IMF objects KRG budget share, could cost Iraq billions
The International Monetary Fund (IMF), which controls Baghdad’s access to over $5 billion in international loans, has come out against Iraq’s recently-passed 2018 budget, in large part due to the decrease of the share allocated to the Kurdistan Region.
“The budget is not satisfactory because we think it’s not enough to maintain macroeconomic stability in Kurdistan, which is an important region of Iraq,” Christian Josz, deputy division chief of the IMF’s Middle East and Central Asian department, told Iraq Oil Report on Thursday.
Iraq’s adherence to regulations in the IMF’s Stand-By Arrangement (SBA) acts to free up $5.34 billion in international loans. It also indirectly allows Iraq to access billions more, due to the positive effect on the confidence of investors and businesses that IMF partnership carries.
If Baghdad fails to reach specific economic and governance benchmarks laid out in the SBA, the IMF can cite non-compliance to put the agreement, and therefore billions of dollars for Iraq, on hold.
According to Josz, because the budget share for the Kurdistan Region has just been reduced to a level deemed insufficient by the international monetary body, “the budget is clearly not in line with the SBA.”
The official added that the IMF did not expect the issue to be resolved by the current Iraqi administration and would need to wait until after a new one is formed following upcoming national elections, scheduled for May 12.
“I think the logical conclusion is that the [SBA] review cannot be concluded until a new government is in place and we have reached [an] agreement with the new government,” Josz said.
The IMF also objects to articles in the 2018 budget that diminish Iraq’s economic solvency, such as those reducing tax revenue and other income not related to oil production.
On March 3, the Iraqi Parliament in Baghdad voted to reduce the Kurdistan Region’s annual share of the nation’s budget to roughly 12 percent, a significant drop from its previous 17 percent allocation.