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IRAQ FINANCE 2014 IRAQ’S ECONOMY: RECENT DEVELOPMENTS AND CHALLENGES Carlo Sdralevich - International Monetary Fund.

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Presentation on theme: "IRAQ FINANCE 2014 IRAQ’S ECONOMY: RECENT DEVELOPMENTS AND CHALLENGES Carlo Sdralevich - International Monetary Fund."— Presentation transcript:

1 IRAQ FINANCE 2014 IRAQ’S ECONOMY: RECENT DEVELOPMENTS AND CHALLENGES Carlo Sdralevich - International Monetary Fund

2  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 Iraq’s relations with IMF http://www.imf.org/external/pubs/ft/sc r/2013/cr13217.pdf http://www.imf.org/external/arabic/pu bs/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  Weakening policy implementation  Deterioration of political and security situation  Delays in ramping up oil production  Oil market shocks Risks

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 2014 IRAQ’S ECONOMY: RECENT DEVELOPMENTS AND CHALLENGES Carlo Sdralevich - International Monetary Fund


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