Economic ; Dinar Revalue

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030311 IRAQ DINAR

http://www.imf.org/external/np/loi/2011/irq/030311.pdf

III. ECONOMIC AND FINANCIAL POLICIES IN 2011
6. In 2011, we plan to build upon the successes of our economic policies of the past few
years and to accelerate the reconstruction and rehabilitation process. Most notably, the
agreements we have reached in the past one-and-a-half years with the international oil
companies to assist us in the development of Iraq’s oil fields will start to bear fruit, although
the pace of increase in production will be slower than we originally expected, given the scope
of auxiliary investment still needed in the sector. We expect that oil production will increase
to an average level of 2.75 mbpd in 2011 and that oil exports will average 2.2 mbpd. Oil
production and exports will continue to accelerate in the following years, although we
recognize that this will need to be accompanied by large investments in our oil infrastructure,
to address bottlenecks and ensure that the incremental production can reach international
markets.
7. The increase in oil exports will allow us to limit our government budget deficit in
2011, while making additional room for investment. We continue to follow a cautious
approach in budgeting oil revenues, as the volatility in international oil prices remains high
and uncertainties are many, and we have therefore based our 2011 budget on an average
export price for Iraqi oil of $76.50 per barrel. In addition, reflecting our commitment to
transparent government finances, we have reflected in our budget the estimated payments
to the international oil companies for cost recovery and remuneration, which we expect the
companies to request to be paid in-kind. The 2011 government budget aims to limit the deficit
to ID 15.7 trillion (Ministry of Finance as well as IMF presentation), or about 13½ percent of
GDP. To achieve this, we are strictly containing current spending to ID 66.7 trillion (Ministry
of Finance presentation; ID 64 trillion in IMF presentation), a level only somewhat higher
than the expected outcome of 2010, to make room for a substantial increase in capital
spending. We will use part of the financing resources we planned to use in 2010 to help
finance the 2011 deficit. In case oil exports or prices in 2011 turn out higher than budgeted,
we will use half of the additional revenues to further increase investment, while the other half
will be used to rebuild our financial buffers. As the levels of oil production and exports will
increase further in 2012 and the years thereafter, we will aim to gradually reduce the budget
deficit further in 2012 and return to a surplus position in the following years, with a view to
place government finances on a sustainable footing and rebuild the government’s financial
buffers. To ensure integrity in our payment and budget systems, we will refrain from
accumulating domestic expenditure arrears. In addition, the Ministry of Finance will refrain
from issuing guarantees on any loans extended by domestic banks

D. The Bank Group Strategy and Operations
2. The World Bank’s Group’s third ISN for Iraq for the period FY2009–FY2011 was
discussed by the World Bank’s Board of Executive Directors on March 19, 2009. The central
guiding principle of the ISN is that the main role for the World Bank is to help Iraq use its
resources more effectively and transparently and to lay the ground for private sector
development. The ISN includes three thematic areas of engagement: (i) continuing to support
ongoing reconstruction and socio-economic recovery; (ii) improving governance and the
management of public resources, including human, natural and financial; and (iii) supporting
policies and institutions that promote broad-based, private-sector-led growth, with the goal of
revitalizing the private sector and facilitating job creation. The Bank is initiating preparation
of a Country Partnership Strategy (CPS), which will cover the period FY12-FY15.
3. Analytical and Advisory Activities. In addition to financial support, the Bank places
special emphasis on its analytical and advisory activities (AAA), including capacity building,
policy advice, and economic and sector work, as key vehicles of Bank assistance to Iraq.
Examples of recent key analytical work include a Report on the Management of the Public
Distribution System (2005), a Public Expenditure Institutional Assessment (2008); and a
Poverty Assessment (2010). An Investment Climate Assessment is underway, and a Country
Economic Memorandum and a Public Expenditure Review are underway.
4. Public finance management reform continues to be a key component of the Bank’s
engagement with Iraq. The PEIA, issued to the Government in June 2008, outlined steps for
strengthening the accountability and transparency of public finance institutions and policies
and help Iraq meet the goals set in the Iraq Compact. The PEIA underpins an Iraqi-owned
public finance management reform program. A Public Financial Management project,
financed through the World Bank-administered Iraq Trust Fund (ITF) was approved in June
2009 to provide technical assistance (TA) to help the GOI’s develop a more effective,
accountable and transparent public financial management system. The Bank has also
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provided related support to modernize the public procurement system, including the drafting
of a new public procurement law.
5. While focusing on public resource management, the Bank is supporting other key
issues: strengthening social safety nets and modernizing the pension system; improving the
efficiency and effectiveness of the Public (food) Distribution System; assessing poverty and
vulnerability; improving management of oil revenues; and restructuring the state-owned
banking system, for which an ITF-financed Banking Sector Reform project was approved in
April 2009. The Bank has also provided policy support in a wide range of sectors including
education, electricity, health, transport, water supply and sanitation, and water resource
management.
6. World Bank Iraq Trust Fund (ITF). Seventeen donors have deposited
US$494 million in the ITF. ITF projects focus on helping the GOI strengthen its institutional
capacity to deliver services, utilize its resources in an efficient and transparent manner, and
implement key reforms. ITF grants finance textbooks, schools, pharmaceuticals and health
clinics, improved social safety nets, water supply and sanitation, irrigation and drainage,
electricity, environmental management, private sector development, banking and public
finance management reform efforts, and the development of a national energy strategy. The
ITF also finances technical assistance to help strengthen Iraqi institutions to develop baseline
poverty data, and improve social safety net targeting mechanisms.
7. The ITF is fully committed, with 19 active projects valued at US$439 million
(5 additional projects for US$$89 million have now been completed). The vast majority of
ITF projects are implemented by Iraqi agencies (15) to help the GOI develop effective
institutions to ensure country ownership. Five projects, totaling US$21 million, finance
technical assistance/capacity building activities that are implemented by the Bank at the
request of the GOI. Commitments and disbursements continue to increase. Overall, as of
December 31, 2010, project-level commitments totaled about US$333.6 million (about
76 percent of the grant amounts), and disbursements for project expenditures totaled
US$281.6 million (about 64 percent of the grant amounts).
8. The following technical assistance (TA) operations have been the latest projects
approved for ITF financing are: (i) Institutional Strengthening and Capacity Building for the
Education Sector Project (US$3 million) to help four education ministries develop a
coherent, Iraqi-owned, national education sector strategy; (ii) Pension Reform
Implementation Technical Assistance Project (US$6 million) to support the Ministry of
Finance in developing a long-term pension strategy to expand social insurance coverage, and
unify the policies and administrative bodies of private and public sector pension schemes;
and (iii) Integrated National Energy Strategy Technical Assistance Project (US$5 million) to
support the GOI in formulating an Integrated National Energy Strategy covering the entire
energy sector (including oil, gas and power), with particular emphasis on their coordination
and on setting the stage for effective medium- and long-term development.
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9. IDA and IBRD. In late 2004, Iraq benefited from an exceptional IDA (the Bank’s
concessional assistance window) allocation of about US$500 million. Since then, the Bank
has approved 5 IDA projects amounting to US$509 million, to finance projects in education,
roads, electricity and water. Following a lengthy delay in identifying the required steps to
make the credits effective, Iraq’s parliament ratified the four loans on July 2007, and the
water project in September 2009.As of December 2010, project-level commitments totaled
US$332.7 (about 68 percent of the credit amounts) and disbursements totaled
US$104.0 (about 20 percent of the credit amounts) In February 2010, the World Bank’s
Board of Executive Directors approved the first IBRD loan for Iraq–a US$ 250 million First
Programmatic Fiscal Sustainability Development Policy Loan. This project was signed in
March 2010; became effective in April 2010 and disbursed in May 2010.
10. The Bank engages a Fiduciary Monitoring Agent (FMA) to help supervise ITF and
IDA project implementation. The FMA employs about 24 Iraqi professionals to monitor the
physical implementation of projects and compliance with procurement and financial
management requirements. The FMA visits projects sites and meets with ministry staff on a
daily basis and provides monthly progress reports to the Bank.
11. IFC investment and advisory services and MIGA’s political risk guarantee
products aiming at leveraging private financing. IFC’s committed portfolio in Iraq
currently stands at US$65 million in 3 companies: a 10% equity stake in Credit Bank of Iraq
in partnership with the National Bank of Kuwait (NBK); a US$14 million loan committed in
FY10 to Malia Investments for the establishment of a Greenfield hotel in Erbil, and a
US$45 million loan to Gulftainer (a UAE based container port operator) to support their
investments in ports and logistics sector in Basra-southern Iraq The focus of the advisory
services activities is to support the improvement of the Investment Climate, Financial
Infrastructure strengthening, capacity building of the banking sector, selective SME
management training, especially targeting women, and the promotion of public-private
partnerships in collaboration with the World Bank. This program will be supported by the
Iraq Business Assistance Facility (IBAF), a US$38 million multi-donor fund. In FY11, IFC
expects to make new investment commitments in telecommunication, construction material
and the power sectors as well as support trade finance through its Global Trade Finance
Program (GTF).
12. MIGA approved a $5 million guarantee was approved in September 2010 for Karo
Dis Ticaret ve Sanayi Ltd. of Turkey covering a shareholder loan to the Sebeel Al Safa
Manufacturing Petrochemicals and Water Filling Company in Iraq. MIGA is considering
future projects in housing, oil and gas, and telecoms. Additionally, MIGA has identified
several potential projects for Iraq for support under its new Conflict Affected and Fragile
Economies Facility (pending Bank Board approval of the facility this summer).
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E. IMF-World Bank Collaboration in Specific Areas
13. The Bank is working closely with the Fund on the reform program in Iraq. The two
institutions have conducted a number of joint missions and organized policy workshops and
training courses for Iraqi civil servants and academics, covering public financial
management, oil revenue management, intergovernmental finance, investment climate,
payment system, banking supervision, social safety nets, and the like. There are no major
differences of views between the two institutions on policy issues. The staffs are in broad
agreement on the core reform program in Iraq, namely: (i) reinforcing public governance and
institutions, including management of oil revenues; (ii) ensuring coherent and wellsequenced
market-focused reforms; (iii) strengthening social safety nets; and (iv) improving
delivery of essential services, including education and health.
14. The Bank and the IMF worked collaborated very closely in the design of their
respective budget support operations for Iraq. The Bank’s Development Policy Loan and the
IMF’s new Stand-By Arrangement mutually reinforce each other, and are underpinned by a
similar set of structural reform priorities.
F. Areas in Which the World Bank Leads and There is No Direct IMF Involvement
15. Through ITF- and IDA-funded projects the Bank is providing emergency support to
rehabilitate vital public services—education, health, water supply and sanitation, urban
infrastructure, power, and telecommunications. The Bank anchors its project work in focused
analysis of sector issues, and supports Iraqi capacity-building via policy workshops and
training courses. The Bank leads work on gender issues; and has successfully facilitated the
GOI’s efforts to undertake an Iraqi Household Socio-Economic Survey (IHSES) as well as a
Poverty Reduction Strategy which was completed in June 2009 and included feedback from
more than 100 donors and Iraqi stakeholders.
G. Areas in Which the World Bank Leads and Its Analysis Serves as Input into the
IMF-Supported Program
16. The Bank has provided policy advice and inputs to the Prime Minister’s Supreme
Economic Committee and to key ministries. Bank inputs are provided in the form of policy
papers on key reform areas, such as subsidy reform, pension system and social protection, oil
revenue governance, public finance management, civil service and payroll reform,
restructuring of SOEs and public banks, investment climate, and trade policy and facilitation.
17. The IMF has a strong interest in the areas listed above from the macroeconomic
perspective (economic growth and fiscal sustainability, including the phasing out of
nontransparent quasi-fiscal operations). The IMF has also a strong interest in governance
issues, in particular with regards to oil revenue management.
10
H. Areas of Shared Responsibility
18. The IMF and the World Bank are working together on macroeconomic and fiscal
sustainability, revenue management, the reform of domestic subsidies, financial sector
reform (comprising state bank restructuring, strengthening payment system and banking
supervision and regulation), public debt management, and statistical capacity building. The
Bank and the Fund closely coordinate their capacity building activities in macroeconomic
management, public sector governance, private sector development, and social safety nets.
The Bank’s design of the IHSES benefited from comments provided by the Fund.
I. Areas in Which the Fund Leads and its Analysis Serves as Input into the World
Bank–Supported Programs
19. The IMF leads the dialogue on core macroeconomic policies and has taken the lead
on debt sustainability analysis, monetary policy, and the management of aggregate
expenditures. The Bank is working with the IMF to ensure consistency of the overall
macroeconomic and fiscal framework. With the support of the IMF and the World Bank,
progress in strengthening budget management and banking sector reform is underway. With
support from the IMF, the Government also executed a debt restructuring program with all
Paris Club creditors.
J. Areas in Which the IMF Leads and There is No Direct World Bank Involvement
20. The IMF leads the dialogue on monetary and credit policies, exchange rate
management, tax policy and administration, and balance of payments issues.
Iraq Country Director: Mr. Hedi Larbi, contact number 5367-224.
11
Table 1. Iraq: Bank-Fund Collaboration
Area of Reform Lead Institution
1. Market-focused reform
Reform of domestic subsidies World Bank/IMF
Trade policy and facilitation/WTO accession World Bank
2. Monetary and credit policies IMF
3. External sector
Balance of Payments IMF
Debt sustainability IMF
4. Public sector governance
Public financial management IMF/World Bank
Oil revenue management World Bank/IMF
Fiscal Federalism World Bank/IMF
Payroll reform World Bank
Tax administration IMF
Tax policy IMF
Public debt management World Bank/IMF
Intergovernmental finance World Bank/ IMF
Governance and anticorruption World Bank
5. Public service delivery
Education and health World Bank
Power, water and infrastructure World Bank
Agriculture, and environment World Bank
Telecommunications World Bank
6. Private sector development
Investment climate World Bank
SOE reform World Bank
Payment System Reform World Bank/IMF
Financial sector development, incl. payment
system and bank supervision and regulation
IMF/World Bank
Public banks restructuring World Bank/IMF
Housing Finance World Bank
7. Human development
Poverty analysis World Bank
Pension reform World Bank/IMF
Social protection strategy World Bank
Labor market issues World Bank
Gender issues World Bank
8. Other
Statistical capacity building IMF/World Bank
Sector strategies (agriculture, power,
telecommunications)
World Bank
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ANNEX III. IRAQ: STATISTICAL ISSUES
A. Background
1. Data provided to the Fund, while broadly adequate for program monitoring, have
serious shortcomings that significantly hamper economic analysis. Macroeconomic statistics
have suffered from years of neglect and recent turmoil has added to the difficulties. While the
Central Organization for Statistics and Information Technology (COSIT) remained in place,
its technical expertise has become outdated. At the Central Bank of Iraq (CBI), statistical
capacity is slightly better, but issues of interagency data sharing and data collection
responsibilities are hampering progress on external sector statistics.
2. Since 2003, the Statistics Department (STA) has provided considerable technical
assistance (TA) in all major datasets, including on dissemination standards. The authorities
participate in the General Data Dissemination System (GDDS). The ongoing TA program
takes into account the absorptive capacity of the statistical agencies involved, and the
contributions of other donors.
B. Shortcomings of Statistical Framework
National accounts
3. COSIT compiles annual and quarterly national accounts at currant and constant
(1988) prices. Annual data of GDP by activity are available on the website of COSIT for
2001-07, and quarterly GDP data for 2007 and the first three quarters of 2008.
4. The national accounts follow the 1968 SNA, however, with technical assistance from
STA, COSIT is moving towards implementing the concepts of the 1993 SNA. The quality of
the national accounts compiled is poor, due to the lack of source data. There are no
comprehensive source data available for estimating the value added by activity and for GDP
expenditure categories. A Household Budget Survey (HBS), restaurants and hotel survey,
and money exchange survey have been conducted during 2007 but, the results have not been
processed yet. Public sector hotels are not covered in the survey because they are occupied
by the coalition forces and their staff. An establishment survey was supposed to be conducted
in 2007, but due to the security situation, COSIT was not able to conduct the scheduled
survey. The data on the oil sector is generally adequate and timely, but there is little
information on non-oil economic activity. COSIT still includes the Kurdistan Territory’s
contribution to GDP by economic activities as percentages for each activity based on results
obtained from previous estimates dating back to 1990. Other activities that started in the
Kurdistan Territory after 1990 are not included. There are limited price and volume
indicators which could be used for deriving volume measures of GDP. The base year (1988)
is outdated and needs to be updated. Work is underway to move the base year to 2004.
13
5. Data collection is reasonably comprehensive for current price data in the formal
sector. Under current procedures, businesses employing more than 10 people must report
calendar year data by the following October, and small businesses need to report by the
following June. Because there are sizable penalties for noncompliance, respondents usually
meet these deadlines. However, with recent changes in the country, there is a risk that the
timeliness of data reporting will deteriorate.
6. There is a shortage of quarterly and monthly indicators of economic activity and a
lack of timely data for services. Quarterly GDP estimates are based on a limited number of
indicators – crude oil output, electricity, rent of dwellings, and government expenditure.
Nevertheless, for several industries, extrapolating from out-of-date benchmarks adversely
affects data reliability. The results of the 2007 HSES should provide better indicators.
Consumer price index
7. Consumer price data are available with relatively short lags but do not cover the
Kurdish region. Staffing is inadequate in number and training has been received only during
STA technical assistance missions. There is not enough computer hardware and software to
process the CPI efficiently. Recent technical assistance missions have focused on providing
hands-on training on methodologies for compiling the CPI and on methods for making
adjustments in the CPI for seasonality and changes in the quality of goods. Improvements in
the CPI have been limited by outdated weights, which date back to 1993. Currently, COSIT
is in the process of rebasing the CPI based on the 2007 HSES. Limited training has also been
provided on methods for constructing the producer price index (PPI) and the wholesale price
index (WPI) and on documenting the procedures and methods used to compile the CPI
(metadata); work in this area is continuing.
Monetary and financial statistics
8. Notable progress has been made in developing the components and structure for
compiling a depository corporations survey, but the quality of the data continues to be
hampered by several factors: (i) the lack of sufficiently trained staff and adequate internal
cooperation within the CBI; (ii) difficulty in collecting information on banking transactions
in the northern region (Kurdistan); (iii) a chart of accounts (COA) that is not fully compliant
with current monetary and financial data requirements—the CBI approved in April 2007 a
resolution for drafting a new COA by end-2008; (iv) the use of pre-conflict forms for
reporting monetary statistics; and (v) the balance sheet presentations for the commercial
banks that do not conform with the sectorization and instrument classification of the
Monetary and Financial Statistics Manual (MFSM).
1. The recent mission (July 2010) found that the authorities have made progress in
implementing the recommendations from previous missions. However, the mission
noted the need for the CBI to undertake actions on: (i) improving sectorization of
data—provided by Rafidain bank —that are currently classified under general
14
government sector and public nonfinancial enterprises; (ii) clarifying the status of
negative balances for other central government deposits and miscellaneous liabilities
in foreign currency as identified in 1SR SRF; and (iii) developing a draft of the bridge
table on mapping the new other depository corporations (ODCs) source data onto
2SR SRF.1
Balance of payments statistics
9. Balance of payments statistics are available to the Fund for 2005-2008 in the IMF’s
Balance of Payments Manual, fifth edition (BPM5) format. The quality of the information for
recent years has improved; however, the presentation is still limited due to coverage
problems and some deviations from the internationally acceptable methodologies. Issues
regarding the recording of external debt data continue to impact the coverage and timeliness
of balance of payments statistics. International reserves are compiled consistent with
international methodologies and published in the IFS since end-2006.
10. A recent TA mission (April 2010) noted that the quality of the information remains
hampered by the lack of data submission to the CBI from other government institutions and
the private sector. The paucity of data exist particularly in the areas of external trade in goods
and services, foreign direct investment and external debt statistics.
To help address these and other issues, the mission proposed several short-term
recommendations, including improved interagency cooperation on direct investment and
external debt statistics, further implementation of the international transactions reporting
system, and the development of international investment position data. External trade
statistics
11. External trade data have serious problems of timeliness and are of poor quality. A
new customs form for imports is available but it is not being used at the customs border due
to the security situation and the lack of Customs Department resources at the border outlets.
Coverage of private sector imports is constrained by data sources. Only goodsthat are paid
for through the Iraqi banking system are captured. Thus goods that are imported under
external payments arrangements (for example, imports for direct investment projects) are not
recorded in the balance of payments. The coverage of the external trade statistics excludes
the northern region of the country (Kurdistan), and no estimates for smuggling are made.
1 SRFs are the standardized reporting forms used by STA to collected monetary and financial statistics in a
structured way (by instrument, currency and sector). 1 SR refers to the central bank form; and 2 SR refers to the
form for ODCs
15
12. Export data from the oil sector are received from the BOPSD at the CBI. The non-oil
export data, which amounts to the equivalent of 3–5 percent of total exports, are compiled
based on information from the customs export form. Non-oil export data are provided to the
CBI on a monthly basis for crosschecking purposes.
Government finance
13. Despite the difficult security situation, which has a direct impact on data compilation
and analysis, the provision of fiscal data for program monitoring purposes has been
satisfactory. Infrequent submission delays occur, and coverage of the Kurdish region remains
sketchy. However, the authorities are taking measures to address these shortcomings.
14. In February 2005, an STA mission—held jointly with a parallel FAD and World
Bank mission—discussed a work plan aimed at building up reporting as an integral part of
a major rehabilitation of the budgetary, accounting, and fiscal management information
system. The mission identified institutional, technical, resource, and coordination issues that
would need to be addressed prior to developing the government finance statistics (GFS).
These include establishing a macro-fiscal directorate-general in charge of developing and
disseminating fiscal statistical data, implementing the classification for mapping the chart
of accounts and budget classification onto the format of the Government Finance Statistics
Manual (GFSM 2001) (an area where significant progress has been made), and preparing
preliminary estimates of GFS-compliant data for general government on a best effort basis.
The Ministry of Finance has also set up a debt unit with the support of external consultants.
Iraq does not report government finance statistics for publication in the Government Finance
Statistics Yearbook (GFSY) or IFS. Currently there are no fiscal statistics published by the
government beyond the summary of central government budgetary estimates and outturn.
Statement by Mr. Shaalan on Iraq
Executive Board Meeting
March 18, 2011
Background
1. Iraq was able to maintain macroeconomic stability in 2010, notwithstanding very
challenging domestic and external conditions. With the lower level of oil production, GDP
growth in 2010 was modest at about 1 percent. Inflation remained in the low single digits, the
exchange rate remained stable, and international reserves increased. Fiscal performance
improved, mainly reflecting an under-execution of the capital budget and higher than
projected oil revenues. The budget deficit is estimated to have remained well below the
original forecast. Nonetheless, both the fiscal balance and current account are projected to
remain in deficit in 2011 and 2012. Despite persistent capacity constraints and the long delay
in forming a new government, structural reforms progressed in several key areas. These areas
include program safeguards, central banking, as well as the oil sector.
2. Notwithstanding these accomplishments, the Iraqi economy continues to face
daunting challenges and risks, notably a deteriorating security situation, constraints in
administrative capacity, delays in the development of oil fields, and volatility in oil prices.
Economic and Financial Policies in 2011
3. As a result of the increase in oil production, GDP growth is expected to recover
strongly in 2011. Non-oil GDP is projected to continue to pick-up slowly as security
conditions improve.
4. Fiscal policy. The 2011 budget balances the need to accelerate investment in public
services and oil infrastructure with the need to return to a sustainable fiscal position in the
coming years. The authorities appreciate the staff’s support for their budget. Iraq’s
reconstruction needs remain large, and the authorities aim to accelerate the pace of
investment in 2011, within the country’s implementation capacity, to make up for the
previous year’s delays. Current spending is also projected to increase in 2011—after being
held constant in nominal terms for three years. The main objective is to accommodate higher
costs of the in-kind Public Distribution System—stemming from the increase in world food
prices— as well as higher security outlays. The budget continues to be based on a
conservative assumption for oil revenues.
5. Monetary policy. The Central Bank of Iraq (CBI) intends to maintain its present
monetary policy, which aims at keeping inflation in the single digits. The exchange rate
remains the CBI’s main policy instrument, given the very low level of financial
intermediation. The authorities remain committed to ensuring the independence of the CBI,
which they view as critical for maintaining confidence in the Iraqi dinar.
2
Structural reforms
6. Continued capacity constraints, compounded by the difficult security situation and the
long delay in forming a government, have slowed progress in structural reforms.
Nonetheless, considerable progress was made in strengthening program safeguards―notably
with the completion of an external audit of the CBI’s net international reserves and net
domestic assets and the strengthening of the internal audit committee that is charged with
addressing remaining safeguard risks that were identified in the safeguard assessment update.
The restructuring of the balance sheets of the two largest state-owned banks, Rafidain and
Rasheed, is ongoing and is expected to be completed by end-June 2011.
7. With regard to public financial management, the review of all bank accounts in the
banking system that were classified as central government accounts is nearly completed, with
about only 7 percent of the accounts remaining to be clarified. The authorities acknowledge
that improvements in cash management as well as fiscal controls and reporting can be made
with the introduction of a Single Treasury Account. With support from the World Bank, the
Board of Supreme Audit will carry out a review of a number of large 2008 investment
projects with a view to distill lessons on how to enhance the quality of investment projects in
the future.
8. Continued progress is being made in improving transparency in the oil sector with the
installation and calibration of oil metering systems. Moreover, the authorities are working on
modeling, in cooperation with the Fund, the implications of the agreements with the
international oil companies on government finances. This work would feed into their
Medium-Term Budget Framework. They reiterate their commitment to maintaining a single
oil export revenue account that is subject to the principles of transparency and accountability
that apply to the Development Fund for Iraq currently.
Performance under the Stand-By Arrangement (SBA)
9. The Iraqi authorities have demonstrated a strong commitment to the program’s
objectives. They met all the performance criteria for which data were available at end-
December 2010. They request waivers of applicability for the end-December performance
criteria for which data are not yet available, and for which there is no evidence that these
were not observed. Furthermore, they request an extension of the SBA by five months to
allow time for an additional review and the implementation of the structural reform measures
under the program. Accordingly, and as their financing needs have shifted to 2011, they
request a rephasing of the remaining disbursements under the SBA. The authorities intend to
treat the SBA as precautionary if oil revenues, irrespective of the combination of volumes
and prices, in the first three quarters of 2011 exceed the projection of $46 billion by more
3
than $3 billion or if at the time of the fourth review, the rate of execution of the capital
budget is below 90 percent.
10. The Iraqi authorities are grateful for the valuable policy advice and technical
assistance they receive from staff in support of their stabilization and reform efforts, as well
as for the continued support provided by the Fund and its membership. They see the
arrangement as continuing to provide them with a valuable anchor during a period of difficult
political transition and considerable global economic uncertainty.
Press Release No. 11/90
FOR IMMEDIATE RELEASE
March 18, 2011
IMF Executive Board Completes Second Review Under Stand-By Arrangement with
Iraq, Grants Waivers and Approves US$471.1 Million Disbursement
The Executive

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