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Context of 'September 29, 2004: Iraq Reaches Agreement with IMF on Economic Reforms'

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The new Iraqi government settles with the IMF on $81 million in overdue financial obligations to the organization. The settlement paves the way for Iraq to receive emergency assistance from the IMF (see September 29, 2004). [International Monetary Fund, 9/29/2004]

Entity Tags: Iraq, International Monetary Fund

Timeline Tags: Iraq under US Occupation

The UN World Food Programme announces the results of a survey in Iraq that found that some 6.5 million people—25 percent of the total population—remain highly dependent on the country’s food rationing system. If that system were to be dismantled, “many lower-income households, particularly women and children, would not be able to meet their food requirements,” the report says. “Although food is generally available, the poorest households cannot afford to buy from the markets.” According to the study, 2.6 million Iraqis are so poor they resell a portion of their food rations so they can buy basic necessities like medicines and clothing. [UN World Food Programme, 9/28/2004; Environment News Service, 4/3/2006] A day after the results of this study are released, the IMF will announce that Iraq has agreed to implement a number of economic reforms. One of those reforms would be a scaling back of food subsidies (see September 29, 2004).

Entity Tags: UN World Food Programme

Timeline Tags: Iraq under US Occupation

The Iraqi government agrees to meet conditions set by the IMF for an “enhanced post-conflict facility” program. The IMF program will include $436.3 million in Emergency Post-Conflict Assistance loans to the Iraqi government. The amount will be upped if Iraq meets more demanding conditions. A press release issued by the organization states that it intends to develop “a reform program in areas in which progress must be made in 2005 to set the economy on a sustainable path, including tax reform, financial sector reform, restructuring of state-owned enterprises, and enhancing the governance and transparency of the oil sector, all of which will be key in promoting the recovery and growth of the private sector.” [International Monetary Fund, 9/29/2004; Inter Press Service, 10/1/2004] One of the reforms the new Iraqi government agrees to implement is the rolling back of Iraq’s huge subsidies system. But as Inter Press Service notes, Iraq’s food subsidies system “kept millions of Iraqis from starvation under US and UK-pressed sanctions imposed by the United Nations after the 1991 Gulf War.… It is believed that many more Iraqis would have died if not for Hussein’s strong subsidies system that gave food to Iraqi families.” [US Department of State, 12/21/2004; Inter Press Service, 12/24/2004]

Entity Tags: International Monetary Fund

Timeline Tags: Iraq under US Occupation

Top Iraqi officials head to Washington for the second meeting of the Iraq-US Joint Economic Commission. The first meeting took place in September. At a press conference, Iraqi Finance Minister Adil Abdel Mahdi tells reporters that the new Iraqi government is implementing, or intends to implement, a number of major changes to the country’s economy. Some of the reforms he mentions would be part of a new oil law that will be “open to investment, to foreign investment downstream, maybe even upstream.” He explains that the law is being developed by a “high-ranked official from the Oil Ministry” in consultation with “his counterparts and with agencies here in the States.” Mahdi also says that Iraq will review the oil contracts that Saddam Hussein had inked with countries like France and Russia. “So I think this is very promising to the American investors and to American enterprises, certainly to oil companies,” he says. Mahdi also defends an agreement the Iraqi government recently made with the IMF to implement certain reforms, which included an end to food subsidies (see September 29, 2004). “I think this is a necessity for the Iraqi economy,” Mahdi says. “We really need to work on our subsidy side. Subsidies are taking almost 60 percent of our budget. So this is something we have to work on… Other measures really were a real necessity for the Iraqi economy before becoming conditions asked by the IMF.” But as Inter Press Service notes, Iraq’s food subsidies system “have kept millions of Iraqis from starvation under US and UK-pressed sanctions imposed by the United Nations after the 1991 Gulf War.… It is believed that many more Iraqis would have died if not for Hussein’s strong subsidies system that gave food to Iraqi families.” An issue that is apparently not discussed during the two-day meeting between US and Iraqi officials is the large amount of money that is known to have been defrauded from the CPA. In response to a reporter’s question, Mahdi says only, “No, this issue has not been discussed. We are interested to follow such issues, of course. Whatever concerns corruption or money, we are interested.” [US Department of State, 12/21/2004; Inter Press Service, 12/24/2004]

Entity Tags: Adil Abdel Mahdi

Timeline Tags: Iraq under US Occupation

The US-Iraq Joint Commission on Reconstruction and Economic Development meets in Amman, Jordan, to discuss Iraq’s progress in implementing a number of reforms that will help transition the country to a market-based economy (see, e.g., September 29, 2004). During the two-day meeting, Iraqi representatives reconfirm their commitment to scaling back fuel and food subsidies. They also announce the opening of a USAID-backed Investment Promotion Agency that will help Iraqi and foreign investors open businesses in Iraq. [US Department of State, 7/13/2005]

Entity Tags: Iraq, United States

Timeline Tags: Iraq under US Occupation

December 18, 2005: Iraq Cuts Fuel Subsidies

The Iraqi government cuts subsidies on gasoline, diesel, kerosene, and cooking fuel in order to meet an IMF requirement that Iraq allow fuel prices to increase to levels on par with prices elsewhere in the Middle East. The Iraq government agreed to implement this reform, and a number of others, in exchange for having as much as 80 percent of its debts forgiven (see September 29, 2004 and November 22, 2004). The debts had accumulated during the rule of Saddam Hussein. Iraq’s rolling back of the fuel subsidies is followed by violent protests across the country. The price of cooking fuel immediately increases by about three-fold, while gasoline prices increase by a factor of five. Diesel fuel prices rise about nine-fold. [Associated Press, 12/19/2005; BBC, 12/30/2005; New York Times, 12/31/2005]

Entity Tags: Iraq

Timeline Tags: Iraq under US Occupation

The IMF’s 24-member executive board approves a standby arrangement for a new $685 million loan for Iraq. The IMF previously provided the country with a $436.3 million emergency post-conflict loan in September 2004 (see September 29, 2004). The approval means that creditor nations will forgive an additional 30 percent of Iraq’s debt, all of which was incurred under the rule of Saddam Hussein. If Iraq fulfills the requirements in the standby arrangement, another 20 percent of its debt will be forgiven (see November 22, 2004). [Associated Press, 12/23/2005; Agence France-Presse, 12/23/2005] One of the reforms required by the stand-by arrangement is that Iraq work with the IMF on the drafting of an oil law to be implemented by the end of 2006. [Bretton Woods Project, 1/23/2006] The agreement states that Iraq needs to “draft a new petroleum law in line with the new constitution and international best practices, thereby defining the fiscal regime for oil and establishing the contractual framework for private investment in the sector.” It adds that IMF staff have underscored “the need to press ahead with structural fiscal reforms,” which include “the move forward toward the commercialization of oil-related state enterprises, and the drafting of a new petroleum law.” [International Monetary Fund, 12/7/2005, pp. 18 pdf file]

Entity Tags: Iraq, International Monetary Fund

Timeline Tags: Iraq under US Occupation

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