June 16, 2009 / 11:19 AM / 10 years ago

Iraq, IMF near agreement on $5.5 bln standby deal

* Central bank advisor says conditions “reasonable”

* Proposed agreement to be submitted to government

By Khalid al-Ansary

BAGHDAD, June 16 (Reuters) - Iraq and the International Monetary Fund are nearing agreement on a $5.5 billion, 5-year standby loan that the war-battered country would be able to draw down in three instalments, a central bank official said Tuesday.

The IMF presented its proposed conditions for the loan during a recent meeting in Amman, including a call for fiscal reforms, restructuring of state banks and banking sector reform, said senior Iraqi central bank advisor Mudher Kasim.

The Fund called on Iraq to reconsider its food ration programme so only those in need received subsidised products, and also proposed that the central bank be obliged to pursue currency stability and to fight inflation.

“The Iraqi delegation thinks that everything raised by the other side was reasonable,” Kasim told Reuters.

“The negotiating delegation does not have the right to accept or to reject the proposals, but the atmosphere was positive and the Iraqi side was comfortable with the viewpoints expressed.”

The proposed agreement, which involves three tranches of 1.2 billion SDRs, or a total of around $5.53 billion, will be submitted to the Iraqi government for consideration, Kasim said.

The meetings in Jordan were attended by Iraqi Central Bank Governor Sinan al-Shibibi and Finance Minister Bayan Jabor.

Jabor had previously told Reuters Iraq might seek a loan arrangement for as much as $7 billion to help it cope with a budget shortfall that has resulted from a drop in oil prices from a record high above $147 a barrel last summer.

Iraq relies on oil exports for more than 95 percent of state revenue and desperately needs money to rebuild after years of sectarian warfare and insurgency triggered by the 2003 U.S. invasion.

Iraq has had two previous arrangements with the IMF of less than $1 billion each, set up without the expectation Iraq would draw on the funds given strong oil revenue in recent years. (Editing by Michael Christie/Mike Peacock)

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