São Paulo – Despite a decline in oil output, Iraq grew in 2013, kept inflation at bay, and raised its US dollar foreign exchange reserves. Still, the country needs to cut spending and reform its banking system, as per a report released this Tuesday (25th) by a mission of the International Monetary Fund (IMF). The IMF technicians met with Iraqi government authorities in Amman, Jordan, between last Wednesday (19th) and Monday (24th).
According to the survey, the Iraqi Gross Domestic Product (GDP) was up 4.2% last year, as a result of 7% growth in the non-oil sector, driven by retail and civil construction. Oil production was lower than projected, but should reach 3.2 million barrels per day in 2014. Of these, 2.6 million should be exported. In case the forecast proves true, then Iraq’s GDP should be up 6% in 2014.
In 2013, the inflation rate in Iraq was 3.1%, down from 3.6% in 2012. Foreign exchange reserves increased by US$ 7 billion to US$ 78 billion by the end of 2013 – enough for ten months’ worth of imports.
Despite the good performance last year, challenges still lie ahead for Iraqi authorities. One of them is increasing domestic security. Another is cutting spending. Last year, the budget deficit increased to 6% of the GDP. This imbalance in public accounts was funded by the Development Fund for Iraq, which went from US$ 18 billion in 2012 to US$ 6.5 billion in 2013.
In the statement issued by the Fund, mission head Carlo Sdralevich says the IMF technicians and Iraqi authorities discussed implementing economic reforms. “The Central Bank of Iraq is pressing ahead with the improvement of its operations and the reform of the financial sector by preparing new central bank, commercial bank, and anti-money laundering/combating the financing of terrorism legislation, and introducing a new payment system,” he said.
The mission head said Iraq must strive to restructure state-owned banks and allow private institutions to gradually increase their business with the government. The mission has advised Iraq to liberalize its foreign exchange market and reduce the gap between the official and parallel exchange rates.
*Translated by Gabriel Pomerancblum
