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Iraq requests emergency assistance from IMF

Iraq has requested emergency assistance from the International Monetary Fund (IMF) to ease its deficit, Reuters reported on Monday, a day after Bloomberg quoted the country’s finance minister Ali Allawi saying he was negotiating a $6 billion borrowing package from the body.

Iraq is in talks with the IMF over a loan package amounting to $6 billion, the finance minister told Bloomberg in an interview published on Sunday, a move seeking to ease the country’s expected 71 trillion dinars ($49 billion) deficit for 2021.  Reuters reported on Sunday that the body had told them Iraq had already requested emergency assistance, as well as discussed a “longer-term arrangement.”

Late last year, Baghdad borrowed over $25 billion from the country’s central bank in an attempt to cover the state’s fiscal deficit and pay civil sector employees.

Iraq’s central bank announced on December 19 that it would be devaluing the country’s currency in an effort to combat a national liquidity crisis and bring in much-needed cash to the government’s coffers.

Ziad Daoud, Bloomberg’s chief emerging markets economist, notes that Iraq’s 2021 draft budget has already accounted for a hefty borrowing package from the international body.

“Iraq’s 2021 draft budget assumes an IMF loan of $4.1 billion to fund this year’s deficit. If this loan is secured and oil prices are sustained at their current levels, the depletion of foreign-exchange reserves could slow, preventing another round of currency devaluation,” he told the media outlet.

Iraq had an economically woeful 2020, thanks in part to a global crash in the price of oil and the coronavirus pandemic.

Once the spending plan is approved by parliament, Iraq can apply for $2 billion in quick financing from the IMF, Allawi said in his Thursday interview. He could later seek out $4 billion through another mechanism. Source