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More Iraqi News Thursday PM 2-11-21

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IMF Executive Board Concludes 2020 Article IV Consultation with Iraq

February 11, 2021  Washington, DC: On February 8, 2021 the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation [1] with Iraq.

The COVID-19 pandemic and a sharp decline in oil revenues have exacerbated Iraq’s longstanding economic vulnerabilities. Real GDP contracted by an estimated 11 percent in 2020, reflecting a slowdown in non-oil activity and cutbacks in oil output as a result of OPEC+ decisions. Large fiscal and external current account deficits of 20 and 16 percent of GDP, respectively, constrained the government’s ability to mount an effective fiscal response to the crisis.

The authorities have begun to take much-needed steps towards ensuring macroeconomic stability while protecting the vulnerable. To help safeguard foreign exchange reserves and reduce the external imbalance, the Central Bank of Iraq has announced a devaluation of the exchange rate.

Alongside, the draft 2021 budget, submitted to Parliament, aims to reduce the fiscal deficit through measures to contain the unsustainable expansion of government wage and pension bills and to raise non-oil revenues, while significantly boosting targeted assistance to shield the most vulnerable. The authorities have also set aside sizable resources in support of their efforts to minimize the loss of life to COVID-19, including through acquisition and distribution of a vaccine.

The economy is expected to gradually recover, and the imbalances to narrow, although the outlook remains challenging. Real GDP is projected to return to its pre-pandemic level by 2024. The fiscal and external current account deficits are projected to decline over the medium term. Government debt is expected to peak in 2023 and decline gradually thereafter.

This outlook hinges on strong implementation of reforms and is subject to significant downside risks. Political constraints ahead of the parliamentary elections, renewed bouts of social unrest, or security risks could undermine the reform efforts, putting macroeconomic stability at risk. Furthermore, pandemic‑related risks and oil market uncertainties could further complicate the economic situation.

Executive Board Assessment [2]

Executive Directors agreed with the thrust of the staff appraisal. They noted that the COVID 19 pandemic and the sharp decline in oil revenues have further exacerbated Iraq’s existing significant socio-economic fragilities. Directors also noted the authorities’ efforts to strengthen the health policy response, boost social safety nets, and reduce the fiscal and external deficits.

Nevertheless, downside risks to the economic outlook remain significant amid a challenging socio-political environment. Directors emphasized that implementing strong policies and structural reforms is essential to ensure macroeconomic stability and achieve sustainable and inclusive growth.

Directors emphasized that reducing fiscal imbalances is critical to ensuring fiscal and debt sustainability. They welcomed the authorities’ planned fiscal reforms in the “White Paper” and encouraged their careful prioritization and swift implementation while minimizing the impact on the vulnerable. To create room for the much-needed reconstruction and social safety nets, Directors highlighted the importance of strengthening public finances. To this end, they called for a comprehensive civil service reform to contain the public wage bill and recalibration of the pension system to put it on solid financial footing. Priority also needs to be given to increasing non-oil revenues and strengthening public financial management to reduce the fiscal risks stemming from off-budget expenditures and government guarantees.

Directors concurred that the recent exchange rate adjustment would help reduce external imbalances and preserve foreign exchange reserves. They underscored that a strong fiscal framework remains critical to ensuring the credibility of the new exchange rate peg as well as minimizing future need for monetary financing of the budget. Directors also saw need for further monetary policy measures by the central bank to contain inflation.

Directors stressed that wide-ranging structural reforms are necessary to cement macroeconomic stability and pave the way for higher and more inclusive growth. They underscored that reform efforts should focus on stemming the financial losses in the electricity sector. This requires sustained efforts to strengthen governance and improve collection, as well as gradual adjustment of tariffs to increase cost recovery and reduce arrears.

In addition, Directors emphasized the importance of reducing corruption in key public institutions, continued improvement and effective implementation of the AML/CFT framework, restructuring of large state-owned banks to foster financial stability, and developing the private sector.

Directors noted the authorities’ interest in emergency financing with the Fund to support their stabilization and reform efforts with some Directors encouraging a longer-term arrangement to address structural challenges.

It is expected that the next Article IV consultation with Iraq will take place on the standard 12-month cycle

Iraq: Selected Economic and Financial Indicators, 2019–26 Act.  Projections

Sources: Iraqi authorities; and IMF staff estimates and projections.

1/ Converted from GDP in local currency using the period-average exchange rate (1191 in 2020).

2/ Negative price differential of about $2.9 per barrel compared to the average petroleum spot price (average of Brent, West Texas and Dubai oil prices) in 2020 – 2025.

3/ Adjusted to exclude (i) full year estimates of federal government transfers to the Kurdistan Regional Government, and (ii) non-oil tax revenues from the KRG to the federal government.

4/ Adjusted to exclude full year estimate of federal government transfers to the Kurdistan Regional Government.

5/ Includes arrears. The debt stock includes legacy arrears to non-Paris Club creditors on which the authorities have requested (but not yet obtained) Paris-Club comparable relief. Implementing comparable terms will substantially reduce debt (e.g. by 15 percent of GDP in 2017). The 14 percentage points increase in 2020 is partly attributed to a devaluation in mid-December 2020 which led to an upward revision of external debt.

6/ Converted from the total government debt in local currency using the end-of-period exchange rate (1450 in 2020).

7/ Positive means appreciation.

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

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

Iraq : 2020 Article IV Consultation-Press Release; Staff Report; And Statement By The Executive Director For Iraq

Author/Editor:International Monetary Fund. Middle East and Central Asia Dept.Publication Date:February 11, 2021 Electronic Access:Free Download. Use the free Adobe Acrobat Reader to view this PDF file

Summary:Iraq’s socio-economic fragilities have been severely aggravated by the pandemic and the sharp decline in oil revenues, which arrived on the heels of widespread social unrest and political instability. The health system’s limited capacity has been strained, while the fiscal position has become untenable as oil revenues declined sharply to a level that barely covers the government’s large wage and pension bills.

Although the number of new infections declined recently, Iraq registered the second-highest COVID-related fatalities in the region, and the fiscal response to the pandemic has been one of the lowest. A six-month political paralysis preceding the formation of the government in May 2020 and plans to hold early parliamentary elections in mid-2021 have been weighing on political support for reforms. Risks of social unrest, geopolitical tensions, and insecurity remain elevated.

Deputy Speaker Of Parliament: A Great Convergence Of Views Between Baghdad And Erbil

Deputy Speaker of Parliament, Bashir Al-Haddad   Today, Thursday (February 11, 2021), Deputy Speaker of Parliament Bashir Al-Haddad confirmed that there is a great convergence of views between Baghdad and Erbil, pointing out that one of the most important foundations that should be a gateway to finding serious solutions is invoking the constitution.

He said Haddad in a press statement, said that “there is a great convergence of views between Baghdad and Erbil, and talks the region delegation with the Parliamentary Finance Committee was characterized by openness, transparency and seriousness”, and added that ” the region provided all the data and figures and information to the federal government has been a successful meeting and fruitful Between the Federal Office of Financial Supervision and the Office of Supervision in the region.

Al-Haddad explained, “One of the most important foundations that must be a gateway to finding serious solutions is invoking the constitution by all parties to define obligations and rights, and to continue dialogue and communication with the aim of finding solutions and not aggravating and deepening disagreements while giving priority to the supreme national interest and preserving national consensus and partnerships. .

Al-Haddad To The “News Center”: This Is What The Baghdad-Erbil Agreement Represents

Thursday, February 11, 2021 6:54 PM   Category: Uncategorized  Private / News Center   The Deputy Speaker of Parliament, Bashir Al-Haddad, stressed today, Thursday, that reaching a fair and comprehensive agreement between Baghdad and Erbil is a national necessity, while calling on all parties to support efforts to achieve this.

Al-Haddad said, in a special statement to the “National News Center,” that “reaching a just and comprehensive agreement between Baghdad and Erbil is a national necessity and strengthens real partnership in the political process and supports stability and prosperity in the country.”

He called on all parties to “support efforts aimed at overcoming obstacles and reaching a formula for a fair agreement between the two parties,” stressing that “there is a truth that we should all be aware of, that the strength of the region is a force for all of Iraq, and that the region’s development, prosperity and stability will be reflected positively on the rest of Iraq.”

Al-Haddad stressed “the need to work on transferring the successful experience in this part to the rest, just as the strength and stability of Iraq is the basis for the prosperity of the region. We are all in one country and we remain under its large tent,” concluding by saying: “Let us strive to build a state of citizenship on the basis of justice and consensus Balance and partnership, within the framework of the constitution ”.

An Economist Warns Of The Continued Exit Of Hard Currency To Other Countries

08:34 – 11/02/2021  Information / Special  Economic expert, Ihssan Al-Kinani, warned that the continued exit of hard foreign currency from inside Iraq to the outside will have negative effects on the Iraqi economy, pointing out that any decrease in oil prices will have disastrous consequences for the loss of the currency.

Al-Kinani said to / the information /, that “the exit of foreign currency from Iraq has not noticed its negative effects at the present time due to high oil prices and the large amount of dollars entering the country.”

He added that “the banking policy in Iraq is incorrect because of its reliance on the auction of selling the currency and not launching any investment projects to maximize revenues.”

And that “the political class’s acquisition of banks, especially the currency auction, will lead to disastrous results that lead to the exit of most of the foreign currency from Iraq.”To the outside, either through politicians to deposit them in foreign banks or through trade exchange, as Iraq depends 95 percent on foreign goods. 25 n

Economist: The Government Is Unable To Impose An Administrative System In The Region

18:35 – 11/02/2021  Information / Special …The economic expert, Malik Al-Tamimi, called, on Thursday, the federal government to impose the prestige of law on the region and the provinces.

Al-Tamimi said in a statement to the information agency, that “the government suffers from a failure to implement legal procedures on the region and the provinces,” indicating that “the dispute in the dialogues between Baghdad and Erbil revolves around the number of“ space ”employees in Kurdistan.

Al-Tamimi added, “The delay in announcing a solution that satisfies all parties is due to the issue of dealing with the aliens,” explaining that “Baghdad is calling for the region to limit the number of its employees, but Kurdistan responds by refusing and denying the presence of aliens, and thus the point of dialogue between the two parties returns to the beginning.”

Al-Tamimi noted that “the fundamental solution to this issue is the initiation of a comprehensive and general reform process in all federal and regional Iraqi state institutions inside and outside Iraq, and I mean embassies and diplomatic attaches around the world.”

The Temporary Private Sector Development Council Holds Its First Meeting Chaired By The Minister Of Planning

Thursday 11, February 2021 16:56 | Economical Views: 180  Baghdad / NINA / The Private Sector Development Board held its first meeting, in the presence and participation of representatives of federations, associations, unions and organizations representing the sectors under the banner of the private sector, as well as representatives of relevant government agencies.

And the transfer of a statement of the Ministry of Planning received the Iraqi National News Agency / NINA/ A copy of it, “The Minister of Planning, Khaled Battal Al-Najm, declared at the meeting that the formation of this council represents an advanced step in the way of empowering this sector, and giving it the real space that qualifies it to lead and lead development, stressing that the current formation represents a transitional stage,

In order to work on preparing and preparing for the formation of the permanent council, after setting the mechanisms and rules of procedure for it, by this temporary council, calling on representatives of the private sector and relevant government agencies, to work at a high pace, to complete the tasks assigned to them, and to invest time, to complete the requirements for the formation of the permanent council during for six months.

He noted the minister “to the existence of many of the problems and challenges facing the work of the private sector, which should be addressed by the Council, explaining, we need to reconsider the regulations and legislation related to development, economy and investment, which are no longer commensurate with the identity of the Iraqi economy The role of the private sector in it.

He explained that the next stage of the work of the Private Sector Development Council will witness the formation of sub-committees, which will undertake the preparation of papers for each of the sectors that operate in the private sector, including indicating problems, solutions and proposals through which the level of performance in these sectors can be improved,

pointing out that The role of the government in general, and the Ministry of Planning in particular, was keen to ensure that all productive and economic sectors are represented in this council, and the role of the ministry will be to provide the facilities and support required, to achieve the provisions of the private sector development strategy in accordance with its timelines, leading to building a sector A real private one, stressing the need to include Iraqi businesswomen in this council.

During the meeting, representatives of the private sector and government agencies presented a lot of constructive proposals, reviewing the problems and obstacles facing the work of the private sector.

The meeting concluded with the formation of a mini-committee to undertake the preparation of the internal system of the permanent council, as well as laying down the mechanisms for holding periodic meetings, and submitting each sector a detailed paper on the sector, with the aim of developing a general plan for the development of the private sector. ”

The meeting was attended by the Undersecretary of the Ministry of Planning Maher Hammad and Director General of economic and financial policies, Alaeddin Jaafar, representatives of the Council of Advisors, the ministries of commerce, labor, social affairs, finance, the Central Bank and the National Investment Authority, while the private sector participated, heads and representatives of contractors and industries unions, chambers of commerce, businessmen, and the National Business Council Peasant associations, labor unions, mills, hotels and restaurants, insurance, travel and tourism.