By Omar Sattar, for Al-Monitor. Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.
On May 19, Iraq signed an agreement with the International Monetary Fund (IMF) for a loan for as much as $15 billion over the next three years. Observers are wondering how Iraq will be able to repay the loan and meet the conditions imposed by creditors, which include various countries and the World Bank. One such condition is that Iraq must lift its oil and food subsidies.
The Iraqi Ministry of Finance said the IMF Stand-By Arrangement (SBA) will help Iraq in its battle against the Islamic State (IS) to liberate Iraqi territory, while also helping cut the budget deficit, which is projected at $25 billion, a figure that could worsen because of lower oil prices. The ministry said the loan will not affect government spending on social and health services, but rather it will bring about real financial and economic reform.
Iraq’s previous experience with the IMF doesn’t encourage optimism. In 2004, the IMF imposed an economic reform package that required Iraq to privatize some sectors and raise fuel prices in exchange for reducing and rescheduling the country’s Paris Club debt, estimated at $50 billion. Iraq failed to meet those conditions.
Sirhan Ahmed, a member of the parliamentary finance committee, told Al-Monitor the new IMF loan will only make things worse in the long run.
“Iraq does not need a loan from the IMF, as this loan will eventually turn into a set of conditions and dictations on the Iraqi economy. Instead of borrowing, the government should have resorted to retrenchment and issuing bonds while earnestly fighting corruption to address the budget deficit.”
Majda al-Tamimi, another finance committee member, told Mawazin News on May 17 that the loan “will lead to corruption.”
“The Central Bank’s governor held meetings and negotiations concerning the IMF loan, knowing that he sells $126-$140 million from the state’s treasury funds through currency auctions on a daily basis,” she said, referring to the fact that funds are available, yet the bank’s governor is using Iraqi money in buying and selling operations, not to support the budget deficit.”