Iraq’s government has made commendable efforts to stabilize the economy but progress will be elusive due to worsening sectarian violence, the International Monetary Fund (IMF) said Thursday.
The IMF appraisal of Iraq’s economy came a day after IMF directors reviewed a credit deal worth $685 million that was agreed with Iraqi authorities in December.
Iraqi leaders have taken “important and decisive measures to bring their economic program back on track,” IMF deputy managing director Takatoshi Kato said in a statement. But “continued progress in the authorities’ reform efforts will remain critically dependent on an improvement in the security situation.”
The IMF praised the Iraqi government’s “substantial efforts” to maintain fiscal discipline and control spending, and the Iraqi central bank’s tightening of monetary policy is “an important step in the right direction.”
The international lending institution also praised Iraq’s government for cutting fuel subsidies and moving to liberalize private imports of fuel products.
“Inflation remains, however, a serious source of concern. The ongoing violence and supply disruptions in the non-oil economy will undoubtedly continue to put pressure on prices,” the IMF warned.
Among other economic priorities, the IMF said Iraqi leaders should reform pensions to make benefits sustainable in the medium term, while also making the government’s payroll and spending management more transparent.
The IMF welcomed a debt relief deal between Iraq and the Paris Club of creditor nations last year and cited “excellent progress” in settling debts between Iraq and its private creditors.