(Adds details, quotes)
WASHINGTON, Sept 3 Iraq's economic prospects
are improving with increased security helping to boost oil
output and exports, while inflation has declined, the
International Monetary Fund said on Wednesday.
The IMF approved its first performance review of Iraq's
$746.3 million IMF loan program. It said Iraqi authorities had
largely stuck to the program's agreed economic targets,
although it waived those related to a government wage and
Still, it said further economic progress depended on more
improvements in Iraq's security situation, sound management of
oil revenues, and reform measures.
"After several very difficult years, economic prospects for
Iraq are improving and the authorities are persevering with the
implementation of their economic program in 2008, IMF Deputy
Managing Director Takatoshi Kato said in a statement.
To keep inflation in check, the IMF said Iraq's central
bank planned to tighten its monetary policy stance, including
by increasing the pace of appreciation of its currency.
To speed up rebuilding of Iraq, the IMF said a
supplementary 2008 budget allowed for sizable spending
increases following years of public underinvestment.
It said a civil service pay hike will be phased in over
2008 and 2009 to avoid overheating of the economy.
"It will be important to step up the pace of structural
reform," Kato said.
"Of particular urgency are the early adoption of a
comprehensive reform plan for modernizing public financial
management, the finalization of the census of public service
employees to eliminate ghost workers, and the streamlining of
the in-kind public distribution system," he added.
He urged that a restructuring program for two major
commercial banks, based on financial and operational audits,
should proceed and regulations for commercial banks completed.
A new legislative framework for the country's oil sector
will facilitate investments in the sector, Kato added.
The IMF said Iraq had made progress in fighting corruption
in the oil sectors by introducing oil meters and increasing
transparency. "An extension of the metering system to all oil
sector activities will further strengthen transparency in the
sector," Kato said.
He said Iraqi authorities were making "commendable efforts"
in concluding debt agreements with non-Paris Club and private
(Reporting by Lesley Wroughton; Editing by Gary Hill)