CBI News 12/7/2022

[DWS112]

The Governor of the Central Bank of Iraq receives the mission of the International Monetary Fund

12/5/2022

 

His Excellency the Governor of the Central Bank of Iraq, Mr. Mustafa Ghaleb Makhaif, received today, Wednesday, His Excellency the Minister of Finance, Taif Sami, and the delegation of the International Monetary Fund, which is currently visiting the capital, Baghdad.

During the meeting, the main policy challenges and aspects of bilateral cooperation were discussed and developed in a way that serves the banking and economic sector in Iraq, as well as enhancing financial stability.

It is noteworthy that the Central Bank of Iraq will host on Wednesday and Thursday meetings of the International Monetary Fund mission in the capital, Baghdad, with the participation of the Ministry of Finance and representatives of the Ministries of Planning, Electricity, Labor, Water Resources and the Environment.

 
Central Bank of Iraq
information Office
December 7, 2022

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49 minutes ago, DWS112 said:

The Governor of the Central Bank of Iraq receives the mission of the International Monetary Fund

12/5/2022

 

His Excellency the Governor of the Central Bank of Iraq, Mr. Mustafa Ghaleb Makhaif, received today, Wednesday, His Excellency the Minister of Finance, Taif Sami, and the delegation of the International Monetary Fund, which is currently visiting the capital, Baghdad.

During the meeting, the main policy challenges and aspects of bilateral cooperation were discussed and developed in a way that serves the banking and economic sector in Iraq, as well as enhancing financial stability.

It is noteworthy that the Central Bank of Iraq will host on Wednesday and Thursday meetings of the International Monetary Fund mission in the capital, Baghdad, with the participation of the Ministry of Finance and representatives of the Ministries of Planning, Electricity, Labor, Water Resources and the Environment.

 
Central Bank of Iraq
information Office
December 7, 2022

This has not happened since 2013 and the fall of Mosul…interesting timing why now?

[DWS112]

Finance is discussing with the IMF the priorities of stabilizing the Iraqi economy

12/7/2022

 

Today, Wednesday, the Minister of Finance, Taif Sami, discussed with the International Monetary Fund mission team the priorities for stabilizing the Iraqi economy.
The ministry said, in a statement received by Alsumaria News, that Minister Taif Sami "received the team of the International Monetary Fund mission headed by Tokhir Mirzouf and his accompanying delegation, and in the presence of the ministry's advisor and director general of the Public Debt Department, to discuss strengthening areas of joint cooperation with the Monetary Fund, which comes as a continuation of a series of Bilateral meetings within the framework of benefiting from modern technical programs and capabilities in the financial and economic sector, supporting sustainable strategic projects, and discussing the strategies and expectations of the Iraqi economy and support programs between the two sides.

The minister explained, "The procedures and steps that the ministry is working to implement through the approved government curriculum, identifying the priorities necessary for the stability of the Iraqi economy and measures to confront current challenges, indicating the ministry's plans towards the structural reform program in the financial and economic aspect, and the mechanisms for stimulating the vital productive sectors in addition to providing the requirements for supporting the sector." expansion of the coverage of the social safety net.

For his part, the head of the mission affirmed, "The fund's readiness to support Iraq to implement financial and economic reforms     and confront the effects of global crises, praising the performance of the Iraqi economy in light of the positive indicators that have been achieved despite the regional and international conditions and challenges."

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Finance Minister discusses strengthening areas of joint cooperation with IMF mission team

Wed 07 , December 2022 16:41 |EconomicalViews: 117

The Minister of Finance is discussing, with the International Monetary Fund mission team, areas of joint cooperation (ninanews-com.translate.goog)

Bagdad (NINA) - Finance Minister Taif Sami Mohammed met with the International Monetary Fund (IMF) mission team headed by Tukhir Mirzov, in the presence of the ministry's adviser and the director general of the Public Debt Department.The minister discussed with the team strengthening areas of joint cooperation with the IMF, which comes as a continuation of a series of bilateral meetings within the framework of benefiting from modern technical programs and capabilities in the financial and economic sector, supporting sustainable strategic projects, and discussing the strategies and expectations of the Iraqi economy and support programs between the two sides, " the ministry said in a statement.

During the meeting, the minister explained the procedures and steps that the ministry is working to implement through the approved government curriculum, and to identify the priorities necessary for the stability of the Iraqi economy and measures to face the current challenges, explaining at the same time The ministry's plans towards the structural reform program in the financial and economic aspect, and mechanisms to stimulate vital productive sectors, in addition to providing requirements to support the private sector and expand the coverage of the social safety net.
For his part, the Chairman of the Team, the readiness of the Fund to support Iraq to implement financial and economic reforms and face the effects of global crises, praising the performance of the Iraqi economy in light of the positive indicators achieved despite the regional and international conditions and challenges.
 

 

[chris2028]

Its been a long long time since we've had this wave of good news all at once! Truly hoping we are getting ready to see our investment come into fruition for not only us but the people of Iraq!! GO RV/RI

[6ly410]

 

Economy news

Finance: Our plans aim for the structural reform program in the financial and economic aspects

Posted 26 seconds ago

 

Finance: Our plans aim for a structural reform program in the financial and economic aspects (iraqakhbar-com.translate.goog)

 

news source /First News Agency

News source / Al Oula News Agency

 

(Encyclopedia of Iraq News for News)

Today, Wednesday, the Ministry of Finance announced that its plans aim for a structural reform program in the financial and economic aspects.

The ministry's media office said, in a statement received by (Al-Oula News), that "Finance Minister Taif Sami Muhammad received, today, at the ministry's headquarters, the International Monetary Fund mission team headed by Tokhir Mirzouf and his accompanying delegation, in the presence of the ministry's advisor and director general of the Public Debt Department."

He added, "The minister discussed strengthening areas of joint cooperation with the IMF, which comes as a continuation of a series of bilateral meetings within the framework of benefiting from modern technical programs and capabilities in the financial and economic sectors, supporting sustainable strategic projects, and discussing the strategies and expectations of the Iraqi economy and support programs between the two sides."

And she emphasized that “the procedures and steps that the ministry is working to implement through the approved government curriculum, and identify the priorities necessary for the stability of the Iraqi economy and measures to confront current challenges,” explaining that “the ministry’s plans towards the structural reform program in the financial and economic aspect, and the mechanisms to stimulate the vital productive sectors in addition to providing requirements.” support the private sector and expand the coverage of the social safety net.

For his part, the head of the mission affirmed "the fund's readiness to support Iraq to implement financial and economic reforms and confront the effects of global crises," praising "the performance of the Iraqi economy in light of the positive indicators that have been achieved despite the regional and international conditions and challenges."

 

 

Disclaimer: The content bearing the title (Financial: Our plans aim for the structural reform program in the financial and economic aspects) was first published on the (Al-Oula News) website, and the Iraq News Encyclopedia website is not responsible for the content of the news in any way. Read ( disclaimer ).
You can view the details of this title (Financial: Our Plans Aim for the Structural Reform Program in the Financial and Economic Aspects) through its original source on the (Al-Oula News) website from the source link below the news.

 

[6ly410]

Finance: Our plans aim for the structural reform program in the financial and economic aspects

World Bank signs "significant economic growth" in Iraq (economy-news.net)

 

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Economy News - Baghdad

The Ministry of Finance announced on Wednesday that its plans aim at the structural reform program in the financial and economic aspects.

The ministry's media office said in a statement that "Finance Minister Taif Sami Mohammed, received, today, at the ministry's headquarters, the team of the International Monetary Fund mission headed by Tokhir Mirzov and his accompanying delegation, and in the presence of the ministry's adviser and the director general of the Public Debt Department."

He added that "the minister discussed strengthening areas of joint cooperation with the IMF, which comes as a continuation of a series of bilateral meetings within the framework of benefiting from modern technical programs and capabilities in the financial and economic sector, supporting sustainable strategic projects, and discussing strategies and expectations of the Iraqi economy and support programs between the two sides."

She stressed that "the procedures and steps that the ministry is working to implement through the approved government curriculum, and to identify the priorities necessary for the stability of the Iraqi economy and measures to face the current challenges," explaining that "the ministry's plans towards the structural reform program in the financial and economic aspect, and mechanisms to stimulate vital productive sectors, in addition to providing requirements to support the private sector and expand the coverage of the social safety net."

For his part, the head of the mission stressed "the readiness of the Fund to support Iraq to implement financial and economic reforms and face the effects of global crises," praising "the performance of the Iraqi economy in light of the positive indicators achieved despite the regional and international conditions and challenges."

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53 Views

Added2022/12/07 - 4:46 PM

Update2022/12/07 - 6:27 PM

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[6ly410]

Iraq: Staff Concluding Statement of the 2022 Article IV Consultation Mission

Iraq: Staff Concluding Statement of the 2022 Article IV Consultation Mission (imf.org)

December 7, 2022

A Concluding Statement describes the preliminary findings of IMF staff at the end of an official staff visit (or ‘mission’), in most cases to a member country. Missions are undertaken as part of regular (usually annual) consultations under Article IV of the IMF's Articles of Agreement, in the context of a request to use IMF resources (borrow from the IMF), as part of discussions of staff monitored programs, or as part of other staff monitoring of economic developments.

The authorities have consented to the publication of this statement. The views expressed in this statement are those of the IMF staff and do not necessarily represent the views of the IMF’s Executive Board. Based on the preliminary findings of this mission, staff will prepare a report that, subject to management approval, will be presented to the IMF Executive Board for discussion and decision.

Washington, DC :

High oil prices have provided Iraq’s economy with much-needed respite after a near-crisis in 2020. Nevertheless, underlying imbalances and oil dependence continued to increase. Using the opportunity provided by high oil revenues to reverse the trend of rising vulnerabilities and modernize the economy will be of paramount importance in the face of multiple looming challenges, which could severely test the limits of the current economic model. A meaningful economic transformation must start with a prudent, patient, and disciplined fiscal policy aimed at building financial buffers, reducing oil dependence, and reorienting expenditures toward priority investment and social needs. A careful calibration of the 2023 budget will be crucial to preserve gains from recent policy efforts. Alongside, decisive structural reforms will be critical to improve socio-economic conditions and promote private sector development as the key driver of growth and employment.

Economic Outlook and Risks

1. The economy is gradually recovering amid rising underlying vulnerabilities. Real GDP is projected to grow by 8 percent in 2022, driven by a 12-percent expansion in oil output. Meanwhile, real non-oil GDP is expected to expand at a more moderate pace of 3 percent after rebounding by 21 percent in 2021. Inflation has been relatively contained, averaging 5 percent during the first 10 months of 2022, as the pass-through from high global commodity prices has been muted by food and fuel subsidies. Helped by high oil prices, this year’s fiscal and external current account balances are expected to reach surpluses of 6 and 11 percent of GDP, respectively, while foreign exchange reserves of the central bank could exceed $90 billion by end-year. At the same time, these surpluses veil widening of the non-oil fiscal balance, and Iraq’s dependence on oil continued to increase with the oil price needed to balance the government budget (“budget breakeven oil price”) reaching US$66 per barrel in 2022, up from US$52 per barrel in 2019.

2. Near-term outlook is positive, but vulnerabilities could manifest themselves in the medium term. Oil output is projected to gradually rise from 4.4 to 5 million barrels per day by 2027. Non-oil real GDP growth is expected to accelerate to 4 percent in 2023—helped by the stimulus from the Emergency Law for Food Security and Development—before moderating to 3.5 percent in the medium term. Under the baseline projection of declining global oil prices and continued expansionary fiscal stance, both fiscal and external balances are projected to decline and turn into deficits by 2025. Alongside, foreign exchange reserves could peak at around US$100 billion in 2024 and rapidly decline over the medium term.

3. This outlook is subject to significant downside risks, amid multiple looming challenges. A faster decline in global oil prices could reignite financing pressures sooner. Government finances are particularly vulnerable to faster accumulation of losses in the electricity sector and the depletion of the State Pension Fund, as well as the rising costs of climate change.

Policy Priorities

4. A sound fiscal framework will be critical to tackle Iraq’s economic challenges. Policymakers need to carefully balance the goals of saving the oil windfall to strengthen resilience to future oil price volatility, and increasing critical social spending and public investments, while gradually reducing dependence on oil. IMF staff recommends a commitment to a fiscal rule targeting a gradual reduction of the non-oil primary fiscal deficit to build a fiscal stabilization buffer which would improve the government’s ability to smooth expenditures in response to future oil price declines. At the same time, the fiscal strategy should seek to allocate sufficient resources for public investments and the social safety net to support Iraq’s critical development needs and the vulnerable population.

5. Careful calibration of the 2023 budget parameters will be pivotal. It would be important to provide adequate indexation of targeted cash transfers and low-income pensions to protect the most vulnerable from the rising cost of living. At the same time, a large procyclical boost to expenditures is not advisable as it could fuel inflation pressures, further increase the government budget’s dependence on oil revenues and create conditions for a costly boom-bust cycle. IMF staff recommends saving a significant portion of the oil windfall by targeting a non-oil primary fiscal deficit of ID 114 trillion (58 percent of non-oil GDP) in 2023, most importantly by containing growth of the government payroll and mobilizing non-oil revenues.

6. Elevated inflation risks warrant vigilance on the part of monetary policy. Although inflation has remained stable in recent months, there are significant risks of its acceleration in the near term with a looser fiscal stance and second-round effects of high global commodity prices. Should these risks begin to materialize, it would be important for the central bank to be prepared to tighten domestic financial conditions as needed to avoid fueling domestic drivers of inflation.

7. Implementation of the proposed fiscal framework needs to be accompanied by sustained policy efforts in several key areas:

• Upgrading public financial management notably by urgently establishing a Treasury Single Account and implementing an Integrated Financial Information Management System (IFMIS), in addition to strengthening control over commitments and contingent liabilities.
• Diversifying government revenues , including by making payroll taxes more progressive, eliminating regressive exemptions, strengthening tax and customs administration, and introducing taxes on the sales of selected non-essential goods and services.
• Reducing the government wage bill , which consumes around 40 percent of the annual budget, crowding out other priorities, and cannot be sustained in the long run, which puts a premium on promoting private sector job creation. A multi-pronged approach should focus on strengthening control over payroll; an attrition-based employment reduction strategy; and close alignment of government pay and allowances with the private sector. In parallel, IMF staff encourages developing a civil service reform and a national employment strategy to improve labor force participation, remove obstacles for private employment, and reduce informality.
• Enhancing the social safety net. Limiting eligibility for the untargeted food ration card program would allow to significantly augment the budget for targeted cash transfers. Automatic inflation indexation of cash transfers would ensure adequate protection. Furthermore, a pension reform is increasingly urgent, most importantly to restore the financial sustainability of the State Pension Fund. Going forward, close alignment or integration of pension systems for private and public sector workers is needed to facilitate labor mobility and strengthen incentives for private sector employment.
• Fixing the electricity sector , which incurs an annual loss in excess of 3 percent of GDP while being unable to meet domestic demand. A comprehensive reform strategy should focus on enhanced monitoring and transparency of the sector’s costs, a review of the tariff structure, investments in gas capture and renewable energy sources, and sustained efforts to improve collection and reduce technical losses.
• Strengthening Financial Stability. Accelerating implementation of core banking systems and initiating the restructuring of large state-owned banks remains a critical priority. The IMF team welcomes the completion of Iraq’s first AML/CFT national risk assessment and agrees with the authorities’ plans to swiftly proceed with implementing its key recommendations. IMF staff also supports the central bank’s efforts to strengthen monitoring of transactions through the foreign exchange auction and its plans to explore alternative trade finance mechanisms to facilitate trade. In parallel, the mission recommends developing liquidity management tools to better support exchange rate stability.
• Improving Governance. IMF staff welcomes the authorities’ efforts to implement the 2021-24 National Integrity and Anti-Corruption strategy and emphasized the importance of continuing to strengthen governance, including through timely completion and publication of the audit reports of government accounts, improving the legal framework and streamlining the institutional structure for combatting corruption, and advancing digitalization of government institutions.

 

The IMF team would like to thank the authorities for their hospitality and the quality of the discussions.

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Al-Sudanese discusses with the IMF delegation support for the government's reform approach and support for anti-corruption efforts

Thursday 08 , December 2022 10:11 |PoliticalViews: 169

Al-Sudani discusses with the IMF delegation support for the government's reform approach and support for anti-corruption efforts (ninanews-com.translate.goog)

Bagdad (NINA) - Prime Minister Mohammed Shia al-Sudani met on Wednesday with an International Monetary Fund (IMF) delegation headed by the Fund's Resident Representative in Iraq, Ghazi Shbeikat.Al-Sudanese stressed during the meeting, according to a statement by his office today: "The importance of strengthening aspects of joint cooperation between Iraq and the Fund's development programs, and supporting the path of empowering the Iraqi economy."

They also discussed the IMF's support for the economic reform approach adopted by the government, as well as cooperation in the field of reforming and developing the Iraqi banking system, and supporting Iraq's efforts in combating corruption.

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"At stake". A "gray" picture of the Iraqi economy in the recommendations of IMF staff

"At stake". A "gray" picture of the Iraqi economy in the recommendations of IMF staff (shafaq.com)

2022-12-08 05:54

 

 

Experts from the International Monetary Fund (IMF) on Thursday called on Iraq to be "vigilant and cautious" of economic vulnerabilities that could afflict it in the medium term, and while indicating that the Iraqi economy is "gradually recovering," they urged Iraqi officials to adopt necessary economic steps, most notably diversifying government revenues, strengthening the social welfare network, and correcting the course of the electricity sector.

The International Monetary Fund said in a "final statement" related to "preliminary" conclusions reached by experts at the end of a mission to Iraq, which it described as representing their views and not necessarily the views of the Fund's Executive Board, that "the rise in oil prices provided the Iraqi economy with a much-needed outlet, after it approached entering a financial crisis in 2020."

But the experts' report said that "fundamental imbalances persisted, and dependence on oil continued to increase."

In their report, the experts called for "the need to initiate a meaningful economic transformation, accompanied by a prudent, careful and disciplined fiscal policy aimed at building buffer buffers, reducing dependence on oil, and redirecting spending towards priority investments and meeting social needs.

"Carefully aligning the 2023 budget with this shift is a critical step in preserving the gains made from recent policy efforts," the report said, adding that critical structural reforms represent a critical trend towards improving socio-economic conditions and promoting the development of the private sector as the main driver of growth and employment through job creation.

Economic prospects and risks

Although the experts' report considered that "the Iraqi economy is gradually recovering in the midst of the increasing fundamental vulnerabilities, as real GDP is expected to grow by 8% in 2022, due to the increase in oil production by 12%, but experts also saw that non-oil real GDP will increase at a more moderate pace, by 3%, after recovering by 21% in 2021."

The report added that "inflation has been relatively contained, reaching an average of 5% during the first ten months of 2022, given that subsidies provided for food and fuel have hindered the passage of high global commodity prices and their transfer to the Iraqi market."

"Thanks to higher oil prices, the fiscal current account balance and external balance (i.e., surplus/deficit) for this year are expected to achieve surpluses of 6 percent and 11 percent, respectively, while the size of the Central Bank of Iraq's foreign currency reserves is likely to reach more than $90 billion by the end of the year," the report added.

But the experts' report pointed out that "these surpluses obscure the widening in the balance (surplus/deficit) of non-oil public finances, with Iraq's dependence on oil continuing to increase, and the need to use the price of oil to balance the government budget (the price of a barrel of oil required to reach a zero deficit), to reach $ 66 per barrel in 2022, up from $ 52 per barrel in 2019."

While the report noted that "the economic outlook is positive in the near term," "vulnerabilities can be clearly manifested in the medium term."

While oil production is expected to "gradually rise from 4.4 million barrels to 5 million barrels per day by 2027, non-oil real GDP growth is expected to accelerate to 4 percent in 2023, thanks to the stimulus created by the Emergency support for Food Security and Development Act, before moderating to 3.5 percent over the medium term."

"In light of baseline expectations of a decline in global oil prices, and the continued expansionary stance of fiscal policy, the fiscal balance and external balance are expected to decline and turn into deficits by 2025," the report said.

"The central bank's foreign currency reserves could peak at around $100 billion in 2024 and then decline rapidly over the medium term," the report said.

"These prospects may be exposed to significant downside risks amid many looming challenges," the report warned, explaining that "a faster decline in global oil prices could stimulate financial pressures early, and government funds in particular may be exposed to faster accumulation of losses in the electricity sector, depletion of the resources of the State Employees Pension Fund, in addition to the rising costs of climate change."

Priorities Policy

"A sound fiscal framework is a critical element in overcoming the economic challenges facing Iraq, calling on policymakers to be careful in finding a balance between the objectives of saving unexpected exceptional oil profits, in order to enhance resilience in the face of future oil price volatility, and to increase critical social spending, and spending on public investments, while gradually reducing the level of dependence on oil," the IMF staff report said.

The experts recommended Iraq to "adhere to a fiscal base aimed at achieving the gradual reduction of the main non-oil fiscal deficit, to build a protective reserve margin to stabilize public finances, in a way that improves the government's ability to facilitate spending in response to the decline in oil prices in the future."

According to experts, "this fiscal strategy should, at the same time, seek to allocate sufficient resources to public investments and the social safety net, with the aim of supporting the critical development needs of Iraq and supporting vulnerable population groups."

IMF staff also recommended "saving a significant portion of unexpected potential oil profits by targeting the main non-oil fiscal deficit of 114 trillion Iraqi dinars (58 percent of non-oil GDP) in 2023, and more importantly, targeting it by containing growth in the government wage bill and increasing non-oil revenues."

In light of the high inflation risks, the experts' report called for "vigilance on the part of monetary policy, because although inflation has remained stable in recent months, there are still significant risks of accelerating inflation in the near term, in light of a more loose stance in fiscal consolidation, and the emergence of indirect secondary price effects of rising global commodity prices."

"There must be sustained policy efforts in several key areas, namely:

1- Raising the efficiency of public financial management, especially through the establishment of the unified treasury account and the urgent implementation of the Integrated Financial Management Information System (EFMIS), in addition to strengthening control over contingent liabilities and liabilities.

2. Diversify government revenues, including by making the wage tax progressive, further, eliminating regressive exemptions, strengthening tax and customs administration, and taxing sales of selected non-essential goods and services.

3- Reducing the government wage bill, which consumes about 40% of the annual budget, which leads to crowding out and excluding other priorities. That bill is unsustainable in the long term, encouraging importance to private sector job creation.

The report also called for "the need to adopt a multifaceted approach focused on strengthening control over the wage bill, developing and implementing a strategy to reduce employment in the public sector on the basis of natural attrition, and closely aligning government wages and bonuses with those paid by the private sector."

In parallel, the report urges "the development of civil service reforms (public sector workers), the development and implementation of a national employment strategy to improve the level of labor force participation, remove obstacles to employment in the private sector, and reduce the level of employment in the informal sector."

4- Strengthening the social safety net, as determining eligibility to benefit from the ration card program that is not directed to target groups, would significantly enhance the budget allocated to targeted cash transfers. Automatically linking cash transfers to index numbers (to a set of indicators) would ensure adequate protection for beneficiaries.

In addition, the reform of the pension system is an increasingly urgent issue, with several objectives, the most important of which is to restore the financial sustainability of the State Employees' Pension Fund.

5- Correcting the course of the electricity sector, which suffers annual losses of more than 3% of GDP, at a time when this sector is unable to meet domestic demand. Therefore, the overall reform strategy for this sector should focus on strengthening the issues of monitoring and transparency of the costs of this sector, reviewing the electricity tariff structure, implementing investments in gas capture and harvesting, and in renewable energy sources, and continuing efforts to improve the collection of dues and reduce losses and losses for technical reasons.

6. Enhancing financial stability as accelerating the implementation of basic banking systems and initiating the restructuring of major government banks remains a critical priority.

In this context, the IMF staff team welcomed Iraq's completion of the first national AML/CFT risk assessment and is consistent with the plans of the Iraqi authorities to move forward in accelerating the implementation of the key recommendations contained in the assessment. The experts also "supported the central bank's efforts to strengthen control over transactions through foreign exchange auctions, and its plans to explore alternative trade financing mechanisms with a view to facilitating them."

The expert mission also recommended "the development of tools for liquidity management in order to support better exchange rate stability."

7- Improving governance: IMF staff welcomed the efforts of the Iraqi authorities to implement the National Integrity and Anti-Corruption Strategy for the period 2021-2024, and stressed the importance of continuing to strengthen governance (ways and means of public administration), including through the timely completion and dissemination of government audit reports, improving the legal framework, simplifying the institutional structure to combat corruption, and advancing the digitization (use of digital technology in) government institutions.

Translation : Shafaq News

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IMF: without prudent economic transformation, Iraq might suffer from the vulnerabilities of oil reliance

IMF: without prudent economic transformation, Iraq might suffer from the vulnerabilities of oil reliance (shafaq.com)

2022-12-08 06:57

 

 

Shafaq News/ Iraq's Gross Domestic Product (GDP) is projected to grow by 8 percent in 2022, the International Monetary Fund (IMF) said in a report this week, but warned of overwhelming reliance on oil.

The IMF said that "high oil prices have provided Iraq's economy with much-needed respite after a near-crisis in 2020" and urged authorities to take advantage of the opportunity to maximize the benefits through the implementation of a "prudent, patient, and disciplined fiscal policy aimed at building financial buffers, reducing oil dependence, and reorienting expenditures toward priority investment and social needs."

 

 

"Real GDP is projected to grow by 8 percent in 2022, driven by a 12-percent expansion in oil output," the IMF said, assuring that that inflation has been "relatively contained".

OPEC's second-largest exporter mainly depends on oil revenues to pay the salaries of civil servants and cover operational costs. The country's economy is once again booming as oil prices are increasing globally despite suffering in much of 2021 due to record-low oil prices.

According to the IMF, the profit boom from soaring oil prices could ensure that the foreign exchange reserves of Iraq's central bank will surpass the $90 billion mark by the end of 2022.

However, a drop in oil prices can be detrimental for the country's gains.

"A faster decline in global oil prices could reignite financing pressures sooner. Government finances are particularly vulnerable to faster accumulation of losses in the energy sector and the depletion of the State Pension Fund, as well as the rising costs of climate change," the IMF warned, urging Iraq to adopt" a sound fiscal framework".

The fund also advised Iraq to carefully calibrate its 2023 budget in accordance with the prospect of declining oil prices again "to provide adequate indexation of targeted cash transfers and low-income pensions to protect the most vulnerable from the rising cost of living" while reiterating government's need to reduce its dependence on oil revenues.

The ministers from the 13-nation OPEC group - which Iraq is a member of- and Russian-led exporters met in Vienna in October and agreed to cut oil production by two million barrels starting from November.

Oil prices increased amid shortfalls following Russia's invasion of Ukraine in February, with the US repeatedly urging members of the oil cartel to increase their oil production in an effort to balance the market.

In November, Iraq earned nearly a billion dollars less than it did in October, as the country exported over 99 million barrels of crude oil at an average rate of 3.3 million barrels a day with each barrel selling for $82.4. The country's total revenue was over $8.2 billion, which fell nearly a billion short of October’s $9.25 billion revenue.