Increasing the plight of the Iraqi economy with the continuation of the sharp decline in oil prices and the government’s inability to find new financing outlets contribute to the financing of the budget and the economy. This coincides with the continued conflict with Daash and his successor losses affected most aspects of infrastructure in the liberated areas, as well as the need to ensure required for the continuation of military progress and absorb the displaced file finance and bring them back to their home areas.
These files and other cast doubt on the Iraqi government’s ability to contain the political, security and economic shocks vehicle and adapt to chronic decline of oil revenues, especially in the midst of a regional and global scene is complicated further by the government in the face of the challenges of the crisis.
However, IMF experts praises the government in dealing with the current economic situation of the country, despite the difficult circumstances experienced by Iraq, the authorities have succeeded in implementing many of the recommendations made by the Fund for consultations (Article IV of 2013). The Iraqi government is currently seeking to obtain the assistance of the International Monetary Fund under the “rapid financing instrument” to support its efforts to address the impact of the conflict with the organization “Daash” The drop in oil prices on the balance of payments.
Iraqi authorities and believes that the “rapid financing instrument” will also help provide additional resources through the facilitation of the planned borrowing from capital markets and the availability of funding from other international financial organizations. And engaged Iraqi authorities currently implementing a number of measures and procedures related to economic policies to confront the crisis, including a correct fiscal consolidation and financing on a large scale to address the decline in revenue, while at the same time, the exchange rate peg to the dollar system, which provides a fundamental pillar of the economy.
Public finance reform
Eighth International Monetary Fund, in a report released late last year on Iraq, the Iraqi government to try, through the budget year 2015, to address the pressures on public finances caused by lower oil revenues and the conflict with al Daash. Last year’s budget has introduced wide-ranging measures to enhance revenue and cut expenses, which resulted in reducing the deficit (13% of GDP).
1. on the revenue side, the government has increased the income tax rates and raising customs duties and sales taxes on cars, tobacco and alcohol, mobile phones and Internet usage, and try accumulated on the institutions and citizens for years government debt collection. However, it faced a new trend among other challenges, most notably the weakness of cooperation and coordination between the central government and the provincial government, which a large number of laws malfunction (specifically customs duties).
2. Despite the government’s effort of fiscal consolidation, but the government’s fiscal deficit continued to increase, due largely to continued sharp to meet the major security and humanitarian needs in the country spending pressures. In addition to the reimbursement of investment contracts and international oil companies. Government authorities and believes that these items of public spending can not easily be reduced at this stage, given the difficulty of the prevailing security environment, economic and social challenges.
3. Government authorities in Iraq stepped up its efforts to find alternative sources of financing. With public financial reserves preventive force in the Development Fund for Iraq by the end of 2014, authorities are being forced to borrow from state-owned banks, which in turn receive support from the Iraqi Central Bank by discounts on government bonds, in order to finance government deficits.
4. The Iraqi government has pursued a strategy of prudent public debt management, it is currently examining the development and deepening of the domestic debt market development of new tools that will diversify its sources of funding. In addition, the government will strengthen the control of local debt maintained at sustainable levels. The authorities are tangible progress in the negotiations with creditor countries not members of the Paris Club, and expects to sign new agreements with some creditor countries this year, consistent with the terms of the Paris Club, the 2004 agreement.
5. The Iraqi government launched an initiative to reform state-owned enterprises to help alleviate the burden on the public sector. Has prepared this particular study envisages a systematic assessment of the cost-benefit in order to assess the ability of each institution to survive and to facilitate decision-making on closed or privatized or maintaining state ownership of them after making the appropriate re-structuring.
6. Authorities working to strengthen public financial management procedures have the support of public finances and the efficient use of oil resources discipline. As it continues to work on developing an integrated information system for financial management support from the World Bank. In addition, the State Council is considering a new law of public financial management would pave the way for the introduction of a single treasury account. The authorities will continue to rely on technical assistance from the International Monetary Fund and the World Bank to strengthen its efforts in those areas.