August 02, 2006

IMF Executive Board has completed its first and second reviews under the Stand-By Arrangement with Iraq.

Mr. Takatoshi Kato, Acting Chair of the IMF Executive Board stated: "The Iraqi authorities have taken important and decisive measures to bring their economic program back on track, although continued progress in the authorities' reform efforts will remain critically dependent on an improvement in the security situation. Substantial efforts have been made to maintain fiscal discipline and control recurrent spending, despite the difficult environment, and the Central Bank of Iraq's tightening of monetary conditions constitutes an important step in the right direction. The timely adjustment of fuel prices is welcome, and the submission to the Council of Representatives of the revised draft law to liberalize private imports of fuel products restores to the agenda a key component of the authorities' program, and its early passage into law and implementation will be key to prevent supply bottlenecks in the market for petroleum products. Inflation remains, however, a serious source of concern... Fiscal policy should be supportive by keeping public sector wages and pensions in check... Structural reforms and institution-building will remain the cornerstone of the reconstruction process... The completion of bilateral negotiations with Paris Club creditors is welcome and progress has to be made toward resolving non-Paris Club official claims. The excellent progress in settling arrears with private creditors is also noteworthy."