Iraq says IMF deal "on track" as cabinet approves reform package

World Tuesday 14/June/2016 00:05 AM
By: Times News Service
Iraq says IMF deal "on track" as cabinet approves reform package

Baghdad: 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 resources to fight Islamic State, the ultra-hardline group that seized vast tracts of the north and west, displacing about 4 million people.
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 per cent.
Iraq hopes that international support will bring the bond yields down to 5 or 6 per cent, from about 10-11 per cent 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.
Meanwhile, Iraq said it had made arrests as it investigates allegations that militiamen helping the army retake Falluja had executed dozens of men fleeing Falluja, which is held by IS.
Iraqi authorities "are following up on the violations and a number of arrests have been made," government spokesman Saad Al Hadithi said after a regional governor said 49 men had been executed after surrendering to a militia faction.
Sohaib al-Rawi, governor of Anbar province where Falluja is located, said on Sunday that 643 men had gone missing between June 3 and June 5, and "all the surviving detainees were subjected to severe and collective torture by various means."
The participation of militias in the battle of Falluja, just west of Baghdad, alongside the Iraqi army had already raised fears of sectarian killings.
Iraq's Defence Minister Khalid al-Obeidi said four military personnel were arrested after video footage showed them abusing people displaced from Falluja.
He pledged on Twitter to prosecute any serviceman involved in such acts.
"Harassment of IDPs (internally displaced persons) is a betrayal of the sacrifices of our brave forces' liberation operations to expel Daesh (Islamic State) from Iraq," he said.
Falluja is a historic bastion of the Sunni insurgency against U.S.
forces that toppled Saddam Hussein, a Sunni, in 2003, and the Shi'ite-led governments that followed.
In the north of the country, troops fought with Islamic State militants in the village of Haj Ali for the second day in a row, an Iraqi officer taking part said.
Haj Ali is near the Qayyara, a town under Islamic State control which has an airfield that Baghdad's forces seek to use as a staging ground for a future offensive on Mosul, about 60 km (40 miles) north.
"Strict orders were issued to protect the civilians," government spokesman Hadithi said, adding that these instructions were also given to the Hashid Shaabi, or Popular Mobilisation Forces.
The United Nations said last week it knew of "extremely distressing, credible reports" of men and boys being abused by armed groups working with security forces after fleeing Falluja.
Iraqi authorities routinely separate males aged over 15 from their families when they manage to escape Falluja, to screen them to ensure they do not pose a security risk and check if they may have been involved in war crimes.
human rights chief Zeid Ra'ad al-Hussein said screening was legitimate but should not be done by paramilitary groups.
"The country must avoid further divisions or violence along sectarian lines, lest it implode completely," he said on Monday.
A spokesman for the U.S.-led coalition fighting Islamic State said the Baghdad government was aware of the abuses.
"We know that the prime minister has come out and said that he believes that these abuses have happened and that he... has demanded accountability of any perpetrators," Colonel Chris Garver said."We think that is the right course of action."
The Iraqi army launched the offensive on Falluja on May 23, with air support from the U.S.-led coalition.
The United Nations has said up to 90,000 people are trapped in the city with little food or water.
Repeated phone calls to three spokesmen of the Popular Mobilisation Forces were not answered.
Last week, one of them, Kareem Nuri, said past accusations of human rights violations were "politically motivated and baseless".