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Iraq Finance 2014 Iraq’s economy: recent developments and challenges

Iraq Finance 2014 Iraq’s economy: recent developments and challenges. Carlo Sdralevich - International Monetary Fund. Iraq’s relations with IMF. Emergency Post-Conflict Assistance (2004) Various Stand-By Arrangements (2005-2013) Latest SBA: February 2010 – February 2013, SDR 1.1 billion

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Iraq Finance 2014 Iraq’s economy: recent developments and challenges

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  1. Iraq Finance 2014Iraq’s economy:recent developments and challenges Carlo Sdralevich - International Monetary Fund

  2. Iraq’s relations with IMF Emergency Post-Conflict Assistance (2004) Various Stand-By Arrangements (2005-2013) Latest SBA: February 2010 – February 2013, SDR 1.1 billion Now: Surveillance mode Latest Article IV: July 2013 English Arabic http://www.imf.org/external/pubs/ft/scr/2013/cr13217.pdf http://www.imf.org/external/arabic/pubs/ft/scr/2013/cr13217a.pdf

  3. Recent economic developments

  4. Growth has slowed down as oil production stabilized Proj.

  5. Inflation has remained in the low single digits

  6. The exchange rate has been broadly stable…

  7. … and the real effective exchange rate has appreciated

  8. Fiscal performance is weakening Proj.

  9. Medium term:Oil will continue to drive growth

  10. Oil revenues will support reserves

  11. Challenges

  12. A rising GDP has not fully benefitted the population

  13. Fiscal vulnerability to oil market shocks, with a high break-even price…

  14. …and a rigid spending structure

  15. Financial deepening is still low…

  16. …and the financial sector is dominated by state-owned banks Source: Central Bank of Iraq.

  17. Foreign direct investment is limited…

  18. …reflecting a weak business environment

  19. Risks Weakening policy implementation Deterioration of political and security situation Delays in ramping up oil production Oil market shocks

  20. Role of policies

  21. Fiscal policy • Build fiscal buffers in the DFI • Rationalize current spending (subsidies, wages, transfers, PDS) • Strengthen fiscal institutions and processes (chart of account, single treasury account, information and reporting systems)

  22. Monetary and financial sector • Maintain stable exchange rate • Continue liberalization of FX market, simplify regulations, and strengthen AML/CFT regime • Maintain separate management of CBI and DFI assets • Pursue restructuring of public banks • Support development of private banks by strengthening supervision and ensuring a level playing field

  23. Conclusions • Mixed performance in 2013 • This year will be challenging - risks are high • Enormous oil potential can be maximized through good policies: • Sound fiscal management of oil revenues • Independence of CBI • Stable exchange rate

  24. Iraq Finance 2014Iraq’s economy:recent developments and challenges Carlo Sdralevich - International Monetary Fund

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