The economic and finance adviser to Iraq’s Prime Minister has revealed that talks are taking place with the International Monetary Fund (IMF) for a deferment of the country’s foreign debt payments during the coronavirus crisis. Mohammed Saleh told the IMF that the circumstances constitute a force majeure which is afflicting many countries around the world, the state-owned Al-Sabaah has reported.
“As one of the founders of the International Monetary Fund and the World Bank in the 1940s,” explained Saleh, “Iraq seeks to defer the payment of its debts. The IMF will help Iraq if it agrees to this, or a simplification of procedures, which is possible, but it all needs high-level diplomatic input.”
According to a spokesman for Iraq’s Council of Ministers, Alaa Al-Fahd, while the talks are ongoing and the proposal has been made, the IMF has given no response at the present time, as there are no claims for payment outstanding. He said that when the Iraqi government has a deficit it is approached on a yearly basis by the World Bank which offers it a loan to stabilise its economy.
“This year, however, there are many things that will be taken into consideration, as the United States has proposed stopping debt repayment at this stage, which is a good thing, especially since Iraq’s debts to be paid to the IMF this year are estimated at more than $10 billion,” said Al-Fahd. “In the event that there is an agreement, this will benefit Iraq given the current economic and political situation.”
The burden of paying its foreign debt, added the spokesman, is a strain on Iraq’s already-fragile economy, as most of the country’s wealth is produced by its oil industry due to a lack of economic diversity. “The economy of Iraq is unstable, because it depends 95 per cent on oil and the remaining five per cent cannot be collected now, due to the lack of taxes, fees, etc.” Iraq’s dependence on its oil industry has already been hit by the recent oil price war between Saudi Arabia and Russia.
The coronavirus pandemic and the economic slump it has caused is predicted to be particularly difficult for Middle East countries. In its World Economic Outlook report for 2020 which was released this month, the IMF has predicted that Iraq’s economy will decline by 4.7 per cent.