targets are cumulative from January 1.
5/ To be monitored on a continuous basis. The December 2015 target is cumulative from November 10, 2015.
Table 1. Iraq: Quantitative Targets Under the Staff-Monitored Program, 2015–16 1/
(In billions of Iraqi dinars, unless otherwise indicated)
Targets
4/ Quarterly targets assume spending of at least 90 percent of the budget allocation on health, education, and transfers in support of the
social safety net, the internally displaced and refugees (see Table 3).
IRAQ
12 INTERNATIONAL MONETARY FUND
Measures
Scheduled review by which
the measure will be
completed
Macroeconomic justification Status
Prior action for Management approval
Approval by the Council of Ministers and introduction to Parliament of amendments
to the draft 2016 budget to bring it into line with the macroeconomic framework
agreed under the Staff-Monitored Program.
Preserve macroeconomic
stability.
Met
Structural benchmark
Completion by the Ministry of Planning of a survey of domestic arrears on
investment spending accumulated by all ministries of the federal government at
end-September 2015. Details should include the amount of the arrear, the
identity of the creditor, the bill, the identification of the goods or the services
delivered, and the credit line in the budget authorizing such spending.
1rst review Strengthen cash management.
Compilation by the Ministry of Finance and the Central Bank of Iraq (CBI) of a list of
all bank accounts controlled by the Ministry of Finance and all spending and subspending
units of the central government in CBI, state-owned and commercial banks.
Details should include balances at end-December 2015, account number, title,
location, purpose, authority, signatories.
1rst review Strengthen cash management.
Appointment of one or several international auditors to audit the latest financial
statements of Rasheed Bank and Rafidain Bank according to international standards.
1rst review Strengthen financial sector
stability.
Approval by the Minister of Finance of a draft of the Financial Management law in
line with World Bank and IMF comments on the last draft submitted to the Shura
Council.
2nd review Strengthen public financial
management.
Source: Iraqi authorities.
Table 2. Iraq: Prior Action and Structural Benchmarks, 2016
IRAQ
INTERNATIONAL MONETARY FUND 13
Dec-15 Mar-16 Jun-16 Sep-16 Dec-16
Total Social spending 17,456 4,355 8,710 13,829 18,949
Social Safety Net 1,215 496 991 1,487 1,982
Public Distribution System (PDS - food subsidies) 2,250 556 1,112 1,667 2,223
Wheat and rice subsidy 1,604 396 792 1,188 1,585
Assistance and subsidy to Iraqi refugees 192 0 0 95 189
Assistance and subsidy to internally displaced persons 900 0 0 445 889
Farmer subsidies 457 0 0 226 452
Health Ministry and Environment Ministry- wages 2,546 668 1,335 2,003 2,671
Higher Education Ministry - wages 2,035 564 1,128 1,691 2,255
Lower Education Ministry - wages 6,258 1,676 3,352 5,027 6,703
Targets
Table 3. Iraq: Social Spending
(In billions of Iraqi dinars, cumulative from the beginning of the year)
IRAQ
14 INTERNATIONAL MONETARY FUND
Mar. Jun. Sep. Dec.
Prog. Prog. Prog. Prog.
Revenues and grants 15.5 34.5 56.2 81.7
Revenues 15.5 34.5 56.2 81.7
Oil 13.7 30.1 49.7 72.8
Non-oil 1.8 4.3 6.5 8.8
Grants 0.0 0.0 0.0 0.0
Expenditures 27.4 52.7 78.5 103.1
Current expenditures 20.3 39.7 59.0 77.4
Salary and pension 13.4 26.1 38.8 50.9
Salary 10.3 20.1 29.8 39.1
Pension 3.1 6.0 9.0 11.8
Goods and services 2.1 4.1 6.2 8.1
Transfers 4.1 8.0 11.9 15.6
Social safety net (including PDS) 2.0 3.9 5.8 7.6
Transfers to SOEs 1/ 0.6 1.2 1.8 2.4
Other transfers 1.5 2.9 4.2 5.6
Interest payments 0.8 1.5 2.2 2.9
War reparations 2/ 0.0 0.0 0.0 0.0
Investment expenditures 7.0 13.0 19.5 25.7
Non-oil investment expenditures 3.2 5.5 8.2 11.0
Oil investment expenditures 3.9 7.5 11.2 14.7
Balance (including grants) -11.9 -18.3 -22.3 -21.4
Balance (excluding grants) -11.9 -18.3 -22.3 -21.4
Financing 11.9 18.3 22.3 21.4
External financing -0.5 -1.1 -0.5 1.8
Assets held abroad
Project financing 0.0 0.0 0.5 0.9
World Bank (budget support, other) 0.0 0.0 0.0 0.0
Regional and foreign national banks 0.0 0.0 0.6 0.6
Loan guarantees by export credit agencies 0.0 0.0 0.0 0.0
Eurobond 0.0 0.0 0.0 2.4
Amortization -0.5 -1.1 -1.6 -2.1
Arrears 0.0 0.0 0.0 0.0
Domestic financing 12.4 19.3 22.8 19.7
SDR Allocation 0.0 0.0 0.0 0.0
IMF (RFI) 0.0 0.0 0.0 0.0
Commercial bank loans 0.0 2.4 2.4 6.4
T-bills and bonds 12.7 18.8 22.7 17.1
o/w CBI purchases 3.8 4.6 6.2 7.0
Arrears 0.0 -1.2 -1.2 -2.4
Amortization -0.4 -0.7 -1.1 -1.4
Financing gap: 0.0 0.0 0.0 0.0
Memorandum items:
Security-related expenditure (military and police
equipment and salaries) 4.7 9.2 13.6 17.9
Non-oil primary expenditure 22.8 43.7 65.1 85.5
Non-oil primary fiscal balance -20.9 -39.4 -58.6 -76.7
Sources: Iraqi authorities; and Fund staff estimates and projections.
2016
Table 4. Iraq: Central Government Fiscal Accounts, 2016
(In trillions of Iraqi dinars; unless otherwise indicated. Cumulative from the beginning of the fiscal year)
1/ Includes off-budget transfers to SOEs financed by Bank Rafidain.
2/ Five percent of oil exports as mandated by U.N. Security Council Resolution 1483 to finance war
reparations to Kuwait until 2016.
IRAQ
INTERNATIONAL MONETARY FUND 15
Mar. Jun. Sep. Dec.
Prog. Prog. Prog. Prog.
Trade balance -3.9 -4.3 -2.4 2.8
(In percent of GDP)
Exports 11.0 24.4 40.4 59.4
Crude oil 1/ 11.0 24.3 40.2 59.1
Other exports 0.1 0.1 0.2 0.3
Imports -15.0 -28.7 -42.8 -56.6
Private sector imports -8.7 -16.7 -24.9 -32.9
Government imports -6.3 -12.0 -17.9 -23.7
Services, net -3.2 -6.2 -9.2 -12.2
Receipts 1.1 2.0 3.0 4.0
Payments -4.3 -8.2 -12.2 -16.1
Income, net -0.1 -0.2 -0.3 -0.4
Transfers, net 0.0 0.0 0.0 0.0
Private, net 0.0 0.0 0.0 0.0
Official, net 0.0 0.0 0.0 0.0
Current account -7.2 -10.6 -11.9 -9.8
(In percent of GDP)
Capital account 0.0 0.0 0.0 0.0
Financial account -0.7 -1.5 -1.8 -1.3
Direct and portfolio investment (net) 2/ 0.5 1.0 1.5 2.0
Other capital, net -1.2 -2.5 -3.3 -3.3
Official, net -0.4 -0.9 -0.9 -0.1
Assets 0.0 0.0 0.0 0.0
Liabilities -0.4 -0.9 -0.9 -0.1
Disbursements 3/ 0.0 0.0 0.4 0.8
Amortization -0.4 -0.9 -1.3 -0.9
Private, net -0.8 -1.6 -2.4 -3.2
Errors and omissions 0.0 0.0 0.0 0.0
Overall balance -8.0 -12.1 -13.7 -11.0
(In percent of GDP)
Financing 8.0 12.1 13.7 11.0
Development Fund for Iraq (increase -) 4/ 0.0 0.0 0.0 0.0
Gross International Reserves (increase -) 8.0 12.2 13.3 8.6
Fund credit (net) -0.1 -0.1 -0.1 -0.1
World bank 0.0 0.0 0.0 0.0
Eurobond 0.0 0.0 0.0 2.0
Islamic Development Bank 0.0 0.0 0.5 0.5
Qatar National Bank 0.0 0.0 0.0 0.0
Loan securitized by future oil revenue 0.0 0.0 0.0 0.0
Change in arrears (negative = decrease) 0.0 0.0 0.0 0.0
Financing gap 0.0 0.0 0.0 0.0
Memorandum items:
GIR (end of period) 5/ 43.1 38.9 37.8 42.5
2/ Excludes planned issuances of Eurobonds in 2016, which are reflected under the financing gap.
3/ Excludes prospective disbursements from the IMF and the WB in 2015 and 2016, which are reflected under
the financing gap.
4/ Reflects the transfer of the Development Fund for Iraq from the Federal Reserve Bank of New York to the CBI
in May 2014.
5/ Starting 2014 includes US$ balances from oil revenues.
Table 5. Iraq: Balance of Payments, 2016
(In billions of U.S. dollars; unless otherwise indicated. Cumulative from the beginning of the fiscal year.)
2016
Sources: Iraqi authorities; and Fund staff estimates and projections.
1/ Reflects KRG exports through the State Oil Marketing Company of Iraq. 
IRAQ
16 INTERNATIONAL MONETARY FUND
Mar. Jun. Sep. Dec.
Prog. Prog. Prog. Prog.
Net foreign assets 80,982 79,085 77,820 75,291
Of which: CBI 48,970 44,110 42,816 48,325
Net domestic assets 22,915 26,948 31,257 38,153
Domestic claims 43,694 47,603 51,755 50,715
Net claims on general government 15,890 19,386 23,263 21,671
Claims on general government 55,545 58,042 60,918 58,326
less: Liabilities to general government -39,656 -38,656 -37,656 -36,656
Claims on other sectors 27,804 28,217 28,493 29,044
Other Item Net (OIN) -20,779 -20,655 -20,499 -12,562
Broad money 103,897 106,033 109,077 113,444
Currency outside banks 42,506 43,467 44,137 44,706
Transferable deposits 44,875 45,734 47,469 50,245
Other deposits 16,516 16,832 17,471 18,492
Sources: Iraqi authorities; and Fund staff estimates and projections.
Table 6. Iraq: Monetary Survey, 2016
(In trillions of Iraqi dinars; unless otherwise indicated)
2016
IRAQ
INTERNATIONAL MONETARY FUND 17
Mar. Jun. Sep. Dec.
Prog. Prog. Prog. Prog.
Net foreign assets 48,970 44,110 42,816 48,325
Foreign assets 52,368 47,508 46,215 51,723
Official reserve assets 50,815 45,955 44,662 50,170
Gold 4,488 4,562 4,636 4,710
Other 45,923 41,027 39,698 45,171
SDR holdings and reserve position in the Fund 405 366 328 289
Other foreign assets 1,553 1,553 1,553 1,553
Foreign liabilities -3,398 -3,398 -3,398 -3,398
Net domestic assets 17,686 22,843 24,569 19,333
Domestic assets 20,867 21,752 23,321 24,198
Net claims on general government 20,780 21,665 23,234 24,111
Loans to central government 3,677 3,648 3,620 3,592
Holdings of discounted treasury bills 19,000 19,870 21,435 22,227
Other claims 0 0 0 0
Domestic currency deposits -717 -673 -640 -542
Foreign currency deposits -1,180 -1,180 -1,180 -1,166
Monetary policy instruments 1/ 1,162 5,434 5,591 -521
Other items net -4,343 -4,343 -4,343 -4,343
Reserve money 66,656 66,952 67,385 67,658
Currency in circulation 44,882 45,667 46,498 47,064
Bank reserves 21,774 21,285 20,887 20,595
Memorandum items
Gross foreign exchange assets (in millions of U.S. dollars) 2/ 43,064 38,945 37,849 42,517
Sources: Iraqi authorities; and Fund staff estimates and projections.
2/ Starting 2014 reflects the balances of the Development Fund of Iraq were moved from the Federal Reserve
Bank of New York to the CBI as a US$ account (US$ balances from oil revenues) in May 2014.
1/ This mainly represents the ID standing overnight facilities, US$ deposits of commercial banks, domestic
currency deposits, and CBI bills.
Table 7. Iraq: Central Bank Balance Sheet, 2016
(In trillions of Iraqi dinars; unless otherwise indicated)
2016

Attachment II. Technical Memorandum of Understanding

1. This memorandum defines the quantitative targets for the economic program of the Iraqi
authorities during the period November 10, 2015–December 31, 2016 under the Staff-Monitored
Program (SMP). These indicators, presented in Table 1 of the Memorandum of Economic and
Financial Policies (MEFP) attached to the Letter of Intent dated December 22, 2015 reflect the
understandings reached between the Iraqi authorities and the staff of the IMF. It also specifies the periodicity and deadlines for transmission of data to the staff of the IMF for monitoring purposes.

A. Quantitative Targets

2. The quantitative targets are the following:

(i) a floor on the stock of gross international reserves of the Central Bank of Iraq (CBI);
(ii) a ceiling on net domestic assets of the CBI;
(iii) a floor on the central government non-oil primary balance;
(iv) a floor on the central government social spending;
(v) a continuous ceiling on new external payments arrears on any existing, rescheduled and new debt of the central government and/or the CBI.

B. Definitions

3. An exchange rate set at ID 1,180 per U.S. dollar will be used for monitoring purposes. This exchange rate will be used to convert into Iraqi dinars the U.S. dollar value of all CBI foreign assets and liabilities denominated in U.S. dollars, as required. For CBI assets and liabilities denominated in SDRs and in foreign currencies other than the U.S. dollar, they will be converted in U.S. dollars at their respective SDR-exchange rates prevailing as of November 10, 2015, as published on the IMF’s website. The same rules will be used to convert external debt related parameters.

4. For the monitoring purposes, central government is defined to include the central
administration, the Kurdish regional government, as well as agencies included under Section 6
(the local boards, Iraqi media network, Iraqi national Olympic committee, Bait-Al-Hikma, Ammant Baghdad, Municipality institutions, as well as the General directorates of sewage and water).

5. Gross international reserves (GIR) of the CBI are claims of the CBI on nonresidents that
are controlled by the CBI, denominated in foreign convertible currencies, and are immediately
and unconditionally available to the CBI for meeting balance of payments needs or for
intervention in foreign exchange markets, and are not earmarked by the CBI for meeting specific 
payments. They include CBI holdings of monetary gold, SDR holdings, Iraq’s reserve position in
the IMF, foreign currency cash, holdings of non-resident equity and debt securities, and deposits
in foreign currency abroad, including foreign exchange account of the government (300/600).
Excluded from reserve assets are any assets that are pledged, collateralized, or otherwise
encumbered; claims on residents; precious metals other than monetary gold; assets in
nonconvertible currencies; illiquid assets; and claims on foreign exchange arising from derivatives in foreign currencies vis-à-vis domestic currency (such as futures, forwards, swaps, and options).
For program monitoring purposes, the stock of foreign assets of the CBI shall be valued at
program exchange rates (¶3).

6. Net domestic assets (NDA) of the CBI include: (i) net claims on the general government,
comprising of gross claims on the general government minus general government domestic and foreign currency deposits at the CBI; (ii) gross claims on other depository corporations;
(iii) monetary policy instruments, including dinar and foreign currency denominated term
deposits and CBI bills held by other depository corporations; (iv) net claims on public
nonfinancial corporations; and (v) claims on private sector.
 For the purpose of this SMP, net
domestic assets of the CBI exclude other items net (OIN). OIN is the net value of nonfinancial
assets, capital and reserve accounts, IMF account adjustments (differences between national
record and IMF record), and provisions.

7. The central government non-oil primary balance is defined as the difference between
non-oil revenue and non-oil primary expenditure. Non-oil revenue is defined as total revenue
and grants excluding oil-related receipts (exports of crude oil and refined products, and transfers
from oil-related state-owned enterprises). Non-oil primary expenditure is defined as total
expenditure, including off-budget spending approved by government decree, excluding
(i) interest payments on domestic and external debt; and (ii) oil-related spending (including war
reparations).

8. Social spending will be defined as the sum of expenditure on the social safety net, the
public distribution system, wheat and rice subsidies, assistance subsidies to Iraqi refugees and the internally displaced, farmer subsidies, and wage expenditure of the health, environment and the higher and lower education ministries. The annual targets will be set at 90 percent of the
expenditure in the budget. Expenditure will be measured at the time the Ministry of Finance
transfers the money to the spending units.

9. A continuous ceiling applies to the non-accumulation of new external payments arrears
on rescheduled debt and new external debt contracted or guaranteed by the central government and/or by the CBI. External payment arrears consist of external debt service obligations (principal and interest) falling due after November 10, 2015 and that have not been paid within the grace period specified in the contractual agreements. The SMP monitoring ceilings of the external payments arrears are reported in Table 1.

10. As set out in Executive Board Decision 15688-(14/107), paragraph 8, adopted December
5, 2014) the term “debt” will be understood to mean a current, i.e., not contingent, liability, 
created under a contractual arrangement through the provision of value in the form of assets
(including currency) or services, and which requires the obligor to make one or more payments in the form of assets (including currency) or services, at some future point(s) in time; these payments will discharge the principal and/or interest liabilities incurred under the contract. Debts can take a number of forms, the primary ones being as follows:

 Loans, i.e., advances of money to the obligor by the lender made on the basis of an
undertaking that the obligor will repay the funds in the future (including deposits, bonds,
debentures, commercial loans and buyers’ credits) and temporary exchanges of assets that
are equivalent to fully collateralized loans under which the obligor is required to repay the
funds, and usually pay interest, by repurchasing the collateral from the buyer in the future
(such as repurchase agreements and official swap arrangements).

 Suppliers’ credits, i.e., contracts where the supplier permits the obligor to defer payments
until sometime after the date on which the goods are delivered or services are provided.

 Leases, i.e., arrangements under which property is provided which the lessee has the right to use for one or more specified period(s) of time that are usually shorter than the total
expected service life of the property, while the lessor retains the title to the property. For the
purpose of the guideline, the debt is the present value (at the inception of the lease) of all
lease payments expected to be made during the period of the agreement excluding those
payments that cover the operation, repair or maintenance of the property.

 Arrears, penalties, and judicially awarded damages arising from the failure to make payment under a contractual obligation within the contractual grace period are debt. Failure to make payment on an obligation that is not considered debt under this definition (e.g., payment on delivery) will not give rise to debt.

11. For program purposes, external debt is defined based on the residency of the creditor.

C. ADJUSTORS

12. The floor on the central government non-oil primary balance in December 2015 will be
adjusted downwards/upwards in case domestic arrears incurred in 2015 exceed/are less than
ID 5 trillion of domestic arrears identified at the end of April 2015. The size of the adjuster will be
equal to the difference between the value of domestic arrears and ID 5 trillion.

13. The ceiling on the stock of net domestic assets (NDA) of the CBI will be adjusted upwards
in case foreign financing is lower than programmed to a limit of ID 1.4 trillion in December 2015, zero in March and June 2016, ID 1.1 trillion September 2016, and 3.9 trillion in December 16. The size of the adjuster will be equal to the difference between the observed and programmed value of foreign financing and capped at the values enumerated in the previous sentence. 

14. The ceiling on the stock of net domestic assets (NDA) of the CBI will be adjusted
downward in case foreign financing is higher than programmed. The size of the adjustment will
be equal to the difference between the observed and programmed value of foreign financing.

15. The floor on the stock of gross international reserves of the CBI will be adjusted
downwards in case foreign financing is lower than programmed to a limit of $1.2 billion in
December 2015 zero in March and June 2016, $0.9 billion in September 2016, and $3.3 billion in
December 16.

16. The floor on the stock of gross international reserves of the CBI will be adjusted upward
in case foreign financing is higher than programmed. The size of the adjustment will be equal to the difference between the observed and programmed value of foreign financing.

D. Provision of Information to the Fund Staff

Data

17. To monitor developments under the SMP, the authorities agree to provide the Fund, the
information specified below after the approval of the SMP. The economic adjustment program of
the Iraqi authorities is designed with quarterly quantitative targets and the actual outcome
should be provided within six weeks following the end of the quarter. However, in order to
facilitate regular monitoring, many indicators should be provided with higher frequencies, as
indicated below.

Key Financial Indicators

 Weekly preliminary monetary and financial aggregates as in “Key Financial Indicators”
including exchange rate data (daily), currency in circulation, transferable and other deposits
held at commercial banks, balances on government accounts at the CBI, interest rates on
loans and on deposits at commercial banks, holdings of government securities, and credit
outstanding to the public and private sectors. The data, excluding exchange rates, should be
reported no longer than three weeks after the end of the reference period.


Real Sector

 Oil GDP and indicators of oil activity on crude oil and gas production and use, production
and sales (export and domestic) of refined petroleum products, including heavy residuals,
and associated prices (monthly). These data should be reported no longer than six weeks
after the end of the reference quarter.

 Non-oil GDP and indicators of non-oil real economic activity (quarterly), including production of cement, fertilizers, and electricity, reported no longer than six weeks after the end of the reference quarter.

 Total GDP, reported no longer than six weeks after the end of the reference quarter. 

 Consumer price index (CPI), including indices for main cities (monthly). These should be
reported no longer than a month after the end of the relevant month.

Monetary and Financial Sector

 CBI gross foreign exchange reserves (weekly) and balances of the foreign exchange account
of the government (300/600). This should be reported no longer than 2 weeks after the end
of the reference week.

 The monthly balance sheet of the CBI, with a month lag.

 The monthly consolidated balance sheet of the other depository corporations (commercial
banks), with an eight-week lag.

 The assets and liabilities of the central government (ministry of finance and line ministries) in
the banking sector with an eight-week lag.

 The depository corporations (monetary) survey of all commercial banks and the CBI
(quarterly), with an eight-week lag.

 The latest balance sheet of the Trade Bank of Iraq as well as data on issued, implemented
and outstanding Letters of Credit, with no more than a six-week lag.

 The latest balance sheet of the Rasheed and Rafidain Banks.

 Quarterly financial stability indicators of the banking system, distinguishing the state-owned
banks and the private banks, with an eight-week lag.

Fiscal Sector

 Detailed revenues, operating and capital expenditure, and financing items of consolidated
fiscal and oil operations, and overall fiscal balance. These data should include:
a) the execution of the Iraqi budget, comprising the incremental revenue from the impact
of revenue (tax) measures stipulated in the 2015 Budget Law (sales taxes on mobile
phone cards, internet usage, car sales, and on tobacco and alcohol, in addition to
incremental receipts from the entry into force of the amended Customs Law for 2010),
and savings realized via (a) any cuts in investment projects or financing for investments
through public-private partnership schemes; (B) cuts in operating (current) expenditure,
such as the enactment of compulsory or voluntary national savings schemes (including
as a result of changes in legislation governing the wage ladder for public sector or civil
service employees), and removal/streamlining of subsidies on electricity and gasoline or
other products;

B) transfers to and from the Kurdistan Regional Government; 

c) social spending as defined in ¶8 and total transfers (including in support of the social
safety net—public distribution system—the internally displaced, and on refugees;

d) operations and deposits of the oil-related state-owned enterprises;

e) payments and/or arrears in payments to international oil companies;

f) disbursements of external assistance and loans including issuance of Eurobonds and
loans from the Trade Bank of Iraq (TBI);

g) execution of letters of credit financed through the TBI or by other means;

h) all operations of account 300/600 and its sub-accounts;

i) amounts drawn from Iraq’s 2009 SDR allocation;

j) other forms of multilateral and bilateral assistance and exceptional financing resources
(such as issuance of domestic bonds, loans securitized by futures oil revenue, etc);

k) balances of all government accounts held at the CBI and the commercial banks
(including government and/or line ministry deposits);

l) amounts related to all off-budget and on-budget advances; and
m) outstanding stock of government securities (including treasury bills) held at/by
commercial banks, the CBI, and pension funds. These data should be reported on a
monthly basis and no later than six weeks after the end of the reference month.

Balance of Payments

 Foreign trade statistics (imports, exports, re-exports) (quarterly). This should be reported no
later than six weeks after the end of the reference quarter.

 Amount of total imports of petroleum products financed from the budget on a quarterly
basis starting with the first quarter of 2015. These data should be reported no later than six
weeks after the end of the reference quarter.

 Detailed data on disbursement of external assistance (both project and budget financing)
from the U.S. and other donors, including by recipient sector; foreign debt amortization and
interest payments made; and total outstanding domestic and external debt. These data
should be reported on a monthly basis no more than six weeks after the end of the reference
month.

 The amount and terms of concessional loans contracted and their grant element, on a
quarterly basis, with no more than six weeks lag.

 The balance sheet of the Trade Bank of Iraq (TBI) as well as data on issued, implemented and
outstanding Letters of Credit, with no more than a six weeks lag.

External Debt

 List of short, medium, and long-term government or government-guaranteed external loans contracted during each quarter, identifying for each loan: the creditor, the borrower (ultimate obligor), the amount and currency, the maturity and grace period, repayment terms, and
interest rate (monthly).

 Details on new debt rescheduling and debt relief agreements with bilateral, multilateral, and
commercial creditors, including new outstanding amount and currency, schedule of
payments (principal and interest), terms of agreement, repayment terms, and interest rate
arrangements (quarterly).

Structural Reforms

18. Structural benchmarks comprise a critical component of the SMP. In accordance with
agreed benchmarks (Table 2 of the MEFP), the authorities will prepare and send to the IMF staff
reports, with appropriate documentation, documenting completion.

Other Information

19. Other details on major economic and social measures taken by the government that are
expected to have an impact on program sequencing (such as changes in legislation, regulations, or any other pertinent document) will be sent in a timely manner to IMF staff, for consultation or
information.
http://www.imf.org/External/NP/LOI/2015/IRQ/122215.pdf

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18. The government will maintain the peg with the U.S. dollar. The peg provides a key
nominal anchor in a highly uncertain environment with policy capacity weakened by the conflict
with ISIS.


Read more: http://dinarvets.com/forums/index.php?/topic/214280-imf-update-letter-of-intent-iraq/#ixzz3x74JdDLR

 

So much for the possibility of a float. 

 

And with other references to the 1180 rate , makes one wonder. 

 

Are they saying that after the end of Feb. 2016 that the CBI can do as they wish?

 

Or telling the CBI where to place the value of the dinar? But I thought only the 

 

CBI could set the value of the dinar.

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that  seems  to be  the plan  l g d   ,    1180  ,  too the end  of February , then  the  plan will begin !     now  what  will the first steps of the plan be ,  move too chapter 8 ,    and  begin , monetary  international  acceptance ,    {  but  when  will the dinar start it`s move  upward  toward  the  dollar  -- 1  too 1   ,   baby steps  to that goal  ?    }   thanks  for the brake down     salt life  

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IMF agrees to Iraqi economic program
4961613_640.jpg
Archival image - the International Monetary Fund
 
 
January 13, 2016 10:44

Direct: agreed Christine Lagarde, Managing Director of the International Monetary Fund on a program for the management of informal agreements between the members and experts to follow up the Iraqi Fund economic program set by the government.

IMF said in an official statement, that those agreements do not involve financial assistance or followed by approval of the IMF Executive Board.

It was for this program reached last November, the International Monetary Fund, who pointed out that it allows the Iraqi authorities to establish a positive record of achievement, positioned to the possibility of obtaining financing arrangement from the Fund.

Iraq and is facing several economic challenges of the most important organization Daash the sharp fall in oil prices, and aims to reduce the non-oil primary deficit $ 20 billion and 12% of the total gross domestic product of Iraq from 2013 to 2016.

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Salt life, Hugh thanks man. Made reading a lot more understandable. It seems like everything has to be in place by the end of Fed. I leaning on a March change in value. This, if followed by the time line, is one of the few pieces of information that really sets out what has to be accomplished. This is a good check the box that may tell us we are close, knowing that we will never know for sure all that needs to get done.

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What's important about this article is 1) its a move towards acceptance of Article VIII and 2) due to the program's monitoring timeline gives a rough time frame when article VIII will be accepted. Also the letter stresses non-oil revenue as a way to article VIII, not oil.

 

Given that the timeline for the first review is to be completed by the end of May 2016 and no timeline for the second review, I would estimate this to be almost a two-year process culminating around October 2017 for final acceptance of article VIII for Iraq.I know this is not what people want to hear, but this is about Iraq finally moving into article VIII in which they can do the RV. This letter shows the path to the goal line and now we just have to wait and watch them finish this thing up. Soon is not as soon as people would like (as most would have liked this to be done "yesterday") and not as far away as some had feared. Iraq is closer to getting this done now than they were with Maliki (may he be damned for all eternity). Let Iraq follow through and complete the implemented guidelines and in the end it won't matter how long it took to get here because it will have finally arrived and we will all be happy campers.

 

Chuck, there are at minimum of two reviews. The first is to be completed by the end of May 2016. So there will be no change at the end of Feb 2016 nor will there be one at the end of May 2016. A more realistic expectation would be after 3rd Quarter of 2017. However, that runs into hashing out the budget for that next year so it may not happen even at that time. Also should an additional review or reviews be had this could be longer in duration. This is more of a realistic timeline than placing hope upon hope and having it dashed time and time again.  

Edited by Theseus
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The rate of 1,180 is only used for monitoring purposes. Iraq currently has it set to 1,182 ID per US dollar. The IMF chose this rate, 1,180, which was set in November 2016 as the baseline in which every thing will be calculated against. Iraq can change the rate up or down but for the acceptance to Article VIII, the IMF will be using the figure of 1,180 ID. Think of it like in 1905 a nickel was 5 cents and now that same nickel is worth 20 dollars, hypothetically. The baseline was the 1905 nickel and when compared to today's value that nickel is worth 20 dollars. It's the same thing they are doing here and it is common when dealing with financial calculations to set a baseline number to which all things are compared to going forward.

 

Iraq is free to move the rate up or down, but for the purposes of monitoring and comparison for Article VIII the exchange rate is set to 1,180 ID by the IMF.

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"Given that the timeline for the first review is to be completed by the end of May 2016 and no timeline for the second review,"

 

Let me correct this. The reviews are to be given quarterly. The first quarterly review will be based on the first quarter of 2017 which ends in March 2017. The end of May 2016 is speaking to the second quarterly review deadline. The reviews should take 1 to 2 months to complete. By April or May we should see the results of the first quarterly review and by August or September we should see the results of the 2nd quarterly review. There are charts in the Intent Letter as an addendum which were not posted.  

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Parliamentary Finance: World Bank loans will go to fill budget gaps and distributed to ministries

Economy and Tenders

 Since 01/13/2016 19:21 pm (Baghdad time)

WETART.jpg

Special - scales News

He stressed the parliamentary finance committee member Ahmed Sarhan, said on Wednesday that World Bank loans will be included in the budget to bridge the economic gaps and are distributed according to their importance to the ministries.

Ahmed said L / scales News /, said that "the Central Bank of Iraq excise loans which amounted to about one billion and $ 200 million in Treasury funds will come with the budget to bridge the economic gap."

The member of the parliamentary finance committee, said: "These loans will be spent according to the budget law to the ministries and the most important and Projects directly that generate benefits for the country," noting that "after which comes the role of censorship in the disbursement of these funds to carry out projects." It ended 29/34 R.  


Read more: http://dinarvets.com/forums/index.php?/topic/214350-parliamentary-finance-world-bank-loans-will-go-to-fill-budget-gaps-and-distributed-to-ministries/#ixzz3xBu8Kz9e

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Precondition....Called 2016 Budget Law...which represents many years to come..


01/13/2016 09:00

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BAGHDAD / Obelisk: The Iraqi government said, in a note to the International Monetary Fund, on Tuesday, it plans to finance the deficit in the balance of payments of withdrawal from Iraq, including foreign reserves will make it go down to $ 43 billion in 2016 from 59 billion at the end of last October.

She said the government, under a program approved by the IMF as a precondition for the loan, it is expected that the balance of payments deficit of $ 14 billion in 2015, before shrinking to $ 11 billion in 2016, according to the report published by "Sky News", and I followed, "the obelisk ".

Iraq estimated that GDP will grow by 1.5 percent in 2015 and 10.6 percent in 2016 with the increase of oil production.

While falling oil prices will lead to a budget deficit of 15 percent of GDP in 2015 and a deficit of 10 percent in 2016.

Read more: http://dinarvets.com/forums/index.php?/topic/214292-iraq-resorted-to-foreign-reserves-to-cover-the-deficit/#ixzz3xDhgLnTM

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add this as well...


 
Thursday January 14 2016 12:52
 
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Alsumaria News / Baghdad 
The governor of the Iraqi Central Bank on the Keywords, the loans obtained by Iraq from the IMF and the World Bank has the right, indicating that the conditions demanded by the IMF is representing the government's reforms sought by. 

Keywords and said in unexpected program, which aired Alsumaria that "Iraq is the World Bank Group and the IMF member and pay a large annual contributions which thus has the right to get the facilities and loans from these agencies," pointing out that "the loans are low cost and interest negligible It is also long-lasting. "

 

 

He Keywords that "the function of these two groups is to finance countries that are exposed to the problems and crises when exposed to certain circumstances," noting that "the conditions laid down by the be understanding with the Iraqi government and its acceptance are entitled to a final that rejected if conflicted with its policy." 

He Keywords that "the conditions demanded by the IMF is representing the government's reforms sought by representing the experiences of other countries and thus from the benefit of the Iraqi government to press its expenses and maximize revenue and a way that does not affect the pensions," pointing out that "the IMF at its last meeting with the government Iraq put a condition that does not affect the salaries and other matters of social protection network and the government fulfill its obligations with contractors to stroll projects. " 

Iraq is seeking recently to borrow from the International Monetary Fund in order to bridge the shortfall in the budget for the current year, which amounts to 25 trillion dinars, after the fall in oil prices to low levels amounted to less than $ 30 per barrel.

Read more: http://dinarvets.com/forums/index.php?/topic/214360-central-iraq-has-the-right-to-obtain-loans-from-the-imf-and-world-bank/#ixzz3xDjp4S5G

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Really interesting post and opinions.!

We all know something is going on in Iraq.

We all know the dinar will raise.!

We patiently wait.

Thanks to; yota, chuck, olivesman, Theseus, jeepguy, LGD, Big newby, synopsis, ten years later, salt life and all the rest.

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