Iraq Needs Ambitious Fiscal Reforms to Stabilize Debt and Boost Economic Growth

A comprehensive report by the International Monetary Fund (IMF) has called for an ambitious fiscal adjustment in Iraq to stabilize debt, rebuild fiscal buffers, and protect critical capital spending. The reforms are aimed at promoting economic growth, reducing reliance on oil revenues, and increasing non-oil exports.

Key Recommendations

Fiscal Adjustment

Reduce current expenditure, particularly by controlling the wage bill through mandatory hiring limits and an attrition rule
Broaden non-oil revenue sources by:
- Increasing personal income tax rates
- Reviewing customs tariffs
- Introducing new taxes on luxury items

Strengthening Public Financial Management

Define overall ceilings for guarantee issuance in the budget law
Improve cash management through a Treasury Single Account (TSA)
Restrict the use of extrabudgetary funds

Monetary Policy Adjustments

Reduce excess liquidity and improve market incentives by:
- Raising interest rates
- Increasing reserve requirements
More needs to be done to stimulate economic growth

Structural Reforms

Private Sector Development and Economic Diversification

Adopt a comprehensive employment strategy
Accelerate financial sector reform
Implement pension reform
Combat corruption
Remove hurdles to private sector development

IMF Support

“The Iraqi authorities have made progress in some areas, but more needs to be done to address the country’s pressing economic challenges,” said an IMF spokesperson. “We stand ready to support the government in its reform efforts and believe that a coordinated approach can help Iraq achieve sustainable economic growth.”

Government Response

The report has been welcomed by the Iraqi government, which is committed to implementing the recommended reforms to boost economic growth and reduce debt.

Contact Information

Mayada Ghazala Press Officer, IMF Communications Department Phone: +1 202 623-7100 Email: MEDIA@IMF.org Twitter: @IMFSpokesperson