August 2, 2015
On July 29, 2015, the Executive Board of the International Monetary Fund (IMF) approved SDR 891.3 million (about US$1.24 billion or 75 percent of quota) for Iraq under the Rapid Financing Instrument (RFI).
The purpose of this financial assistance is to help Iraq address present and urgent balance of payment and budget needs in 2015 related to the ISIS insurgency and a decline in oil prices. The IMF financing will support the authorities’ current economic program, which includes fiscal adjustment measures and structural reforms.
Following the Executive Board’s discussion of Iraq, Mr. Mitsuhiro Furusawa, IMF Deputy Managing Director and Acting Chair of the Board, issued the following statement:
“The twin shocks faced by Iraq from the ISIS insurgency and the drop in global oil prices have severely widened the government deficit and caused a decline in international reserves. The authorities’ policies to deal with the shocks, including sizable fiscal adjustment and maintenance of the exchange rate peg, go in the right direction.
“Access under the IMF’s Rapid Financing Instrument will help address Iraq’s urgent balance of payments and budget needs. However, large fiscal and external financing gaps remain.
“The large financing gap calls for the rigorous implementation of the authorities’ policies, but also additional fiscal adjustment measures and identification of domestic and internal financing. In this context, it will be important to implement the new electricity tariff schedule as soon as possible, or adopt compensatory measures.
“Looking ahead, the authorities should lay the ground for medium-term structural reforms that would better support macroeconomic policy management and boost the economy’s resilience to shocks.”