IMF approves lending to Iraq

08 de julho de 2016

The Fund`s executive board signed on an agreement that provides for the disbursement of USD 5.34 billion in three years. The goal is to help the country with its balance of payments.

São Paulo – The executive board of the International Monetary Fund (IMF) approved an agreement worth USD 5.34 billion with Iraq. According to information released this Thursday (7), the Stand-By Arrangement(SBA) aims to help the government`s reforms program and has a three-year term. The SBA is the Fund`s workhorse lending instrument and is used by member countries facing balance of payments problems.

The board`s decision makes available an initial disbursement of USD 634 million. Oil`s low price in international markets has a strong impact in oil-exporting countries, since the commodity usually is the main source of revenue for these countries, and sometimes also the main source of budget funds.

According to the IMF, Iraq`s reforms program aims to address the urgent balance of payment problems, align spending with lower global oil prices and ensure debt sustainability. The program also includes social protection measures, strengthening of fiscal management, increase the stability of the financial sector and curb corruption. “Iraq will need the support of the international community of implement these policies”, says a Fund`s statement.

“The Iraq economy has been hit hard by the double shock arising from the ISIS attacks and the sharp drop in global oil prices”, said Min Zhu, deputy managing director and acting chair of the board, according to the fund`s statement. “The policies put in place by the authorities to deal with this double shock are appropriate”, he added.

In July of last year, Iraq had received a loan worth USD 1.24 billion from the IMF under the Rapid Financing Instrument, which is used in case of urgent balance of payments needs. It can be accessed in moments of crisis caused by a shock in commodities prices, natural disasters, conflicts and other emergencies.

According to data by the Fund, Iraq`s Gross Domestic Product (GDP) decreased 0.4% in 2014 and 2.4% in 2015 in real terms.

*Translated by Sérgio Kakitani