Iraq and the IMF are facing serious difficulties in
negotiations over a loan to ease the countrys growing
Mudher Salih Kassim, senior advisor to the Iraqi central
bank, told Emerging Markets yesterday from Baghdad he was
not sure that Iraq could meet IMF conditions for a
$5.5 billion loan, adding it would take a long time
for any agreement to be reached.
An IMF spokesman in Washington said discussions are
continuing and that the Fund did not comment on specifics
in such circumstances.
But despite a 2009 budget that is $19 billion in deficit,
the Iraqi government on Wednesday proposed a 14% increase in
spending for 2010, taking the budget to $66.7 billion.
Around 95% of government revenues come from oil sales,
meaning the budget has been squeezed since crude prices fell
from the highs of mid 2008.
Only last month the IMF said it was in broad agreement with
Iraq on a new Fund programme to replace the $744 million Stand
By Agreement (SBA) that expired in March. That had followed an
SBA in 2005 and an Emergency Post-Conflict Assistance programme
The IMF is pressing Iraq over public sector finance, private
sector and banking reform, limiting the deficit, and targeting
universal food rations to the needy.
Despite an IMF-projected growth rate of 4.3% for 2009 and
5.8% in 2010 and oil exports of 2 million barrels per day, Iraq
is struggling with political instability.
Iraq is still in transition, Kassim said.
The security situation sometimes turns upside down. So it
is difficult to decide these things [meeting the IMF
But there is a chicken-and-egg relationship between fiscal
balance and security. American officials have expressed concern
over the Iraqi militarys ability to buy US equipment,
including tanks and helicopters, as it assumes greater security
responsibilities before the departure of US troops by August
Prime minister Nouri al-Maliki announced on Thursday he will
lead a new coalition, based on nationalist
principles, into nationwide provincial elections in
Iraqs most pressing political tensions lie between the
central government and the Kurdish administration in the north
over oil resources.
The deputy Iraqi oil minister said on Wednesday he would ban
Sinopec (China Petroleum & Chemical Corporation) from
bidding for oil and gas deals, because it had not abandoned an
oil contract with the Kurds.
The Baghdad government argues that contracts with the
Kurdish administration are invalid unless it endorses them.
A debate on Kirkuk province, a potential flashpoint between
the sides, began this week among Iraqi parliamentary
A UN report in April suggested special status
for the province, which contains 13% of the countrys oil
reserves and is disputed between Baghdad and the Kurds.
Electoral officials have raised the possibility of special
rules for Januarys provincial elections. On current
rules, which do not require power-sharing, Kurdish parties
could win control of Kirkuk, which is ethnically mixed between
Kurds, Arabs and Turkmen.
In a visit to Iraq last month, US vice president Joe Biden
noted that the stalemate over Kirkuk was delaying new laws on
foreign investment in the oil sector.
Although the Iraqi private sector is still struggling to
find its feet, Iraq and the US will jointly host a two-day
Washington conference intended to portray an Iraq that is, six
years after the US-led invasion, open for business.