Bloomberg: Iraq turns to Saudi Arabia and the International Monetary Fund to heal its economy

Free / Translations – Washington

July 01, 2020

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Iraq is seeking a loan from the International Monetary Fund and Saudi investments to overcome its economic woes

Highlighted a report told Bloomberg the US, highlighted the efforts of Iraq ‘s efforts to address the acute crisis plaguing the country ‘s economy, as a result of falling oil prices and exacerbate infections Corona emerging.

The report, published on Wednesday, indicated that Al-Aqq is in talks with the International Monetary Fund to obtain a loan, while seeking to attract Saudi investments to its natural gas fields.

The report quoted Iraqi Finance Minister Ali Allawi as saying that the International Monetary Fund and Iraq are conducting “intensive” negotiations on a loan that could reach a maximum of $ 5 billion. However, in an interview in Baghdad on Tuesday evening, he did not specify additional details about the nature of the loan:

“There is no official proposal from the Iraqi government and there is no official response from the International Monetary Fund, but we are moving in this direction.”

Allawi said that the Iraqi government also suggested that the Saudis put money in the crutch gas field in the west of the country or Mansourieh in the east. Allawi said that they can also invest in extracting gas from Ratawi’s oil stocks in the south.

Allawi added that “Saudi Arabia is very ready to support our energy projects. At the end of the day, they will choose one field. They are also interested in solar energy.”

It is noteworthy that Allawi had made a tour to Saudi Arabia and Kuwait in late May, and observers ruled out that Iraq would receive financial support from Kuwait, or perhaps alleviate the burden of its debts owed to Kuwait, which amounted to about $ 2 billion in compensation for the 1990-1991 Gulf War.

The IMF and Saudi Arabia talks come at a time when Iraq is trying to support its financial resources. Allawi said that the economy will likely shrink from 7 percent to 9 percent in 2020. This is more than the expectations of the International Monetary Fund by 4.7 percent. 

Riyadh is pressing Iraq to cut oil production sharply to meet its share in OPEC, placing more pressure on Prime Minister Mustafa al-Kazemi, who came to power in May.

Baghdad had initially refused to limit production, like other OPEC members, but retreated after intense pressure from Saudi Arabia and Russia.

Allawi said that Iraq’s monthly oil revenues are about 2.7 billion dollars. This is less than the $ 7 billion Iraq earned in 2019. The budget deficit will reach 22 percent of GDP this year, which is higher than anywhere else in the Middle East and North Africa, according to the International Monetary Fund. 

Allawi ruled out that the Iraqi government would resort to issuing new Eurobonds to finance the gap, arguing that it was too expensive.

And yields of Iraqi bonds, worth a billion dollars, fell about 60 basis points on Wednesday, after news of a possible International Monetary Fund loan. And the interest rate of these bonds is estimated at 10 percent, which is the highest of any issuer of Eurobonds in the Middle East, with the exception of the defaulting Lebanon. 

Iraqi Finance Minister Ali Allawi said, “We are not ready to pay 10 percent” interest on new bonds in Iraq.

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