Washington, DC: The Executive Board of the International Monetary Fund (IMF) has reviewed a non-complying purchase by Iraq of SDR 584.2 million following the completion of the second review under the 36-month Stand-By Arrangement (SBA) on August 1, 2017. The SBA was approved on July 6, 2016 for a total amount of SDR 3.831 billion (230 percent of quota) and expired on July 7, 2019.
At the time of the second program review under the SBA, the authorities requested a waiver of applicability for end-June 2017 performance criteria (PCs) on public debt and the non-oil primary balance, information on which was not available. The waiver of applicability was granted on the condition that the information provided on Iraq’s performance under these criteria at end-December 2016 was accurate.
The non-complying disbursement arose as a result of nonobservance of the condition of accuracy for the waivers of applicability of the PCs on public debt and the non-oil primary balance granted by the IMF Executive Board at the time of the second review under the SBA. After the completion of the second review, it was revealed that the end-2016 government-guaranteed debt was under-reported by 1.3 percent of GDP while the non-oil primary fiscal balance was over-reported by 0.1 percent of GDP.
The authorities have closely collaborated with IMF staff to remedy the situation and strengthen their control of government guarantees. Specifically, they undertook a detailed exercise to verify the end-2016 stock of government guarantees certified by a decision of the Council of Ministers. In 2019, the authorities enacted a new Public Financial Management (PFM) law, which requires all government guarantees to be approved by Parliament as part of the annual budget process. Furthermore, Iraq’s Council of Ministers approved a sound regulatory framework for vetting and issuance of government guarantees which, among other things, envisages establishing a database of government guarantees and reconstituting a Guarantee Committee as the primary body responsible for vetting government guarantees. The complexity of these measures and the political events in Iraq explain the time required to bring this case to a conclusion.
In view of the authorities’ corrective measures, the Executive Board granted waivers of nonobservance of the condition of accuracy of the information reported on the end-2016 PCs on public debt and the non-oil primary balance.
The Executive Board also found that the inaccurate reporting on the observance of the end-2016 PCs gave rise to Iraq’s breach of its obligations under Article VIII, Section 5, of the IMF’s Articles of Agreement, which requires member countries to furnish such information as the Fund deems necessary for its activities, including information that is necessary to assess observance of PCs. In view of the corrective measures implemented by Iraq, the Executive Board decided not to require any further remedial action in connection with the breach of obligations under Article VIII, Section 5.