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Humanitarians fear for the 750,000 civilians in western Mosul

100 days after military operations to retake Mosul started, humanitarian partners are expressing deep concern about the plight of the estimated 750,000 civilians who are currently living in the western sections of the city where fighting is expected to start in coming weeks.

"We are relieved that so many people in the eastern sections of Mosul have been able to stay in their homes. We hope that everything is done to protect the hundreds of thousands of people who are across the river in the west. We know that they are at extreme risk and we fear for their lives," said Lise Grande, Humanitarian Coordinator for Iraq.

In the contingency plan prepared prior to the onset of the Mosul campaign, humanitarian partners warned that as many as one million civilians may be impacted by the fighting in a worst case scenario. To date, 180,000 people have fled the eastern sections of the city; more than 550,000 civilians have stayed in their homes.

Humanitarian partners have been working as quickly as possible to provide direct lifesaving assistance. Nearly 600,000 people have received food, 745,000 people have benefitted from water and sanitation support and 370,000 people have sought medical care.

Eighty-five per cent of the people displaced from Mosul are staying in 13 displacement camps and emergency sites constructed by the Government and partners. Ten of these camps are already full of which four are being extended. Seven more are under construction.

"The reports from inside western Mosul are distressing. Humanitarian partners are unable to access these areas but all the evidence points to a sharply deteriorating situation. The prices of basic food and supplies are soaring. Water and electricity are intermittent in neighbourhoods and many families without income are eating only once a day. Others are being forced to burn furniture to stay warm," said Ms. Grande.

"We don't know what will happen in western Mosul but we cannot rule out the possibility of siege-like conditions or a mass exodus. To date, nearly half of all the casualties from Mosul are civilians. It's terrifying to think of the risks families are facing," said Ms. Grande. "They can be killed by booby-traps and in cross-fire and could be used as human shields."

The Iraqi Security Forces have adopted a humanitarian concept of operations putting civilian protection at the centre of their battle plan. Humanitarian partners welcome this approach and renew their collective call on all parties to the conflict to uphold their obligations under international humanitarian law to protect civilians and ensure they have access to life-saving assistance.

"The world’s attention is fixed on the military campaign in Iraq. But once this is over, there will still be a humanitarian crisis. As many as three million Iraqis, maybe even four million depending on what happens in Mosul, Hawiga and Tel Afar may be displaced from their homes as a result of the conflict. These families will need to make crucial choices about how to rebuild and re-establish their lives. And we will need to be here to help them. We hope and trust that the international community will not walk away after Mosul. It would be a mistake — a very big one — if this were to happen."

Signees:

Lise Grande, Humanitarian Coordinator for Iraq
Aaron Brent, Country Representative Northern Iraq, CARE
Altaf Musani, Representative and Head of Mission, WHO Iraq
Bana Kaloti, Regional Director-Middle East, UNOPS
Bruno Geddo, Representative in Iraq, UNHCR
Dina Zorba, Country Representative, UN Women
Erfan Ali, Head of Iraq Programme, UN-Habitat
Fadel El-Zubi, Representative in Iraq, FAO
Francesco Motta, Director of the HRO/UNAMI, Representative of the UN OHCHR in Iraq
Ivo Freijsen, Head of Office Iraq, UNOCHA
Louise Haxthausen, Director, UNESCO Iraq
Mounir Tabet, Country Director, UNDP Iraq
Peter Hawkins, Representative in Iraq, UNICEF
Ramanathan Balakrishnan, Representative, UNFPA
Sally Haydock, Representative in Iraq, WFP
Thomas Lothar Weiss, Iraq Chief of Mission, IOM
Lawk Ahmad, Country Director, Qandil
Matthew Nowery, Country Director, Samaritan’s Purse
Mike Bonke, Country Director, Welthungerhilfe
Stef Deutekom, Deputy Country Director, DRC

(Source: UNDP in Iraq)

This article was originally published by Niqash. Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

Power Station Attack First Sign that Iraqi Kurdish Protestors are Ready to use Violence?

Just after protests about power cuts, somebody fired rockets at a Chamchamal power station. Is this the first sign of violence, after months of protests against the local government?

Although Iraqi Kurdistan’s power needs are met by the natural gas reserves in the area of Chamchamal, the people actually living in the area don’t see a lot of the benefits of their natural resources. Which is why a group of locals decided to protest this situation on January 2.

Then that evening unidentified individuals launched rocket propelled grenades at the gas-fuelled power plant that provides Iraqi Kurdistan with around half of all of its energy needs. The plant was not damaged.

Strangely, after the attack on the power plant, the energy being supplied to locals in Chamchamal increased. Households there had been getting about two hours of power after midnight. Now they were getting an uninterrupted supply between 10pm and 8am. Many locals said that there was a connection between their new electricity schedule and the rocket attacks.

On local social media, people started making jokes about the incident. “Fire a rocket and get 24 hours of free power,” read one witty comment. “This offer is valid until the government wakes up again.”

Some locals suggested that a local hero of sorts, Abdullah Kwekha Mubarak, was behind the rocket attack. Mubarak lived in Norway for almost a decade and returned to Iraqi Kurdistan in 2008; he more or less founded the Chamchamal branch of the Change movement, an opposition party that has campaigned on an anti-corruption platform in the past. In the recent past he has taken what may best be described as staunch positions.

Early in 2016 Mubarak threatened to cut a gas pipeline in Chamchamal if the area didn’t get a better power supply. On January 29, the gas pipeline going from the Khor Mor gas field to Erbil was bombed leading to a disruption in work at other power plants that rely on natural gas.

GE has announced that it has secured more than $1.4 billion in orders from Iraq’s Ministry of Electricity to set up power plants as well as provide technology upgrades and maintenance services.

The company signed agreements that will add over two gigawatts (GW) of power and secure the delivery of ~1.75 GW of existing power to the national grid:

• GE will set up the Samawa and Dhi Qar Power Plants, adding 1,500 megawatts (MW) to the grid. In the first phase of the project, GE will install four 9E gas turbines in simple cycle at each site by 2018. The second phase will entail the combined cycle conversion of the 9E units. GE is also supplying advanced heat recovery steam generators (HRSG) and steam turbine technology as well as serving as the engineering, procurement and construction (EPC) contractor for the projects.

• Under Phase II of the Power Up Plan – a plan with the Iraqi Ministry of Electricity (MoE) for critical electricity generation and maintenance projects throughout the country - GE will add over 580 megawatts (MW) to the national grid through upgrade and rehabilitation works at four power plants.

• Additionally, under Power Up Plan Phase II, GE will sustain ~1.75 GW of existing power generation through the maintenance of 9E gas turbines across six different power plants in Iraq. The activities will help enhance the reliability and efficiency of Iraq’s installed base.

GE has also been working with regional and international institutions to facilitate financing to help the Government of Iraq execute these and other projects. Since 2016, GE has helped the country secure $2 billion in financing for projects in the energy sector leveraging its global sourcing capabilities coupled with its strong relationships with lenders.

This article was originally published by Niqash. Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

Over the past few months the council in the central Iraqi province of Anbar have managed to create a number of new districts and sub-districts.

The last meeting making such decisions was held in December and most of the members of the provincial council voted in favour of establishing four new districts inside the province.

These are Karmah, east of the city of Fallujah, Baghdadi, almost 200 kilometres west of Baghdad, Amiriyat al-Samoud, southwest of Fallujah and Nahib, 280 kilometres southwest of the city of Ramadi. An additional five villages were changed into sub-districts within these new districts.

“Tribal and political influence were among the most important reasons behind the creation of these new districts,” says Daham al-Zubai, a tribal leader in Fallujah. “These were just ordinary villages before, with a population of no more than 3,000 people.”

“Most of the new districts are actually the bases for influential individuals who are trying to control nearby villages and to benefit from them, in terms of political gains,” he added.

It is perfectly legal for a provincial council to rezone areas within the province they run. But as yet, opinions on the new districts in Anbar remain divided. Some believe it to be a positive step in that the re-zoning has the potential to provide more government jobs and could improve the delivery of state services, like electricity and sanitation, to the new districts.

But others think the timing is wrong, given the ongoing security crisis in Iraq, as well as budgetary problems, which mean that even if jobs were created, it would be difficult to pay for them.

“We’ve done a number of studies on what can happen when larger areas are divided into smaller ones – Anbar was one of our case studies,” says Hassan Kashash, a lecturer in geography and administration at the University of Anbar. “The results were positive and suggested that smaller districts will provide better opportunities for management and for the optimized use of human and natural resources.”

In the 1970s, similar plans were enacted with new cities built and the corresponding expansion in residential compounds and employment was seen as positive. “But there is no point in planning new administrative bodies if there is no development plan enacted at the same time,” Kashash concluded.

By John Lee.

Reuters reports that Japan has agreed to lend Iraq up to 27.2 billion yen ($240 million) to rebuild damaged electricity infrastructure, especially in areas recaptured from the Islamic State group (IS, ISIS, ISIL, Daesh).

It also intends to approve another loan worth 21.5 billion yen to repair a thermal power station in Basra province, and will make additional contributions of approximately $100 million through international organizations for humanitarian assistance.

The loan was signed during a visit to Iraq by Japanese State Minister for Foreign Affairs Kentaro Sonoura (pictured).

(Source: Reuters)

The Iraqi-French Business Council Economic Forum was held in Bagdad on the 1st of Dec. 2016 in its 10th session under the joint patronage of the Iraqi and French governments.

The Forum activities opened with a welcoming speech by Dr. Sami Al- Araji, NIC Chairman through which he reviewed the history of establishing the Iraqi – French Business Council since 2009 and how it gathered the Iraqi private sector in all specializations and their French counterparts in “MEDEF”, under whose name more than 800 large and medium French companies are covered, the matter that represents an important economic link between the two countries.

Dr. Sami expected that this meeting will completely differ from previous ones as more discussions will be made between public and privet sectors regarding founding real new partnerships in Iraq generally and liberated areas particularly.

French Ambassador, Mr. Mark Berety in his turn expressed his delight for holding this forum and his hope for it to be a reinforce for the political relations between the two countries which have witnessed perceptible development by exchanging visits, referring to the French military support for Iraq in its war against terrorism and stressing at the same time the importance of leveraging the economic relations to reach the same developed standards of the political ones.

Mr. Raghib Bleibel, the Iraqi Co. Chair in the Iraqi- French Business Council expressed his hope for sustaining such meetings as this Forum in order to foster the economic link with the French side, calling for the Iraqi investors to seize this opportunity to lay down a basis for the joint work on the long run with the French in the various sectors like Oil & gas, Industry, Banking, Arming … etc in the way that raises the relations to the wished standards.

Ministry of Electricity of the Republic of Iraq (MOE) hereby announces that it is issuing a Request for Proposal (RFP) in connection with the following Tender No., for the operation and maintenance of simple cycle Gas Turbine Power Projects and to convert the plan into combined Cycle on a (BOO) basis Build, Own, Operate.

Tender rules against non- refundable amount of (250,000) ID, two hundred fifty thousand Iraqi Dinar for each project to be paid against a receipt from the following address.

Ministry of Electricity / Office of Investment and Contracts – Tender Section , Al- Niqabat Street , Al- Mansour District, Baghdad, Iraq.

Interested parties should note the following:-

• MOE will enter Operation & maintenance Contract for simple cycle power plant in case MOE will accept to award the proposal for simple cycle, which remarked and should be present by the bidder.
• MOE will enter into Power Purchase Contract with the winning bidder for the production of the steam turbine units only, on a (BOO) basis.
• The term of the contracts will be 15 years from the commercial operation of the combined cycle power plant.
• Further details are to be laid out in the (RFP).
• Authorized representative should have authority letter to purchase the Tender Rules.
• Any further questions can be referred to : ([email protected])
• Closing time at 12 pm Baghdad local time for each tender :-
• Tender No. MOE-HQ-22/2016 ALDEWANYA Gas Turbine Power Plant (4 x 125) + 250 MW with closing date Jan.22nd 2017
• Tender No. MOE-HQ-24/2016 ALMANSORYIA Turbine Power Plant (4 x 180) + 360 with closing date Jan. 22nd 2017 .
• The winning Bidder will bear the announcement cost in the local newspapers.

Click here for more Iraqi Tenders.

(Source: NIC)

Baroness Nicholson – Opening Speech for the Iraq Britain Business Council (IBBC) Conference on December 18th in Dubai:

Welcome to Dubai.

IBBC has been aware for many years of the important role that the UAE plays as a regional hub for business and trade through the MENA region and in particular as a regional base for companies and their families working in Iraq.

The ease of doing business here, the major port of Jebal Ali and Dubai and Abu Dhabi airports with their world beating airlines and the large number of Free Zones where companies can base their off shore activities plus enterprising and caring leadership by generations of the leaders of the UAE, all have contributed to the global status that the UAE now enjoys.

I extend my warmest thanks to the UAE Authorities for their support in allowing and promoting this conference, which we hope will become a permanent feature in IBBC’s annual calendar of events. The Department of Tourism and Commerce Marketing here in Dubai have been especially supportive.

I also warmly welcome the record number of non-member delegates who are joining an IBBC event for the first time and I hope you will all use this opportunity to engage with existing members and the senior IBBC team represented here, to learn more about what we do and how we work with our members about promoting business in Iraq. For members, I do urge you to discover the products and services on offer from our new friends.

Welcome to Delegates from Iraq.

I wish to thank the Government of Iraq for its support of this conference and to extend a special welcome to HE Mr Kadhim Finjan AL Hamami, Minister of Transport. Mr Finjan a friend and supporter of IBBC. His genuine concern lies with the People of Iraq and the Basrawis in particular.

Kurdistan Region Deputy Prime Minister Qubad Talabani outlined his government's reform initiatives during speech to the sixth Kurdistan Oil and Gas conference, organised by CWC Group, in London on Monday.

Below is the transcript of Deputy Prime Minister's speech:

Distinguished guest, ladies and gentlemen.

I'd like to warmly thank CWC for inviting me back again this year.  As we approach 2017 I want to outline to you our vision, our plans and our reform initiatives intended to address the many challenges Kurdistan faces today.

Last year, I had the pleasure to address you and I frankly presented to you the challenges of Kurdistan's fiscal and economic situation.  I emphasized how Kurdistan was being tested by political, economic, humanitarian and security crises.

I stressed how the triple shocks of Baghdad cutting our budget in 2014, the war with ISIS, the subsequent influx of almost 2m refugees and IDPs into Kurdistan;  and how our cumbersome and ineffective bureaucracy were all contributing to make our fiscal situation unsustainable and in need of major reform.

I then outlined some of the steps that we had undertaken, or had planned to undertake to address our fiscal imbalances and restore our economic growth, including our government's top three reform priorities at that time, which were to : Restructure government expenses, Reduce and eventually eliminate petroleum product subsidies, and carry out a major overhaul of our electricity sector.

But almost immediately after last year’s conference, we were dealt yet another devastating blow.  Oil prices plummeted even further, and so, the combination of Baghdad cutting our budget, war, the burden of IDPs on our society and economy, our own visible deficiencies, and added to that $25/barrel oil prices left us with growing debts and monumental fiscal challenges.

In January this year, we had a monthly operational deficit of over $460m! So our plans had to be re-examined and we needed to act fast. And we did.

Urgent austerity measures and continued direct oil exports improved our Government’s immediate cash balance, while structural reforms began to tackle the longer-term challenge of transforming the public sector and promoting diversification of the Region’s economy.

Recognizing the need for further austerity to close the gap between cash revenues and expenditures on a monthly basis, we announced a new measure to withhold a significant percentage of government salaries, pensions and stipends—excluding Peshmarga and other security forces.

These cuts have been sustained since, reducing the average total monthly payment for salaries, pensions and stipends by more than one-third, from almost $750m to approximately $450m US.

Needless to say this decision was very hard to make, and understandably unpopular with our massive civil service workforce.  We also reduced non salary operating expenses by over 50%.

My Government has also moved to increase non-oil revenues by raising fees, penalties, water charges and electricity tariffs for industrial consumers; as well as by slashing petroleum product subsidies.

The overall result has been an 80% drop in the consolidated fiscal deficit—measured on a cash basis--from 6.5bn US in 2014 to an estimated 1.3bn US in 2016.

But while our austerity program and shift to direct oil sales have substantially narrowed the gap between monthly operating revenues and expenditures, we still continue to struggle to pay monthly salaries, pensions and stipends on time.

Austerity is expected to continue in 2017 with the ultimate goal of generating an operating surplus in order to restore funding for critical public investments and over time to repay government debts, including advances from the banking system.

The lack of financing has exacerbated the social pressures inherent in any crisis response, while scarce technical expertise imposes important hurdles to program design and implementation.  So along with the World Bank, we have prepared a comprehensive roadmap for structural reform in the Kurdistan region.  Within that framework, we have focused on priority areas that include:

1. Institutional Modernization of our Ministry of Economy & Finance (MOEF) to equip the ministry to lead fiscal policymaking and become a driver for reform.

The program covers five reform streams: macro-fiscal, customs, tax, public financial management (PFM), and IT infrastructure and services.  In the macro-fiscal area, the reform aims to establish a macro-fiscal framework to guide the formulation of annual budgets for the KRG. A key step will be to prepare a budget for 2017 that sets clear targets for non-oil revenues and resizes expenditure envelopes in line with progress achieved under the austerity program.  For customs, we have begun to connect customs posts across the KR (Turkish border, airports and Iran border) to improve service standards, expedite customs clearance processes and provide real-time information on revenue collection.  Attention is also being given to improved coordination with the Federal customs authorities.

In taxation, the priority is to improve tax administration by establishing a new service center for large taxpayers. This large taxpayer office (LTO) to be set up in 2017 will support a shift in procedure from presumptive taxation to self-assessment in line with international standards.  The LTO is expected to promote modernization of the accounting industry in Kurdistan. The immediate goal of PFM reform is to strengthen control over public expenditures, while improving management of government liabilities.

As a key step, a new chart of accounts compatible with international standards (GFS) has been prepared and will be put in place in 2017-18. Regular annual and quarterly reports on the consolidated budget (including both MOEF and MNR operations) will be published starting by the end of 2016.  Improvements in IT infrastructure and services within MOEF will drive the transition to automation and away from outdated manual procedures.  As such, it will underpin the entire modernization effort by equipping the ministry with an international standard, integrated financial management information system (IFMIS).

2. Biometric Registration of government employees, pensioners and other citizens receiving monthly stipends (e.g., students, families of martyrs).  Rightsizing government stands out as a long-term goal of the KRG’s reform program.  Biometric registration represents a first step down this road that answers the question: who are we paying and how much?  This will open the way to more complex questions of ‘why and to do what’ under subsequent civil service reforms.  The registration process—encompassing government employees, pensioners and beneficiaries of stipends—is now underway after an intensive start-up phase with a three-month window to complete. After 2 weeks of actual operation, we have today registered over 150,000 government wage earners, so we are on track to meet our targets. The result will be an Identity Management System that drives broader reform of government payroll, and eventually human resources.  Through this initiative, we will identify those who are unlawfully receiving more than one salary from the government, of which we likely have many.

We will also identify and eliminate ghost employees, of which we surely have many!  This will pave the way to subsequent e-payroll and e-payment systems that will further enhance administrative performance and transparency, as part of the ultimate objective of transitioning to modern e-government services in Kurdistan.

3. On Electricity Sector Reform, we are executing a two-pronged strategy.  The immediate goal is to cut costs and improve financial sustainability, while developing a medium-term reform plan also in cooperation with the World Bank.  Starting in 2015, we have undertaken steps to curtail costs for electricity generation, including:

(i) a shift in supplying natural gas to the power stations in place of diesel fuel,

(ii) the introduction of more fuel efficient combined-cycle technology by IPPs, and

(iii) voluntary renegotiations to lower take-or-pay penalties in light of excess generation capacity.

As a result, total costs have been cut by as much as $1.5 billion in 2016. The immediate focus is now shifting to revenue improvement. Tariff adjustments for industrial consumers came into effect in 2016.

However, revenue performance remains very low, hampered by high losses (including theft) and poor collection.  The government intends to turn the situation around in 2017 through a program centered on the introduction of smart metering and more robust billing and collection.

The medium-term reform plan aims to improve and sustain the quality of service for all electricity consumers through a transition to a modern institutional and regulatory framework that:

(i) clearly delineates generation from transmission and distribution;

(ii) strengthens financial discipline and energy accountability; and

(iii) promotes private sector participation and investment in downstream activities.

This transition will encompass a shift to fully cost-reflective tariffs that protect vulnerable groups in line with international practice.  The KRG’s ultimate goal is to ensure consumers are provided with better electricity service without recourse to fiscal or quasi-fiscal subsidies.

4. We believe Enhanced Government Transparency and Citizen Engagement is key to strengthening credibility and build public support for the KRG’s programs. We recognize that enhancing government transparency and citizen engagement are key to building and sustaining popular support for our programs.

Governance is never a popularity contest, and this is particularly true in situations of crisis. Popular support has to be earned through government actions that strengthen credibility and promote participation.  We are working to step up our citizen engagement and public communications efforts.

A cornerstone is the introduction of international audit of Kurdistan’s oil & gas operations.  Contracts with international auditors have now been signed and initial work is underway.  The audits will cover oil exports, IOCs, and domestic company operations (e.g., local sales of crude and refined products).  To promote public engagement and awareness, an observatory encompassing key representatives of civil society will be established to follow the audit process and help disseminate the results.  You will receive a special presentation on this initiative later on in the program.

Finally…

5.    Reform of the social protection framework aims to deliver on the KRG 2020 Vision to ‘put people first’. It encompasses plans to:

(i) strengthen the labor market—including accelerating private sector job creation,

(ii) expand pensions and social insurance—including introduction of pensions for private sector workers and creation of unemployment insurance, and

(iii) improve the (non-contributory) social safety net—including using poverty as a main determinant of eligibility.

The Social Protection Strategy is a long-term one for KRG that will put in place systems to address the social impact of the current crisis and to respond more effectively to future shocks that may affect the Region.  The new strategic framework has been developed in cooperation with the World Bank, which is now supporting the implementation phase.  We know what needs to be done. Moreover, we know that we must lead these reforms.  Unfortunately, the unconducive political climate in Kurdistan, while not an absolute obstacle to reform, certainly makes implementation more difficult.

To our international partners, we express deep appreciation for the financial and technical support provided to date, including for the Peshmarga.  However, given the extent of the crisis and reforms required, further support is urgently needed in order to increase the odds of success, and alleviate social and other risks.

We welcome guidance and technical expertise from the international community, including learning from other country experiences.  The KRG also remains fully open to engagement and cooperation with Baghdad in all areas, and reiterates its right to benefit from the program of international support currently being provided to Iraq.

So, looking at the broader picture, while the world is focused on war and turmoil in the Middle East, we are steadfastly addressing our own issues head on, all the while being in the eye of the storm.

While fighting a war, managing continued inflows of displaced people, and constantly navigating geo-political minefields, we are steadfastly tackling our own massive economic challenges, and forging ahead to secure Kurdistan’s political and economic viability.

As members of the international coalition support Kurdish and Iraqi forces engaged to defeat ISIS in Iraq, we must be clear that only by ensuring a politically and economically viable Iraq, and Kurdistan, can we cement military victory won on the battlefield.

This requires more strategic global engagement including by key partners such as the US and UK on Iraq and specifically in Kurdistan.  It necessitates a more comprehensive and holistic approach, to include facilitating consensus among the leading political forces in the country and ensuring economic sustainability that in particular creates job opportunities for the youth in the private sector.

Ultimately, progress in diversifying the economies of Kurdistan, Iraq and the wider Middle East region will depend on progress in building a common economic space for all peoples living there.

In closing, we have proven to be resilient in the face of adversity; resolute in delivering on our plans and vision; and unrelenting on the battlefield.

We are thankful for the continued confidence you have in us.  Especially you in the Oil & Gas Community who have invested in Kurdistan. Despite our financial pressures, we are doing all we can to ensure timely payments to you.  Through credible reform efforts, we want to show you, by actions not words, that we are a worthy partner.

We seek your continued and increased investment. Our strong partnership with you in the oil & gas sector is crucial for Kurdistan’s continued progress and our mutual success.  With your sustained support during these difficult times, together we will overcome today’s challenges, and forge a permanent foundation for peace and prosperity in the future.

Thank you.

(Source: KRG)

• IMF disburses about US$617.8 million following completion of first review of Iraq’s reform program
• The IMF-supported program includes measures to protect the poor, enhance financial sector stability, and curb corruption
• Significantly improving public financial management will be important

The Executive Board of the International Monetary Fund (IMF) has completed the first review of Iraq’s three-year Stand-By Arrangement (SBA), which is designed to support Iraq’s economic reform program and restore fiscal balance over the medium term. The Board also completed financing assurances review under the SBA.

The SDR 3.831 billion arrangement (about US$5.34 billion at the time of approval) was approved in July, 2016. The Board’s approval enables the disbursement of SDR 455 million (about US$617.8 million).

As part of the completion of the first review, the Board also approved Iraq’s request for a waiver for the non-observance of the continuous ceiling on new external arrears, and request to modify performance criteria.

The Board also approved the request for a waiver of applicability for end of September targets of four performance criteria on the floor on gross international reserves (GIR) of the Central Bank of Iraq (CBI), the ceiling on net domestic assets (NDA) of the CBI, the ceiling on the stock of outstanding arrears to international oil companies and the ceiling on the stock of gross public debt, as well as a request for the rephasing of the arrangement.

Iraq’s economic reform program supported by the SBA aims to address the urgent balance of payments need, bring spending in line with lower global oil prices, and ensure debt sustainability. The program also includes measures to protect the poor, strengthen public financial management, enhance financial sector stability, and curb corruption. Iraq will require the support of the international community to implement these policies.

Following the Executive Board’s decision, Mr. Mitsuhiro Furusawa, Deputy Managing Director and Acting Chair of the Board, issued the following statement:

“The economic policies implemented by the Iraqi authorities to deal with the shocks facing Iraq—the armed conflict with ISIS and the ensuing humanitarian crisis and the collapse in oil prices—are appropriate. In the fiscal area, the authorities are implementing a sizable fiscal adjustment, mostly through retrenchment of inefficient capital expenditure while protecting social spending. In the external area, the authorities are maintaining the peg of the Iraqi dinar to the U.S. dollar, which provides a key anchor to the economy.

"Performance under the Stand-By Arrangement has been mixed; however, understandings have been reached on sufficient corrective actions to keep the program on track. Resolute implementation, together with strong international support, will be key.

“The revised fiscal program in 2016 and the draft budget in 2017 are aligned with the SBA. The composition of the fiscal adjustment should be improved over time by increasing non-oil revenue and reducing current expenditure, including the payroll and pension payments, and reforming the electricity sector, subsidies, and state-owned enterprises, in order to make room for larger but more effective and efficient investment expenditure that is conducive to growth.

“Significantly improving public financial management will be important. Arrears need to be assessed and paid following verification, and expenditure commitment and cash management should be strengthened to prevent the accumulation of new arrears.

“Measures to bolster financial sector stability include strengthening the legal framework of the Central Bank of Iraq, restructuring state-owned banks, and eliminating exchange restrictions. Measures to prevent money-laundering, counter the financing of terrorism, and strengthen the anti-corruption legislation also need to be implemented.

“Implementation of the budget-sharing agreement with the Kurdistan Regional Government would put both the federal government and the Kurdistan Regional Government in a better position to address the shocks to the Iraqi economy.”

(Source: IMF)