Dinar Iraq News
Iraq says IMF deal on track as cabinet approves reform package
Mon Jun 13, 2016
* Oil repayments among measures approved by the government
* IMF to meet end-June to give final approval for loans
* IMF agreement to unlock $5.4 billion in loans over 3 years (Adds peformance of
Iraqi bonds)
By Maher Chmaytelli and Ahmed Rasheed
BAGHDAD, June 12 Iraq has approved measures requested by the International
Monetary Fund in order to unlock loans that should help overcome a cash crunch
caused by declining oil revenue, a senior government official has said.
The agreement, reached last month between Iraq and the IMF, "is on track",
Mudher Salih, an adviser on financial policy to Prime Minister Haider al-Abadi,
told Reuters late on Sunday.
Among the measures approved are settling by the end of the year all arrears owed
to foreign oil companies operating in Iraq, Salih said. He did not say how much
was owed.
The OPEC member has sought budget support to help it cope with a collapse in oil
prices over the past two years. The drop in revenue that resulted caused the
public deficit to widen and delayed payments to foreign oil producers.
The IMF in May agreed to provide $5.4 billion over three years. But the funds
are conditional on Iraq's implementing measures to cut spending, increasing
non-oil revenue, and settling several billion dollars in arrears to oil
companies.
The Iraqi government approved the measures at a meeting last week and informed
the IMF, Salih said in an interview.
Baghdad expects the IMF board to approve by the end of June or early July the
disbursement of a first tranche of about $600 million, he added.
The reforms include a tax increase, higher electricity fees and better banking
supervision to fight corruption and money laundering, Salih said. There were
also plans to streamline state-owned companies and audit the bloated public
payroll to purge so-called "ghost employees" who do not show up to work.
Global oil prices plunged just as Iraq needed more
HOPES FOR $18 BILLION
Salih said a recent increase in oil prices, to $50 a barrel from below $30
earlier this year, would not delay the reforms.
The agreement with the IMF should unlock a total of $18 billion in international
assistance over three years, Finance Minister Hoshiyar Zebari has said. He cited
the World Bank and the Group of Seven leading
industrialised nations as donors, along with the IMF.
Zebari said Iraq expects to sell $2 billion in eurobonds in the last quarter of
this year, when international aid starts coming in, helping to lower its cost of
borrowing.
Iraq last sold international debt in 2006, when it issued about $2.7 billion of
bonds due in 2028 with a coupon of 5.8 percent.
Iraq hopes that international support will bring the bond yields down to 5 or 6
percent, from about 10-11 percent now.
Iraq's existing bonds have been appreciating steadily since early May, when the
understanding with the IMF was being worked on.
The 2028 bond rose from below 70 cents to the dollar in early May to 77.75 cents
on June 8. On Monday it traded at about 75.75 cents, for a yield of around 10.5
percent.
"We believe this is just a bit of profit-taking after the price had risen
steadily since early May when the agreement in principle with the IMF was
reached," said Alan Cameron, an economist at Exotix in London.
Oil prices and the IMF deal continue to be the main factors driving Iraqi bond
prices, he said.
Moody's and Fitch Ratings last month said Iraq's IMF deal was credit positive.
Fitch rates Iraq's long-term credit at B-, below investment grade.
Source:
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