IMF support for Iraq prepares way for stabilizing economy and debt relief

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IMF SURVEY:What does the IMF's new financial aid mean for Iraq? PEREZ: It's a start, a first step. The IMF's Emergency Post-Conflict Assistance is a window that allows us to help countries that have gone through conflict and have very limited capacity to implement economic programs. In Iraq, we have seen a willingness and a capacity by the interim government to implement policy and put together a program of economic policies and proposals for structural reform that can be supported by the IMF. The support will assist Iraq in promoting macroeconomic stability by financingPage 298 expenditure through petroleum or other available resources, maintaining a stable exchange rate, and keeping inflation under control. The program also looks to the future, with work beginning on the design of an ambitious set of structural reforms. There is, for example, interesting work on the budget, where efforts will be made to begin to eliminate domestic price subsidies on oil products.

Security continues to be a problem. We will have to assess, as we go along, how much of a problem there is in formulating and implementing policies.

IMF SURVEY: The IMF has lent in tenuous situations before, but Iraq is a large and extraordinarily volatile country right now. How does the IMF assess prospects and priorities, and to what extent can its financial and technical assistance really help?

BENNETT: This is an unusually difficult situation, even by the standard of post-conflict countries. Since August of last year, we have not been able to go to Iraq, but we have been able to hold very fruitful and regular discussions with senior officials and government ministers in locations outside of Iraq, and we have been able to provide technical assistance in a similar fashion. We also have counterparts-from the Australian, U.K., and U.S. governments-in the field who have been able to facilitate the dialogue.

PEREZ: We have been involved in a number of projects that have been key to economic restructuring and that have been carried out very well. One example is the currency exchange launched during the last quarter of 2003 until January 2004. We also helped, along with the Bank of England and the U.S. officials,

IMF support for Iraq prepares way for stabilizing economy and debt relief

To help Iraq stabilize its economy and restructure its massive debt, the IMF in late September approved $436.3 million in Emergency Post- Conflict Assistance. This financing lends support...