IMF: Iraq reflects positive economic development & economic growth acceleration

Posted: December 19, 2013 in Iraqi Dinar/Politics
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IMF-Logo12.19.2013

A report prepared by experts at the International Monetary Fund Article IV Consultation with Iraq in 2013, which took place in the first quarter of the year 2013 in Amman, Jordan, that “in spite of the circumstance of the Iraqi difficult, the economic developments generally positive and has seen economic growth acceleration, At the same time did not hide his report the risks resulting from the decline in the level of political and security situations.

and followed (range) a chart he submitted the Resident Representative of the International Monetary Fund for Iraq, Ghazi reticles showing the latest economic developments and prospects in the medium term in addition to the risks and economic reforms.

shows reticles rate Inflation remained within the confines of the box one of 6% at the end of 2011 to 3.6% at the end of last year, which is mostly due to lower prices of imported food, but it is expected to be slightly more than at other times of 2013. (see scheme 1)

The reticles that he “has increased international reserves at the Central Bank and to the Development Fund for Iraq of $ 61 billion at the end of 2011 to 70 billion dollars at the end of 2012 (more than nine months of imports, equivalent to 33% of GDP) due to higher exports oil, also increased reserves of public finance at the Development Fund for Iraq, from 16.5 billion dollars to 18 billion dollars (six months of salaries and pensions, the equivalent of 8.5% of GDP).

Iraq is a country rich in oil
and the report shows that “Iraq’s oil reserves are installed, which amounted to about 143 billion barrels, are among the highest in the world, and are the costs of oil extraction as very low. contributed to the increase in production since 2003, the high per-capita GDP of $ 1,300 in 2004 to 6,300 dollars in 2012. increases total GDP in a series of new data significantly (from 114 billion dollars to 180 billion dollars in 2012). economy depends heavily on oil and the report confirms that “the government and state-owned enterprises employ almost half of the labor force.

The majority of the population relies on income from government employment or financial transfers from the state. In addition, the population believes that the public sector is the main vehicle for the distribution of oil wealth. While contributing to rising government employment and high wages in social stability, improvements in the delivery of public services are still scarce. “(Scheme 5) and sees Iraqi economists that “at present, accounts for workers state with most spending of oil resources and there disguised unemployment huge device State is the other source of waste, corruption and financial and in-kind privileges and pensions without work for by many people there. Canada with the three million square kilometers and a population equivalent of Iraq was run by about 650 000 employees in 2006 and with high efficiency compared to three million employees (except military and police) in Iraq to about 450 square kilometers and efficiently degraded. ” Iraq likely be seriously at risk of decline in oil prices and see reticles in the framework of an oil price of investigator equivalent of $ 102 a barrel in 2012, and is among the highest prices in the region, Iraq is likely severely to the risk of decline in oil prices. At the same time, the high level of current spending makes it difficult to adapt to external shocks without reduce investment spending disproportionately, as happened during the global financial crisis in 2008-2009.

Additionally, the budget is the main channel through which transmitted the effects of fluctuations in the oil market to the local economy. foreign direct investment is low, which is due mainly to the weakness of the environment business and governance and report argues that “the business environment are suffering from extreme weakness, and Iraq lies in the lowest world ranking list for ease of doing business as a result of weak governance, and the inefficiency of the judicial system, and the inconsistency of regulations, and inadequate security. Less foreign direct investment, especially in the non-oil sector, for its counterpart in other countries in the oil-exporting region. (Scheme 6) The total banking assets in Iraq at a rate of 77% of GDP, compared with an 130% in the Middle East and North Africa, with a total credit about 29% of GDP, compared with 55% in the region. However, the numbers college credit largely reflect loans and trade credit granted by the state-owned banks to state-owned enterprises.

Accordingly, the estimated credit to the private sector about 15% of GDP. likely report to remain macroeconomic prospects in Iraq, driven by developments in the oil sector while continuing foreign reserves to rise, and will result in oil export revenues powerful to increase the price of goods is rising business the real exchange rate.

It will range from domestic inflation rate between 5% and 6%, a level higher than its counterpart in the trade partners.

Risk: poor implementation of the policy of a decline in the political and security situation, the delay in increasing the volume of oil production (the delay in the development of oil fields and energies of the export of oil in Iraq) fell oil prices, the role of policy: fiscal policy and financial reform to accumulate the margins of financial and protective.

Rationalization of current spending (subsidies, wages, transfers, in-kind support for the food basket). institutional structure of public finances (the accounting system, the Financial Administration Act, the Treasury account, the integrated system for financial management information ). role of policies: monetary policy and the financial sector and the existence of a stable exchange rate and to create the conditions for greater flexibility in the exchange rate.

Market liberalization of foreign currency, to simplify the instructions of foreign currency and strengthen the system of anti-money laundering and terrorist financing. Administration prudent Central Bank reserves of foreign currency and the Development Fund for Iraq . restructuring of public banks and support the growth of private banks through the establishment of fair competition with public banks.

The role of policies: structural reforms and private sector development of the energy sector (a law on the Gaza hydrocarbons, there is a need to invest in the production of electricity, the abolition of fuel subsidies granted to producers). owned enterprises of the state. Restructuring of institutions and governance reform and capitalized institutions that can be repaired and the closure of non-viable ones. improve the business environment. agriculture sector (reform of the public distribution system, which contributed to the decline in domestic production). Conclusions: will oil continues to dominate the Iraqi economy. would be oil revenue management a good way is crucial. should budget to isolate the economy from the volatility of oil prices. should spend public finances to be strong to stand up to the fall in oil prices. could be the exchange rate stable, if it were free of distortions. implementation of policies and political matters are key factors dangerous.

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