December 20, 2007

The International Monetary Fund on Thursday approved a $744 million loan agreement to Iraq through March 2009 designed to support the country's economic program.

"The authorities' program for 2008 aims to allocate resources toward investment, including in the oil sector, and to improve the provision of public services, while containing current government spending, notably on the wage and pension bill," Takatoshi Kato, the IMF's deputy managing director and acting chair, said in a statement.

"The program, which envisages an increase in economic growth, a further reduction in inflation, and an increase in net international reserves, will also encompass priority structural reforms, including actions to strengthen administrative capacity and governance," Kato said.

Iraq last week cleared its debts with the IMF with the early repayment of about $470 million. The country's ability to repay early reflected its strong international reserves position against a background of high oil prices, the IMF said.

"Although the security situation has showed signs of improvement in recent months, it remains a major obstacle for investment and reconstruction, hampering oil production and economic growth," Kato said.

"Also, much remains to be done to modernize financial management of the government and the central bank, and to reform the banking system," he added.

Source: Reuters