Iraq must increase its non-oil exports and enhance government revenues to reduce the economy's exposure to oil price shocks, according to new recommendations from the International Monetary Fund (IMF).
The Fund warned, in a report issued Sunday, that greater declines in oil prices, or extending OPEC+ production cuts, may affect Iraq’s financial and external accounts. "The country should focus on achieving higher and more sustainable non-oil growth to accommodate the rapidly growing workforce."
The Fund’s statement came at the conclusion of its mission’s visit to the Jordanian capital, Amman, and a meeting with the Iraqi authorities from February 20 to 29, to conduct Article 4 consultations for the year 2024.
The rise in public spending in the country pushes the price of a barrel of oil required to achieve fiscal breakeven to more than $90, which could push the public finance deficit to 7.6% in 2024, according to the Fund.
Several bodies raised their expectations for oil prices this year, including Bloomberg Intelligence, which saw that any escalation of the conflict in the Middle East would push the price to above $100, after previously estimating that the average price this year would reach $80, while Goldman Sachs raised He estimates prices will peak at $87 a barrel in the summer, $2 more than his previous estimate.
The Fund estimated Iraq's real non-oil GDP growth at 6% in 2023 after declining in 2022, while the headline inflation rate fell from a high of 7.5% in January 2023 to 4% by the end of the year.
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