1. Hi everyone, this is Nick Giammarino from GlobalCurrencyReset.net as well as
DinarRVnews.net– here are the latest updates for August 2015 from the CBI (Central Bank
of Iraq) and the IMF (International Monetary Fund) on the country of Iraq regarding the
deleting of the zeros and other news.
Included in this presentation are:
#1 - IRAQ SELECTED ISSUES 2015 International Monetary Fund
IMF Country Report No. 15/236 Pages 2-32
#2 - IRAQ 2015 ARTICLE IV CONSULTATION AND REQUEST FOR PURCHASE
UNDER THE RAPID FINANCING INSTRUMENT—PRESS RELEASE; STAFF
REPORT; AND STATEMENT BY THE EXECUTIVE DIRECTOR FOR IRAQ
IMF Country Report No. 15/235 Pages 33-132
#3 - IMF Executive Board Concludes 2015 Article IV Consultation with Iraq Pages 133-144
#4 - CBI Statement Green Light for Zeros Deletion Translated Arabic via (Voice of
Iraq/Central Bank of Iraq) Pages 145-146
#5 - CBI Statement on 50 Dinar Note Removal Translated Arabic via Central Bank of Iraq
Pages 147-148
#6 – CBI Statement on Currency Auctions Translated from Arabic via Central Bank of Iraq
Pages 149-151
For updates visit my websites listed above – enjoy, and please share this presentation with
others. All the best,
Nick Giammarino
Subscribe by copying the links below:
http://globalcurrencyreset.net/subscribe-newsletter/
https://www.youtube.com/user/globalcurrencyreset
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2. © 2015 International Monetary Fund
IMF Country Report No. 15/236
IRAQ
SELECTED ISSUES
This paper on Iraq was prepared by a staff team of the International Monetary Fund as
background documentation for the periodic consultation with the member country. It is
based on the information available at the time it was completed on July 14, 2015.
Copies of this report are available to the public from
International Monetary Fund  Publication Services
PO Box 92780  Washington, D.C. 20090
Telephone: (202) 623-7430  Fax: (202) 623-7201
E-mail: publications@imf.org Web: http://www.imf.org
Price: $18.00 per printed copy
International Monetary Fund
Washington, D.C.
August 2015

3. IRAQ
SELECTED ISSUES
Approved By
Middle East and Central Asia
Department
Prepared By Koba Gvenetadze and
Amgad Hegazy
THE IRAQI OIL SECTOR: DEVELOPMENTS AND PROSPECTS AFTER THE TWIN
SHOCK_____________________________________________________________________________________2
A. Introduction_____________________________________________________________________________2
B. Recent Developments ___________________________________________________________________3
C. Impact of the Insurgency on Regional Oil Production and Exports _____________________5
D. The Oil Factor in Baghdad-Erbil Relations ______________________________________________8
E. Renegotiation of Contracts____________________________________________________________ 10
F. Oil Sector Expansion Plans Under Revision ____________________________________________ 10
References _______________________________________________________________________________ 14
FOOD AND ELECTRICITY SUBSIDIES IN IRAQ_________________________________________ 15
A. Food Subsidies: The Public Distribution System (PDS) ________________________________ 15
B. Electricity Subsidies ___________________________________________________________________ 20
References _______________________________________________________________________________ 30
CONTENTS
July 14, 2015

4. IRAQ
2 INTERNATIONAL MONETARY FUND
THE IRAQI OIL SECTOR: DEVELOPMENTS AND
PROSPECTS AFTER THE TWIN SHOCK1
A. Introduction
1. The Iraqi economy was affected by the two major challenges during 2014—ISIS
insurgency and the fall in global oil prices. The ISIS insurgency put pressure on budget through
increased military and humanitarian spending and threatened the security of oil facilities. The
spillover from falling oil prices to the economy was strong as the structure of the economy is not
diversified and oil is effectively Iraq’s only export. The impact of ISIS insurgency and weak global
prices are fully unfolding in 2015. This paper will describe the Iraqi oil sector developments under
the twin shock and discuss its impact on oil sector growth prospects in the short- and medium-term.
2. With the fifth-largest proved crude oil deposits,
Iraq is a major oil producer and exporter of crude oil.
Currently it produces about 4 percent of the global oil
supply and is the second-biggest producer in OPEC after
Saudi Arabia. Iraq possesses a huge potential for increasing
its contribution to global oil supply due to a number of
factors. First, with already vast proven reserves, most of Iraq
remains greatly under-explored compared with other major
oil producing countries. Second, the cost of oil production in
Iraq is one of the lowest in the world due to relatively
uncomplicated geology, multiple super giant oilfields and
their onshore location, and close location to coastal ports
(IEA, 2012).
3. Iraq’s oil resources are unequally spread geographically. The lion’s share of proven oil
reserves—about 75 percent—is concentrated in the south, including in five super-giant fields
(Rumaila, West Qurna, Zubair, Majnoon, and Nahr Umr) and this region contributes roughly the
same share in Iraq’s oil exports. About 17 percent of the reserves are in the north. The rest of the
reserves are in central (East Bagdad) and west Iraq.
1
Prepared by Koba Gvenetadze.
Billion
barrels
Percent of
global
Saudi Arabia 267.0 15.7
Russia 103.2 6.1
U.S. 48.5 2.9
Iran 157.8 9.3
China 18.5 1.1
Mexico 11.1 0.7
Venezuela 298.3 17.5
Canada 172.9 10.2
Norway 6.5 0.4
U.A.E 97.8 5.8
Nigeria 37.1 2.2
Kuwait 101.5 6.0
United Kingdom 3.0 0.2
Iraq 150.0 8.8
OPEC 1,216.5 71.6
Global 1,700.1 100.0
Source: BP Statistical Review of World Energy 2015.
Selected Countries: Proven Oil Reserves
(At end-2014)

5. IRAQ
INTERNATIONAL MONETARY FUND 3
B. Recent Developments
4. Iraq’s oil sector has performed well despite the security challenges that emerged after
the onset of the ISIS insurgency in June 2014. The share of the oil sector in Iraq’s real GDP
increased to an estimated 53 percent in 2014 from 50 percent a year earlier. Iraq produced
3.11 million barrels per day (mbpd) crude in 2014 compared to 2.98 mbpd in 2013. Oil exports also
increased to 2.52 mbpd from 2.39 mbpd. These numbers, however, do not include oil production
and exports by the Kurdistan Regional Government (KRG) for 2013 and most of 2014.2
The KRG
2
The Baghdad-Erbil agreement regarding the oil revenue sharing started to be implemented in December 2014.
Source: http://esplift.com/iraq_oil-map.jpg

6. IRAQ
4 INTERNATIONAL MONETARY FUND
crude oil production is estimated to have averaged
0.22 mbpd in 2013 (IEA, MTMR, 2014). For the
second half of 2014, the KRG has reportedly
produced 0.35 mbpd of crude oil. The KRG
Ministry of Natural Resources has announced a
target to achieve 1.0 mbpd oil production in 2015.
5. On average, Iraq earned $97 per barrel
(pb) on oil exported in 2014. Iraq’s oil prices
have been closely aligned to the Dubai Fateh
benchmark. The monthly spread between the Iraqi
oil and Dubai Fateh fluctuated within the years,
but the monthly spread in 2013 and 2014 on
average was –$2.5 pb and +$0.35, respectively.
The rapid advance of ISIS in Northern Iraq affected the global oil market and Dubai prices in June
2014 increased by about $2.5 per barrel compared to May. However, prices reverted to the May
level quickly, already in July, probably reflecting the decreasing risk of ISIS expansion towards the
south, where Iraq’s main oil facilities are located. Despite increased volume of exported volume in
2014, export receipts fell by 7 percent compared to the previous year.
6. Asia remained the leading destination of the Iraqi oil exports during 2013–14 and its
share increased from 50 percent in 2012 to 65 percent in 2014. Two main factors contributed to
this outcome. First, America’s shale oil boom lessened demand for OPEC oil, including from Iraq, in
North America. Second, Iraq is reaping the benefit of its relative proximity to the Asian customers,
such as China and India, which account for large part of global oil demand growth. Iraq established
2012 2012 2013 2014 2015 3/
Oil production North 1/ 0.76 0.65 0.40
South 2/ 2.18 2.33 2.72
Total 2.94 2.98 3.11
Oil Exports North 1/ 0.37 0.26 0.06
South 2/ 2.05 2.13 2.46
Total 2.42 2.39 2.52
Source: Ministry of Oil of Iraq.
1/ North Oil Company and Midland Oil Company.
2/ South Oil Company and Maysan Oil Company.
3/ For five months.
0.32
2.54
2.87
Oil Production and Exports, 2012–2015
(In million barrels per day)
0.31
2.81
3.13
Sources: Iraqi authorities;and IMF staff calculations.
1/ Positive values indicate higher Iraqi oil prices than Dubai oil prices.
-20
-15
-10
-5
0
5
10
15
Jan-10 Sep-10 May-11 Jan-12 Sep-12 May-13 Jan-14 Sep-14 May-15
Spread between Dubai and Iraqi Oil Prices 1/
(In U.S. dollars per barrel)
40
50
60
70
80
90
100
110
120
130
140
Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Aug-13 Feb-14 Aug-14 Mar-15
IRQ Dubai
Iraqi Oil Price vs. Dubai Fateh Price
(In U.S. dollars per barrel)

7. IRAQ
INTERNATIONAL MONETARY FUND 5
itself as an important source for China’s growing
energy needs. China, the world's top energy
consumer, boosted its investments in Iraq’s oil
sector in support of its energy security. Chinese
state-owned companies have invested around
US$10 billion in Iraq since 2003, accepting
relatively lower profits to win contracts and
secure supply of oil for its fast-growing energy
needs. In January 2015, Iraq overtook Angola and
Russia to become China’s second-largest oil
supplier. While China is expected to remain an
important importer of Iraqi oil in the medium
term, the possible removal of international sanctions on Iran may increase the competition between
Iraq and Iran in supplying oil to its Asian customers. Overall, these developments could reduce Iraq’s
oil export receipts.
7. To maintain the quality of its flagship southern Basra Light blend and improve
importers’ confidence, Iraq recently announced splitting its crude supply into light and heavy
grades. Mixing of Basra Light with the growing supply of heavier oil from the south due to lack of
centralized blending and storage facility deteriorated its quality. The Basra Light failed to meet
specifications predetermined by buyers’ refineries.3
As a result, in early 2015 some companies
declined to load cargoes with it, which had to be sold with about $3 pb discount. The Ministry of Oil
(MOO) announced that starting from June two of the three export facilities in the south of Iraq
would be allocated exclusively to Basra Heavy. Splitting of the crude grades is appropriate to
prepare for the long-term as the larger part of the newer production increases is expected to be in
heavy oil. It will also help avoid paying penalties to customers for delivering lower quality crude than
contracted. However, it may take some time before Iraqi heavy establishes itself in the market as
some Asian refiners do not have high capacity to refine heavy crude.
C. Impact of the Insurgency on Regional Oil Production and Exports
8. Against initial fears, the conflict with ISIS has not spread to the south so far, leaving
oil sector activities in this area unaffected. ISIS has not been able to advance to the proximity of
any of the large oilfields in southern Iraq (map). Southern fields pumped 2.72 mbpd oil in 2014
compared to 2.33 mbpd in 2013. Exports from this part of the country also increased by 0.33 mbpd
3
The American Petroleum Institute (API) gravity of Basra Light crude has recently fluctuated between 28.1 and
32.2 degrees. In contrast, the API gravity of the Basra Heavy blend is about 23.6 degrees. The API gravity is an inverse
measure of petroleum liquid’s density relative to that of water. The higher the API gravity, the lighter is the crude,
requiring less processing. Crude with gravity below 27 degrees is considered to be heavy.
0.0
0.5
1.0
1.5
2.0
2.5
3.0
2010 2011 2012 2013 2014
Asia Europe Americas
Sources: Iraqi authorities; and IMF staff calculations.
Composition of Exports by Destination
(In million barrels per day)

8. IRAQ
6 INTERNATIONAL MONETARY FUND
for this period to reach 2.46 mbpd in 2014. An extension of the conflict to the south would have had
serious consequences for Iraq and for the global oil markets. For this reason the Iraqi government
posted around 100,000 policemen to defend its southern oil facilities. During a recent OPEC meeting
the Iraqi oil minister announced that 27,000 more security personnel would be allocated, trained,
and equipped to protect its oil and energy facilities from ISIS offensive.
9. Deteriorating security, however, took a toll on oil sector activities in northern and
central Iraq, resulting in a complete halt of exports through the northern Kirkuk-Ceyhan
pipeline since early 2014. In 2014 northern Iraq produced 0.40 mbpd oil, 40 percent less than in
2013. Exports fell much more. Due to the halt of exports through the damaged Kirkuk-Ceyhan
pipeline, exports from the north were just 0.06 mbpd compared to 0.26 mbpd in 2013. Military
attacks in these areas had been widespread already before the ISIS insurgency. The unprotected
Iraqi western provinces have been affected since the start of the Syria conflict. The federally-
controlled Kirkuk-Ceyhan pipeline—the principal export outlet for the Kirkuk oilfields—has been a
target of various insurgent attacks since 2012. Its 0.90 mbpd export capacity before 2003 has been
reduced to 0.50 mbpd and further to around 0.25 mbpd due to more than 50 attacks during 2013.

9. IRAQ
INTERNATIONAL MONETARY FUND 7
It was ultimately shut down in early March 2014 as workers could not carry out repair works due to
continued violence and repeated attacks. Furthermore, ISIS occupied most of the unexplored
northern territories (with the exception of Kurdistan) and western parts of Iraq, posing a threat to
the exploration activities of the international oil companies’ (IOCs) in this area. Some of the IOCs
working in the surrounding areas abandoned or suspended their exploration projects, delaying
future development of oilfields.
10. ISIS surrounded Iraq’s Baiji refinery shortly after the start of the insurgency and it has
been out of commission since then. The Baiji refinery, located about 155 miles north of Baghdad,
had been contributing more than a quarter (about 0.18 mbpd) of country's entire refining capacity
before the ISIS invasion. The Iraqi forces retook the refinery from ISIS militants in November, but
later lost its control, regaining it again in April 2015 with the help of the U.S.-led coalition airstrikes.
The battle caused a fire and severe damage to Baiji’s storage tanks. The fight for Baiji refinery
continues.
11. The KRG Peshmerga forces moved into the previously federally controlled northern
city of Kirkuk to fill a security vacuum after government troops fled the city due to rapid ISIS
advancement. The status of ethnically diverse and oil-rich Kirkuk has been one of the thorniest
topics between Baghdad and Erbil over Iraq’s disputed territories. According to the Article 140 of
Iraq’s 2005 constitution, the legal status of the Kirkuk governorate should have been determined
through the referendum by no later than December 31, 2007. However, the referendum never took
place. The constitution also stipulated that a census had to be conducted before the referendum
takes place. The KRG has effectively been controlling large parts of Kirkuk’s oilfields since mid-July.
Oilfields around Kirkuk are estimated to hold about 10 billion barrels of oil. The oil produced from
Kirkuk field is currently shipped through the KRG autonomous pipeline to the Turkish border in line
with the Baghdad/Erbil agreement on oil-revenue sharing (see below).
12. According to some estimates, ISIS controlled only four oilfields in northern Iraq by
end-2014 compared to seven fields in mid-2014. Total production capacity of these fields for this
period is estimated to have fallen from about 0.08 mbpd to 0.02 mbpd. Allegedly ISIS has been
using part of the produced oil for its own oil supply. Reportedly, it has created a sophisticated
smuggling system to ship the rest of the produced oil on tanker trucks to small refineries in
northern Iraq and sell at a major discount at the long-standing black export market via Turkey. It has
also been reported that after the invasion ISIS got hold of about three million barrels of oil by
draining pipelines, storage tanks, and pumping stations (IEA, OMR, October 2014). The revenues
from smuggled oil are thereafter used by ISIS to pay for fighters and military commanders, and
finance some public sector activities in captured territories.

10. IRAQ
8 INTERNATIONAL MONETARY FUND
D. The Oil Factor in Baghdad-Erbil Relations
13. Baghdad and Erbil have been in disagreement on the rights and modalities over the
control and exploitation of oil reserves since the enactment of the 2005 constitution. Articles
111 and 112 of the constitution are supposed to define the control and distribution of natural
resources, but they are not entirely clear and exhaustive, allowing different interpretations by each
side.4
According to Baghdad, the federal government has the exclusive right to develop and export
oil and sign contracts covering the Iraqi territory and the KRG is not allowed to adopt unilateral and
permanent measures over the management of oil and gas fields. Erbil’s interpretation, however, is
that it also is entitled to enter into contracts and export oil independently of Baghdad. A
hydrocarbon law could settle the legal issues between the KRG and the federal government
regarding ownership, development, sharing, and exporting of natural resources. The original
hydrocarbon law, submitted to the parliament back in 2007, has not been approved due to
disagreements among the various parliamentary factions. The current government, which is
considered to be more inclusive in terms of sectarian representation compared to previous
governments, has a better chance to accomplish this challenging task. In the absence of a national
hydrocarbon law, the KRG passed its own hydrocarbon law in 2007. In April 2015 the KRG adopted
the Oil and Gas Revenue Fund law which defines the principles of spending of oil revenues,
including allocation to the future generation fund, and aims at improving transparency of spending.
14. The landlocked KRG has been striving to export oil independently in spite of
Baghdad’s disapproval and in an attempt to achieve greater economic autonomy. Small scale
independent oil exports to Turkey by trucks reportedly started at end-2012. In 2013 about
0.04 mbpd of the KRG production is estimated to have been sold to truckers at a discounted price
and exported to Turkey. An estimated 0.18 mbpd was processed at local refineries and an increasing
number of so-called “tea pot” refineries in the KRG and then also trucked to Turkey and Iran. In 2014
the KRG advanced work toward creating its independent network for oil exports. It upgraded
existing pipelines on its territory, built a new pipeline connecting the region to Ceyhan terminal on
Turkey’s Mediterranean coast, linked it to Kirkuk, and started to ship oil (an estimated 0.3 mbpd) in
4
Article 111: Oil and gas are owned by all the people of Iraq in all the regions and governorates. Article 112:
First: The federal government, with the producing governorates and regional governments, shall undertake the
management of oil and gas extracted from present fields, provided that it distributes its revenues in a fair manner in
proportion to the population distribution in all parts of the country, specifying an allotment for a specified period for
the damaged regions which were unjustly deprived of them by the former regime, and the regions that were
damaged afterwards in a way that ensures balanced development in different areas of the country, and this shall be
regulated by a law. Second: The federal government, with the producing regional and governorate governments,
shall together formulate the necessary strategic policies to develop the oil and gas wealth in a way that achieves the
highest benefit to the Iraqi people using the most advanced techniques of the market principles and encouraging
investment. Source: http://www.iraqinationality.gov.iq/attach/iraqi_constitution.pdf

11. IRAQ
INTERNATIONAL MONETARY FUND 9
May bypassing federal government control. Truck shipments supplemented the KRG oil exports to
Turkey through the export pipeline. Baghdad warned potential customers that any oil exported from
Iraq outside the State Oil Marketing Organization (SOMO) would be illegal and a violation of
country’s constitution. The federal government had been blocking the KRG cargoes through
litigation, making it difficult for the KRG to find buyers and forcing it to sell crude at a considerable
discount.
15. In February 2014 Baghdad suspended federal budget transfers to the KRG due to the
standoff over revenue sharing and the legality of contracts signed by the KRG. Reflecting its
share of the country’s population, the KRG had been receiving 17 percent of the federal budget
revenue in exchange for an agreed level of oil production. The KRG managed to export around
0.19 mbpd oil between June and November 2014 and earned an amount equivalent to about one-
third of the $8 billion in transfers suspended by the federal budget. The cut in federal transfers
plunged the KRG into economic difficulties. It further strengthened the KRG’s incentive to carry on
independent oil shipments.
16. Under the pressure of the ISIS insurgency and sharply falling oil prices, Baghdad and
Erbil reached an oil revenue sharing agreement in December 2014. According to the deal, the
KRG committed to export 0.55 mbpd oil on behalf of the federal government, including 0.30 mbpd
from the Kirkuk field through the new KRG-Turkey pipeline, and 0.25 mbpd from the new fields of
the core KRG territory. All exports have to be marketed by SOMO. In return, the federal government
resumed fiscal transfers to the cash-constrained KRG. Kurdish exports through the northern corridor
boosted Iraq’s overall production, exports, and more importantly, revenues for the federal
government to battle ISIS. The financially stronger KRG also became better-positioned to continue
fighting ISIS in the north. Apart from the positive financial impact, the agreement was a landmark
achievement that demonstrated Erbil’s and Baghdad’s collaboration and commitment to fight ISIS.
17. While the agreement has been working relatively well, some problems have been
reported in June. In particular, the KRG announced that it had to increase direct sales to repay the
debt accumulated in 2014 because of in advance oil sales, but it still remained committed to the
2015 federal Budget Law.5
Adhering to the preliminary agreement on oil revenue sharing and
ultimately reaching a long-standing solution will be beneficial for both Baghdad and Erbil.
5
Monthly Export Report, June 2015, Kurdistan Regional Government.

12. IRAQ
10 INTERNATIONAL MONETARY FUND
E. Renegotiation of Contracts
18. Falling oil prices have triggered the renegotiation of existing oilfield development
contracts by the federal government. Mirroring different interpretations of power distribution
embedded in the 2005 constitution, the Iraqi federal government and the KRG have employed
different contractual systems for upstream oil sector development.
19. Starting 2009 the federal government has been awarding so-called Technical Service
Contracts (TSCs) to the IOCs. Under the Iraqi TSC, the IOCs don’t have a share in production;
instead the government reimburses IOCs for the cost of oil production (including investment
expenses) and pays a flat fee per-barrel (US$1–5, depending on contracts). While the TSCs gave
relatively low profit margins to the IOCs, the guaranteed and quick cost recovery provided solid
incentives for them to stay in business. The TSCs were lucrative for the government when oil prices
were high, but they became less attractive with falling oil prices as revenues from oil exports
plummeted and payment obligations to the IOCs remained high. To reduce the burden of the
investment payments, the MOO has asked the IOCs working in the southern fields to cut down
development plans and lower oilfields’ development budgets. Production peaks have been adjusted
downwards in five out of twelve contracts and the decisions for the rest of the contracts are
pending. The MOO has requested to renegotiate the contracts and proposed to link the flat per
barrel fees to oil prices but lock the resultant fees into the pre-determined corridor. However, the
companies have so far not accepted this proposal.
20. Aiming to attract further interest in its hydrocarbon sector and promote economic
development, the KRG created a more open contractual system. In spite of Baghdad’s
opposition, it has reportedly entered into dozens of Production Sharing Contracts (PSC) with a
number of international companies, giving them an equity stake in discovered oilfields.
Development of northern oilfields brought lucrative signing bonuses and revenues. Oil development
projects also attracted foreign investments and created tertiary-sector employment. However,
continued objections from the federal government and existing uncertainty over the
constitutionality of oil deals with the KRG have slowed down development of the region’s oil and
gas resources. Apart from questioning the legality of KRG’s awarded contracts, Baghdad has been
asking for increased transparency and accountability of the KRG contracts.
F. Oil Sector Expansion Plans Under Revision
21. The Iraqi government set an ambitious target to increase oil production capacity to
over 13 mbpd when it signed service contracts with major IOCs during 2009–10.6
While
recognizing Iraq’s huge potential for oil production growth capacity, oil markets analysts were
doubtful that this target could be met. In fact, production targets have been officially revised
6
IEA 2012 report on Iraq assumed oil production of 4.2 mbpd by 2015, 6.1 mbpd by 2020, and 8.3 mbpd by 2035 as
a Central Scenario.

13. IRAQ
INTERNATIONAL MONETARY FUND 11
downwards substantially since then. The baseline scenario of Iraq’s 2013 National Energy Strategy
targeted oil production to increase from 4.5 mbpd in 2014 to 9 mbpd by 2020 (IEA, OMR, May
2015). The government’s latest targets for oil production and oil export are 7 mbpd, and 6 mbpd,
respectively, by 2020.
22. It is unlikely that the government will meet the production (3.8 mbpd) and export
(3.3 mbpd) targets set in the approved 2015 budget. Based on average actual oil production
(3.13 mbpd) and export (2.87 mbpd) for the first five months, production and exports for the
remainder of the year should average 4.28 mbpd and 3.61 mbpd, respectively, to meet these targets.
(In 2014 production averaged 3.11 mbpd and exports averaged 2.52 mbpd). Northern exports
averaged 0.32 mbpd during the same period and they should average 0.71 mbpd for the remainder
of the year to reach an average 0.55 mbpd in 2014 set in Baghdad/Erbil agreement. Achieving these
levels will be extremely difficult, if not impossible, task despite continued growth in oil production
and exports.
23. A number of factors will impact Iraq’s medium-term oil sector expansion plans.
 Conflict with ISIS. While the government is slowly retaking ISIS-controlled territory, the fight
against ISIS could be protracted. Fear of continuation or outbreak of new hostilities could
suspend implementation of the next phases of some of the existing projects or deter IOCs from
starting new projects.
 Extended period of lower oil prices. Pressure from the sharp drop in oil prices was already felt
in 2014. Because of lower-than budgeted oil prices the government has been delaying payments
to the IOCs which reduced their profit margin. IOCs have also lowered their investment plans at
the request of the MOO. Apart from the developments in Iraq, currently the IOCs are generally
less inclined to invest in oil projects due to the weaker profitability prospects.
 Limitations of Technical Service Contracts. IOCs will be assessing the profitability of further
investments in Iraq versus investment opportunities in other locations, where their profit is not
constrained by fee-per-barrel based TSCs.
 Insufficient storage facilities. Up until February 2015, the Basra terminal had 9.5 million oil
storage capacity, enough to store production of just seven days during bad weather when oil
cannot be shipped. Three newly opened storage tanks increased the storage capacity to
10.5 million and completion of another 4–5 million barrels storages capacity is planned by end
2015. This should help deal with halting oil production caused by bad weather. New ramping
stations are also necessary to increase export potential.
 Insufficient pipeline capacity. Iraq’s southern export capacity increased with the addition of
a three Single Point Moorings (offshore oil loading system) to export crude oil via the Gulf.
However, these are not enough to keep up with increasing southern export capacities. Iraq’s
plan to ramp up production and diversify oil export routes through a 1 mbpd, 1,050 mile long

14. IRAQ
12 INTERNATIONAL MONETARY FUND
pipeline from its southern oilfields to the Jordanian port of Aqaba will most likely be delayed
because of security concerns and lack of financial resources.
 Water and gas injection. Iraq has to reduce gas flaring and develop new gas fields to meet its
oil production targets. Injection of gas or water is necessary to increase oil recovery rates. About
10 to 12 bbl/d seawater is needed to maintain oil reservoir pressure and keep up production
from its fields in the south. The start of the Common Seawater Supply Project (CSSP), which
should provide treated seawater from the Gulf to oilfields in southern Iraq through pipelines, has
been postponed several times. In February 2015 it was announced that the American company
Parsons has been awarded a front-end engineering design deal for CSSP.
 Cumbersome bureaucratic procedures. Many IOCs voiced concerns over the inefficient and
slow procedures for approval of field development plans and signing off on contracts to
advance projects. Focusing on the fight with ISIS could delay the approval of new oil plans.
Procedures for visa issuance for expatriate workers and customs clearing of equipment have also
been criticized. The MOO acknowledged these shortcomings and in response prepared a decree
on “Facilitation and Simplification of Procedures in Oil Projects Execution” that was approved by
the cabinet in March 2015.
24. Market observers have been revising downward Iraq’s medium-term oil production
forecast taking into account these factors.
 The IEA reduced Iraq’s annual average estimated increase in sustainable oil production
capacity forecast from 0.21 mbpd over the period of 2013–19 to 0.18 mbpd over 2014–20
(IEA, MTMR, 2014 and 2015). Iraq is still expected to account for the largest individual
contribution (40 percent, or 1.07 mbpd) to OPEC’s crude oil production capacity growth over
2014-2020 (IEA, MTMR, 2015),7
albeit lower compared to 61 percent projected a year earlier.
7
The forecast assumes that international sanctions on Iran remain through the forecast period.
2013 2014 2015 2016 2017 2018 2019 2020 Increment Average annual growth
2015 MTOMR 2014–20 2014–20 (mbpd)
OPEC total 29.45 29.43 29.87 30.54 31.02 31.58 32.12 2.68 (mbpd)
ow: Iraq 3.66 3.90 4.10 4.22 4.33 4.52 4.73 1.07 (mbpd) 0.18
40.0 in percent
2014 MTOMR Increment Average annual growth
Global supply 2013–19 2013–19 (mbpd)
OPEC total 34.98 35.16 35.52 35.58 36.48 36.67 37.06 2.08 (mbpd)
ow: Iraq 3.26 3.67 3.87 3.99 4.19 4.29 4.54 1.28 (mbpd) 0.21
61.5 in percent
Source: IEA Medium-Term Market Report 2014 and 2015.
1/ MTMR capacity estimates are based on a combination of new project start-ups, and assessed base load supply, net of mature field decline.
Estimated Sustainable Crude Production Capacity: OPEC and Iraq 1 /
(In million barrels per day)

15. IRAQ
INTERNATIONAL MONETARY FUND 13
 BMI Research also forecasts that the current challenges will negatively impact longer-term
investment in expansion of oil projects in Iraq. It revised down Iraq’s oil production forecast
in 2015 from 3.7 to 3.5 mbpd. The main factors behind the downward revision were a lack of oil
export growth from the southern fields and limited (0.100 mbpd) additional oil from the KRG
during 2015. BMI projects 0.5 percent and 1.4 percent production increase in 2016 and 2017,
respectively, mainly on account of the existing projects reaching their peak capacity.
25. Fund staff has also revised Iraq’s oil production and exports forecast over the
medium-term. Currently we project oil production to reach 4.7 mbpd in 2018 compared to
5.7 mbpd forecasted at the time of the 2013 Article IV consultation. Projection of exports for the
same period has also been reduced to 3.84 mbpd from 4.75 mbpd.
Sources: Iraqi authorities;and IMF staff calculations.
2
3
4
5
6
2014 (act.) 2015 2016 2017 2018
Iraq Oil Production
(In million barrels per day)
Article IV 2013
Revised baseline scenario
2
3
4
5
2014 (act.) 2015 2016 2017 2018
Iraq Oil Exports
(In million barrels per day)
Article IV 2013
Revised baseline scenario

16. IRAQ
14 INTERNATIONAL MONETARY FUND
References
BMI Research, (A Fitch Group Company), 2015, “Iraq: Industry Trend Analysis—Oil Production
Growth to Struggle,” (April).
International Energy Agency (IEA), 2012, “Iraq Energy Outlook”
———, 2014a, Medium-Term Market Report (MTMR), “Market Analysis and Forecasts to 2019”
———, 2014b, Oil Market Report.
———, 2015a, Medium-Term Market Report (MTMR), “Market Analysis and Forecasts to 2020”
———, 2015b, Oil Market Report (OMR)
Kurdistan Regional Government, 2015, Monthly Export Report

17. IRAQ
INTERNATIONAL MONETARY FUND 15
FOOD AND ELECTRICITY SUBSIDIES IN IRAQ1
This note focuses on food and electricity subsidies in Iraq. Together with subsidies on fuels, they make
up for the bulk of subsidies, for a total subsidy cost at least about 9 percent of GDP (2014), of which
1.8 percent from food, 3.4 percent on electricity, and 3.6 percent on fuels according to staff estimates.
These figures may actually be conservative—according to the authorities, energy subsidy alone
accounts for about 13 percent of GDP.2
The note reviews how the food and electricity subsidy systems
work, and presents some suggestions on reform, together with quantified reform scenarios. While it is
difficult to plan subsidy reform in Iraq under the current challenging circumstances, the fiscal pressures
from the conflict and the decline in oil prices may actually mobilize support for reform, especially with
effective communication about the trade-offs between reducing subsidies and cutting other, more
necessary government expenses or increasing non-oil taxation. In addition, the conflict with ISIS is
undermining the distribution of in-kind food subsidies through the Public Distribution System, the
main food vehicle, and may therefore accelerate reform towards more efficient social safety nets such
as cash transfers. Explicit recording of subsidies on the government budget as a line item would
improve transparency and facilitate reform.
A. Food Subsidies: The Public Distribution System (PDS)
Current Structure, Institutional Setup and Key Issues
1. The main food subsidy mechanism in Iraq is the Public Distribution System (PDS).3
The
PDS is a ration card system through which the government provides a list of subsidized food
commodities to the vast majority of the population, benefiting over seven million Iraqi households.
The ration card covers disbursed quantities for a number of commodities: wheat flour
(nine kilograms/card/person/month), rice (three kilograms), sugar (two kilograms), vegetable oil
(one liter), and children’s milk (three packs; 450 grams each). The government’s General Company
for Trade in Grains is in charge of ensuring adequate provision of food commodities to beneficiaries.
The government purchases local crops from farmers after each season at administered prices, and
sells them to beneficiaries through the ration cards at subsidized prices. Locally administered prices
are determined by the Ministry of Agriculture and Cabinet, with the cost accounting maintained by
the Ministry of Trade. Quantities imported are determined by the shortfall between the volumes
needed for the PDS basket and local production. The system makes use of silos and warehouses to
maintain inventories.
1
Prepared by Amgad Hegazy.
2
See analysis below for food and electricity, and MCD subsidy study for fuels (based on the price-gap approach). The
full cost of fuel subsidies along the entire chain for the sector—apart from the direct product subsidy—is more
difficult to measure given lack of accurate information on a product by product basis.
3
The conflict with ISIS is affecting the PDS by limiting coverage in the conflict-affected areas and restricting the
variety of food stuffs provided under the scheme. The description of the PDS in this section is mostly based on the
pre-conflict set-up.

18. IRAQ
16 INTERNATIONAL MONETARY FUND
2. Food subsidies amounted to 1.8 percent of GDP in 2014. Subsidies are calculated as the
difference between revenues to the government and the cost of food purchased from local farmers
or imported. Therefore, the calculation takes into account (a) local (final) selling prices to end
consumers, (b) local purchase prices paid by the government to farmers, and (c) import prices. The
cost of the PDS recorded in the budget stood at ID 4.8 trillion (1.8 percent of GDP) in 2014, and
makes up over 60 percent of the total cost of the entire social safety net system.
4
3. Most commodities are imported or have sizable import content, with wheat purchases
being the most costly. Wheat subsidies comprise over 60 percent of total food subsidies under the
PDS due to its particularly low selling price, with sligthly over half of all wheat purchases being
imported. The second largest total subsidy relates to rice because of its subsidized sale price and
high administered purchase price. Remaining products disbursed on ration cards—sugar, vegetable
oil and milk products—are wholly imported and sold locally at very low prices.
4. Administered prices create significant
distortions. In the case of wheat, the government’s
purchase price paid to local farmers is almost double the
import price, as a way to encourage farmers to grow wheat.
In the case of rice, two distinct domestic varieties exist,
with the higher quality’s purchase price paid to farmers set
above import prices, and the lower quality’s purchase price
set marginally below the import price. The local
administered selling price is set at less than half of
1 percent of the purchase price, on average.
4
Iraq’s social safety nets also include assistance to widows and martyrs, and agricultural subsidies.
Composition of Food (PDS) Subsidies, 2014.
Source: Ministry of Trade.
Wheat
63%
Rice
15%
Sugar
11%
Vegetable oil
11%
Children's
milk
0%
Food Subsidies Under the Public Distribution System (PDS)
Source: Ministry of Finance.
-
20
40
60
80
100
120
140
160
180
-
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
2011 2012 2013 2014
Percent of total expenditure
Percent of GDP
Subsidy per capita (USD, Annual Avg., Right scale)
Prices for selected food commodities, 2014
(USD per unit)
Source: Ministry of Trade.
0 200 400 600 800 1000
Wheat
Local purchase price
Import price
Sale price
Rice
Local purchase price 1
Local purchase price 2
Import price
Sale price
Sugar
Import price
Sale price

19. IRAQ
INTERNATIONAL MONETARY FUND 17
5. The administrative costs of the PDS are relatively low. Administrative costs in 2014
(defined as all costs except purchase costs) were ID 697 billion, or 0.3 percent of GDP. This amount
is about 13 percent of the total PDS cost. Costs related to transportation and wages comprise over
60 percent of total administrative costs.
6. Subsidized wheat flour quantities exceed consumer needs. Wheat flour quantities
disbursed on ration cards are reportedly higher than typical household consumption (which
according to some estimates would amount at 6–7 kilos compared to 9 kilos of the allocation).
Excess subsidized quantities reportedly find their way to the black market where they are resold at
a profit margin.
7. The timing of import procurement is inefficient. Food import needs to cover part of the
disbursed quantities through the PDS take place when the need arises. As such, import costs—and
hence, the subsidy burden—are affected by exogenous factors, such as a surge in demand by other,
price-making globally important players (e.g., Egypt and Brazil in the case of the wheat market).
8. Targeting of beneficiaries has been improved for public employees, but not for private
sector employees. In recent years, the government made an effort to improve PDS targeting by
excluding public sector employees with a monthly income of ID 1.5 million ($1286) or higher. This
income threshold was possible to determine given that public workers’ payrolls are known and
could be easily differentiated and identified based on income. However, this approach could not be
applied to private sector beneficiaries—who comprise around 50 percent of total labor force—given
the lack of information on their salary structures.
9. The government made other attempts to reform the PDS in the past, but the most
radical changes faced difficulties. The government streamlined the list of subsidized commodities
in mid-2009, de facto eliminating subsidies on tea, beans, soap, detergents, and adults’ milk, which
where all available on ration cards prior to that time. However, more ambitious attempts to replace
the PDS with a cash transfer system in 2012–13 led to widespread demonstrations, and the
government had to backtrack, leaving the in-kind nature of the system unchanged.
10. Governance issues have historically affected the distribution of commodities. In Iraq, as
in other countries with similar schemes, the cumbersome structure of the in-kind subsidy system
appears to have generated governance issues. Several former officials were charged with corruption
and embezzlement related to food imports (May 2009). In addition, observers have attributed the
reported delays in commodities reaching distribution outlets (by up to more than one month at
a time) to poor management and corruption along the delivery channel.
11. The ISIS insurgency since mid-2014 is undermining the coverage of the PDS. The
intensification of the conflict with ISIS has negatively affected the coverage of the distribution
system, impacting the disbursement of some products to eligible households in areas under ISIS
control. ISIS’ smuggling and abuse of the system has also been reported.

20. IRAQ
18 INTERNATIONAL MONETARY FUND
Possible Reform Objectives and Estimated Savings
12. Despite past efforts, the PDS remains a costly and inefficient system and needs to be
reformed further. The PDS weighs on the budget, does not target well the poor, creates price
distortions, and generates waste and governance problems. The authorities are aware of these
issues, and have undertaken serious reform efforts in the right direction, testing the limits of political
and social acceptability of reform. Some of these efforts, such as the streamlining of covered
products, have borne fruit. But the reform momentum needs to be maintained, even though a
gradual approach, mindful of social impact, should be undertaken, particularly under the current,
extremely difficult conditions. Reform should aim at improving overall efficiency, first of all in terms
of support to needy households, but also in terms of removing distortions—such as those created
by the large wedge between local purchase and import prices. These considerations may in fact be
even more important than budgetary savings, which are likely to be relatively limited once the
alternative social support systems are adequately funded. In the following, some broad reform ideas
are laid out.
13. The reform path could follow two broad options. With a more gradual approach, the
current system could be improved at the margin along its main dimensions (targeting, distributed
quantities, procurement system etc.) while leaving the main architecture intact, including the
support to local farmers. In alternative, the PDS could be entirely replaced with a cash transfer
system which would monetize the current in-kind support and explicitly target the poorest
segments of society.
Option A: Reform at the margin
 Better target beneficiaries. Targeting should be extended to households depending on private
sector employment. This would require creating a database to set an income-based eligibility
threshold. Such database could be based on household income/expenditure or similar surveys
(carried out by the authorities with the support of the World Bank) cross-checked against self-
reporting and bank accounts. The data could be corrected taking into account geographical
disparities in incomes across provinces. While improving targeting, restricting access would also
bring substantial savings. Estimates based on 2014 subsidy and consumption data identify
savings in the neighborhood of ID 1.1 trillion (0.4 percent of GDP) assuming current coverage is
cut by one-fifth as a proxy assumption in the absence of income distribution data. These savings
would increase to around ID 1.8 trillion if coverage is cut by one-third. However, creating a
database would be very difficult, particularly in the current unstable and conflict-prone
environment.
 Re-set quantities in the basket. The basket could be updated based on actual dietary needs
and preferences (the basket was last revised in 2009). But quantities need clearly to be revised
downward for wheat, given the reported leakages to the black market. Estimates of subsidy
savings assuming wheat quantities disbursed are 2 kilograms lower than their currrent levels
(i.e., 7 Kg instead of 9 Kg per person) amount to ID 0.8 trillion.

21. IRAQ
INTERNATIONAL MONETARY FUND 19
 Lower government purchase price of wheat, link it to import cost, and partially
compensate farmers. The government’s policy of supporting farmers can be still pursued even
if prices are lowered, which would bring substantial savings. For example, capping wheat
purchase price at 25 percent above import prices (instead of being set at double the import
price as at present) would yield ID 0.8 trillion in estimated subsidy savings. The price should also
be linked to movements in international prices. As partial compensation, the government can
assist farmers through other means, including from the rollout of a system of government
discounts on seeds, fertilizers, cultivating machinery, or similar measures.
 Improve import procurement methods, particularly with regard to timing. By relying on a
risk-based system that better manages the interplay between local harvest times, consumption
patterns, stocks of commodity inventories and a closer monitoring of international food prices,
the government would be in better position to avoid peak purchase times created by market
price makers. This is particularly important for wheat due to its high import content.
 Strengthen governance to improve PDS distribution. Better institutional governance and
accountability along the chain (from borders, to inventories/silos, to transportation, to delivery
and finally at the outlet stage) through improved controls over, and monitoring of, the delivery
of subsidized commodities at each stage of the process, is needed. This would necessitate a
more prudent system of checks and balances at every stage of the distribution process, with
clear roles and accountability frameworks, supported by stepped-up coordination among
various authorities (e.g., between the Ministry of Trade, Customs Authority, Ministry of Interior).
Option B: Replace PDS with a cash transfer system
 Moving to a cash transfer system would improve efficiency and could drastically reduce
governance issues. With the PDS mechanisms indirectly undermined by the ISIS insurgency, a
cash transfer system may also become the only viable approach. At the same time, a proposal to
transform the PDS into a cash transfer system would also likely increase resistance to reform
from farmers and vested interests. Furthermore, it would require setting up an adequate
targeting system to avoid a quasi-universal transfer approach. Cross-country experience of
a well-planned and gradual phasing out of in-kind subsidies in favor of cash transfers is
encouraging. Iran’s experience, while focused on energy, is a case in point that could be applied
to food subsidy reform in Iraq. In 2010, Iran envisaged migration to cash transfers through a
gradual, five-year plan to eliminate subsidies on energy products and replace them with
unconditional cash transfers to the entire population. Revenue from price increases on fuel,
electricity, and gas were redistributed among population segments and sectors. In the initial
phases (2011), the government cash transfer handouts were reported to be $40 a month per
individual applicable to 90 percent of the population. A fraction of the revenue was also
earmarked for assistance to affected industry sectors.

22. IRAQ
20 INTERNATIONAL MONETARY FUND
14. A communication and consultation strategy can support the reform of the PDS. In
advance of reform initiatives, beneficiaries should be brought on board by consulting them on the
strategic choice between food rations and cash transfers. Reform implementation should also be
supported by a communication campaign that would point to the advantages of change and the
compensating measures to alleviate the impact of the reform (including for local farmers).
15. The government should introduce mitigating measures, where needed, and strengthen
social safety nets. A successful reform of the PDS should improve support to the poor. However,
the poorest segments may be negatively affected if the introduction of an adequate social safety net
(e.g., a cash transfer system replacing the PDS) is delayed compared to the elimination of the in-kind
subsidies. The government is implementing a Social Protection Strategic Framework with the
support of the World Bank, which is also intended to mitigate the effects of subsidy reform.
B. Electricity Subsidies
Current Structure, Institutional Setup and Key Issues
16. The government controls the electricity sector in Iraq. The government owns the
24 companies operating across the electricity sector (chart). Electricity generated is sold to
transmission companies. The transmission phase includes two key networks: Ultra-high voltage
network (400 Kilovolt), and high-voltage network (132 Kilovolts) that links the ultra-high network to
distribution networks. Electric power is then
bought by distribution companies, who sell it to
end-consumers at administered tariff rates set
by the Ministry of Electricity (MoE) through a
distribution sector comprising two networks
(medium-and low-power).
17. Iraq’s electricity production has
increased over the years. Production increased
in recent years in tandem with rising demand,
reaching 70.4 million mega-watt-hours (MWH) in 2013, up from 48 million MWH two years earlier.
While electricity production is somewhat diversified by source, most is generated through thermal
power, whose output comprises above 75 percent of total production. Thermal power depends
largely on gas powered-stations which represent 70 percent of installed capacity.
Structure of the Electricity Sector in Iraq
24 Companies Operating across Iraq
Production
(6 Companies)
Distribution
(7 Companies)
Support and logistics
(6 Companies)
Transmission
(5 Companies)

23. IRAQ
INTERNATIONAL MONETARY FUND 21
Source: Ministry of Electricity
18. Consumption demand has also grown strongly, driven by the government sector
which is now the second largest
consumer after households. Consumption
rose markedly during the same period,
almost doubling to 45 million MWH.
Households remain the largest consumers
of electricity, while commercial activity
utilizes the least power. However, the
relative share of the government sector’s
demand in total electricity demand rose to
almost one-third (from almost one-fourth),
replacing receding consumption shares of
industrial and commercial sectors.
19. Shifts in the structure of the economy help explain changes in sectoral consumption
patterns for electricity. Sectoral output composition shows that the nominal share of the
agricultural sector in non-oil GDP has declined by almost 18 percentage points over the ten year
period from 2003–13. Similarly, the share of wholesale and retail trade has halved. While the share
of industrial (non-oil manufacturing) output retreated by just 1 percentage point of non-oil GDP
over this period, the share for building and construction has increased by 13 percent.
23%
41%
12%
7%
13%
4%
Electricity Production bySource:2011-2014
(Share in total production,by year)
Steam
Gas
Diesel
Hydro
Import
other
Thermal
Geograpic distribution of installed capacity for Gas powered stations, 2014
(Million Watt)
Source: Ministry ofElectricity
0 500 1000 1500 2000 2500 3000
Baghdad
Basrah
Karbalaa
Kirkuk/tamim
Babylon
Salah Al Din
Qiyara
Nagaf
AlOmarah
Mosul
Nasiriya
Al samawah
Source: Ministry of Electricity
42%
17%
6%
32%
3%
Electricity Consumption Composition: 2014 and
2011
(Share in total consumption)
Residential Industrial Commercial Government / Public Agriculture
44%
25%
6%
23%
2%2014
2011

24. IRAQ
22 INTERNATIONAL MONETARY FUND
20. Electricity production is affected by
significant losses, poor distribution networks,
lack of production inputs, and reliance on
liquid versus gas fuel. First, losses make up one-
third of total production. Technical losses—
considered at acceptable levels between
12–14 percent of production—are mainly due to
obsolescence of electrical equipment (up to
30 years old in a number of power plants). Non-
technical losses however, are reportedly larger,
partly reflecting encroachments on the electricity
grid by inhabitants from slum areas. Most of the losses are realized during the distribution phase
(chart). Second, distribution of electricity is problematic from production plants to end-consumers
because of the vast geographical distances between power plants and end-users (most production
takes place in the south). Furthermore, some land owners refuse to allow for the construction of
electricity towers on their plots of land. Third, inputs for electricity generation are sometimes
unavailable. In particular, gas used in some power plants is not regularly supplied by the Ministry of
Oil, causing stations to be often run on liquid fuel for generation despite having been designed to
run on gas.
21. Production is not sufficient to meet demand for energy, leading to blackouts.
Insufficient overall production is resulting in limiting the number of hours of service delivery. For
example, in Baghdad, with around eight million inhabitants, average daily consumption of electricity
is reported to be limited to 12 hours a day. Some consumers are increasingly relying on electricity
supplied through private generators, but this only allows running very small electrical appliances
(given low amperage).
The Subsidy System and Financial Aspects
22. Electricity pricing is progressive in Iraq, but revenues are weak given currently
administered low tariff rates. Tariff rates for light users of electricity (up to 1000 KWH) are roughly
ID 10 ($0.009) per KWH, and the structure is progressive, with tariffs rising to ID 50 per KWH for the
largest consumers. Nevertheless, overall revenues are low, covering only 10 percent of total
production costs. Currently, Iraq is ranked among the cheapest Arab countries in the Middle East in
terms of electricity prices.
Source: Ministry of Electricity
0%
5%
10%
15%
20%
25%
30%
35%
From production from transmission from distribution
Electricity Losses by Phase: 2011-2014
(Share in total production, by year)
2011 2012 2013 2014 est.

25. IRAQ
INTERNATIONAL MONETARY FUND 23
23. Electricity costs are high amid production cost rigidities and large fuel input and
import content. Electricity production costs doubled within a span of just three years (2011–13).
Total and unit costs rose, respectively, from ID 3.5 to ID 7 trillion and from ID73 / KWH to
ID122/KWH. Costs reflect mainly production, transmission, and distribution expenses, and include
wages and salaries of personnel, material purchases (e.g., fuel and oil for generation in some power
plants), and contracting services, among others. Costs also vary by generation type (gas, hydro-
power, etc). Rigidities prevail in the production costs structure; while the cost of input materials in
the production phase comprise the largest cost, expenses related to wages and salaries in the
distribution and transmission phases form the bulk of operational spending. Meanwhile, 16 percent
of electricity is imported, mostly through Iran’s grid.
24. As a result, subsidies are large and rising. The cost to subsidize electricity almost tripled
from 2011 to 2013, with the total electricity subsidy bill estimated by staff at ID 9 trillion in 2014
(3.4 percent of GDP and 8 percent of total budget expenditure). The estimate includes the
production subsidy arising from the artificially low price of fuel used as input by the electricity grid
in electricity generation.5
Electricity subsidies benefit a wide range of end-users, but particularly
households (residential sector) and government, in addition to an industrial share of 15–20 percent
of total subsidy, and much less for commercial activity and agricultural users. The share of subsidies
going to households has declined over time while that for the government has increased (Figure).
5
The estimate does not include some costs for which adequate information was not available, such as investment for
the expansion of the existing grid, construction of new electricity lines, infrastructure, etc.
Source: RCREEE.
Cross-Country Comparison of Electricity Prices, 2014
1
1
Residential prices based on a 500 KWH average monthly consumption; Commercial prices on 1,500 KWH, and Industrial prices on a 30,000
KWH average monthly consumption.
(In US$ / KWH)
0
2
4
6
8
10
12
14
16
18 Tunisia
Morocco
Jordan
UAE
Algeria
Sudan
Lebanon
Yemen
Egypt
Oman
Qatar
Libya
SaudiArabia
Iraq
Bahrain
Kuwait
Residential Commercial Industrial

26. IRAQ
24 INTERNATIONAL MONETARY FUND
25. The electricity sector is affected by several financial issues:
a. Non-payment of electricity tariffs by consumers. The authorities report rampant tariff
evasion by end-users, often justified because of poor-quality (and intermittent) service, which
forces many consumers to rely on private providers of electricity generators for their power
supply. In addition, many public or state-owned entities are delinquent. Non-compliance is
made easier by the poor consumption monitoring by electricity companies.
b. Ministry of Oil-Ministry of Electricity cross-debt. During 2013 and 2014, lack of
reconciliation between the Ministry of Electricity and the Ministry of Oil over the exact quantities
of petroleum products delivered as inputs for electricity generation has resulted in dues on the
electricity sector to the budget worth ID 4 trillion (according to the MoE).
c. Inadequate coverage of electricity subsidies by the federal budget. The MoE estimates
the annual cost of subsidies on the budget for electricity purposes at roughly ID 10 Trillion
(which is broadly consistent with staff’s estimate). However, the MoF’s current transfers
(ID 314 billion in 2014) besides other capital investments for the sector have been recently
insufficient to cover MoE’s total costs, which resorts to independent borrowing and
postponement of non-essential expenses. In addition, the government does not explicitly record
the total subsidy costs on budget as a clear line item.
d. Investment in recent years favored production capacity over transmission and
distribution. Investment in electricity over the past decade focused on the production phase,
leading to bottlenecks in distribution networks over the years and inability of networks to
accommodate such high (growing) production capacities.
26. The expected cost of rehabilitation and expansion of the electricity sector in the
coming years is high. The MoE estimates the cost of expanding the electricity sector to meet rising
electricity/power demand over the next five years at $25 billion. Of this, $6.7 billion would be
needed for additional electricity generation, $8.6 billion for transmission, and $9.6 billion for
distribution. However, international investment—so far mostly financed by donors such as the Japan
International Cooperation Agency—remains very limited, as poor security conditions keep away
international investors.

27. IRAQ
INTERNATIONAL MONETARY FUND 25
Current and Prospective Transmission and Distribution Requirements to Meet Electricity
Demand by 2020
Electricity Reform Scenarios: Redesigning the Tariff Structure, Cutting Costs, and
Improving Payment Compliance
27. The authorities are planning to reform electricity tariffs. Under the current tariff
structure, subsidies are projected to rise to ID 10 trillion (5 percent of GDP) in 2015 and about
ID 18 trillion (5.4 percent of GDP) by 2020. The authorities recognize that this subsidy level is
unsustainable financially, but also that it prevents adequate investment in the sector and ultimately
does not allow meeting the growing demand. As a first step to address subsidies, the government
intends to raise the tariff structure and make it more progressive by introducing new consumption
(Number)
Source: Ministry of Electricity
Transmission Grid: Current number of stations and new
required additions to the network until 2020.
0
2
4
6
8
10
12
14
Baghdad
Basra
SalahAl-Din
Anbar
Waset
Thi-kar
Najaf
Nineveh
Misan
Alqadesiyya
Karbalaa
Dialy
Babylon
Almuthana
Kirkuk
Additionalstations
Existingstations
(MVA)
Source: Ministry ofElectricity
Transmission Grid: Current Installed Capacity and new
required additions to the network until 2020.
0
2000
4000
6000
8000
10000
12000
Baghdad
Basra
SalahAl-Din
Anbar
Waset
Thi-kar
Najaf
Nineveh
Misan
Alqadesiyya
Karbalaa
Dialy
Babylon
Almuthana
Kirkuk
Additionalcapacity
Existingcapacity
(Number)
Source: Ministry ofElectricity
Distribution: Medium-power network: Current number of stations
and new required additions to the network until 2020.
0
50
100
150
200
250
300
350
400
Baghdad Middle Mid-furat North South
Additionalstationsrequired
Existing stations
(MVA)
Source: Ministry ofElectricity
Distribution: Medium-power network: Current installed capacity
and new required additions to the network until 2020.
0
5000
10000
15000
20000
Baghdad Middle Mid-furat North South
Additionalcapacity required
Existing capacity

28. IRAQ
26 INTERNATIONAL MONETARY FUND
brackets for high-end users. This is designed to minimize the social impact on poor segments, for
example on low-income households (where the tariff increase will only be marginal on the two
lowest consumption brackets).6
Tariff increases will be steep for the government sector. A previous
attempt to raise tariffs in the first half of 2015 had to be abandoned as Parliament increased the
original tariff structure proposal by the MoE, thus generating political backlash and rejection of the
reform. The proposal currently under consideration is closer to the MoE original proposal and hence
more realistic (Table).
6
Simulations prepared by the World Bank confirm that the impact on the lowest consumption segments would be
minimal, even though data availability may affect these results.
Source: Ministry of Electricity
Electricity Tariffs: Proposed New, and Old Structures
Consumption bracket Tariff (ID/KWH) Consumption bracket Tariff (ID/KWH)
Residential Residential
1-1000 10 1-500 10
1001-2000 20 501-1000 10
2001-4000 30 1001-1500 20
4000- 50 1501-2000 40
2001-3000 80
3001-4000 120
4001- 200
Industrial Industrial
1-1000 10 0.4 KV 100
1001-2000 20 11 KV 100
2001-4000 30 33 KV 100
4000- 50 132 KV 100
Commercial Commercial
1-1000 10 1-1000 100
1001-2000 20 1001-2000 125
2001-4000 30 2001-3000 150
4000- 50 3000-4000 200
4000- 225
Government (Public entities) Government (Public entities)
1-1000 10 1-5000 125
1001-2000 20 5001-10000 150
2001-4000 30 10001-20000 175
4000- 50 20001-40000 200
40001- 225
Agriculture Agriculture
1-1000 10 Unified (one) bracket 100
1001-2000 20
2001-4000 30
4000- 50
Old structure New structure

29. IRAQ
INTERNATIONAL MONETARY FUND 27
28. The proposed tariff reform scenario is expected to generate ID 5–7 trillion in gross
annual subsidy savings in 2015-16, which should allow phasing out subsidies almost
completely by 2019. The new tariff structure would raise the highest tariff rate to ID 200 per KWH
for households, ID 225 for commercial and government sectors, and to a flat rate of ID 100 for
industry and agriculture. Based on data from the authorities, the estimated gross subsidy savings to
the ministry of electricity—built on a one-time tariff increase—are estimated to amount to some
ID 5 trillion in 2015, and to start being almost completely removed as early as 2019. A small annual
surplus starting 2020 is estimated, beyond which the electricity sector is expected to generate
increasing annual surpluses. Given the bulk of consumption falls in the higher tariff brackets,
average revenues increase over time and drive the reduction in subsidies, assuming all consumption
brackets grow at the same rate (unit production costs are assumed to remain constant). It is
noteworthy that much of the subsidy savings accruing to the government sector will be an
additional cost to it as well (given higher tariffs levied), implying less savings realized on a net basis.
The scenarios that follow are presented on gross basis.
29. In the following analysis, four alternative reform scenarios simulate the evolution of
the subsidy bill in 2015 and over the medium term. Each simulation illustrates results from
combining the new tariff structure with one other reform measure, benchmarked on the current
system (baseline). Scenario A looks at impact of consumption savings, Scenario B covers improved
cost efficiency and Scenario C examines improved fee payment compliance. The last scenario shows
the impact of undertaking all these variants simultaneously.
 Scenario A: Combining lower consumption (due to higher tariff rates) with higher tariffs.
Given the large increases in tariffs for the middle-high users, even a very small elasticity has
large effects on these users’ consumption and on revenues. For illustrative purposes, the
scenario assumes an elasticity of –0.02 percent of consumption to tariff increases, with the
impact concentrated in households and government, the two highest-usage categories (in the
baseline and simple tariff reform scenarios, zero elasticity is assumed given the repression of
demand). Results under this scenario—when compared to the baseline of no reform—yield
savings estimated at ID 4.5 trillion in 2015, which is lower than under the simple tariff reform
scenario (without consumption rationing) because consumption in the higher-tariff brackets is
lower. Over the projection horizon, consumption grows from a lower base, and at slower annual
pace compared to the baseline and simple-tariff reform scenarios. Therefore, subsidies still
increase, yet compared to the baseline of no reform the base effect will still yield sizable savings
on an annual basis because of the base effect.
 Scenario B: Combining cost efficiency measures with the new tariff structure: This scenario
assumes that the MoE is also able to undertake some cost saving measures leading to a
10 percent reduction in operational expenses (bringing costs down by an additional 7 percent
compared to the simple tariff reform scenario). In comparison with the baseline scenario, this
reduces further the subsidy bill to create estimated savings of ID 6.0 trillion in 2015. Over the
medium term, subsidies are eliminated starting in 2019, and by 2020, the projected electricity
sector surplus converges to ID 4 trillion.

30. IRAQ
28 INTERNATIONAL MONETARY FUND
 Scenario C: Combining improvements in fee payment compliance with higher tariffs: This
scenario assumes better compliance through, for instance, better service provision and/or more
stringent penalties for noncompliance and enhanced monitoring capacity by the MoE. This
scenario estimates subsidy bill savings over the baseline scenario in the neighborhood of
ID 5.8 trillion over 2015, with a small surplus starting in 2019 and increasing to ID 3.8 trillion
by end of the projection horizon.
 Finally, a combined reform scenario takes into account the new tariff structure,
consumption rationalization, cost efficiency and better compliance simultaneously. This
scenario yields estimated savings of ID 5.7–6.7 trillion in the short term (2015–16) compared
with the baseline scenario, with the subsidy burden continuing in outer years, to around
ID 6 trillion by 2020.
30. These results underline that tariff reform should be deepened and complemented by
reform in cost structure, institutional framework, tariff collection, investment and renewable
energy.
 The tariff structure may need to be gradually increased further in the future, and should be
linked to costs or energy price benchmarks, as well as to appropriate mitigating measures.
 Production costs need to be reduced through technical and organizational restructuring along
the production-transmission-distribution chain.
 Institutional framework:
a. The true cost of subsidies needs to be reflected on-budget. The transfers from MoF to
MoE reflect only a portion of the true subsidy burden on MoF accounts. Explicit recording
of subsidy costs on budget is essential to give a comprehensive and transparent view of the
financial interrelationship between MoF and MoE and compensate financial losses of the
MoE which are the result of government policy.
Source: Ministry of Electricity and IMF Staff calculations.
(20)
(15)
(10)
(5)
-
5
2015 2016 2017 2018 2019 2020
Baseline (no reform)
Tariff Reform Scenario
Tariff Reform plus Consumption saving
scenario
Tariff Reform plus Cost cutting scenario
Tariff Reform plus Better compliance scenario
Tariff Reform plus Combined Reform scenario
Subsidy Estimates Under Alternative Electricity Tariff Reform Scenarios: 2015-2020 1
(Trillion Dinars; negative values denote subsidy)
1 Tariff reform based on authorities'design ofthe newly proposed tariffrates structureand electricity consumption brackets.

31. IRAQ
INTERNATIONAL MONETARY FUND 29
b. Intra-government debts need to be addressed, and resolved, by means of an agreement
among all stakeholders to settle dues simultaneously (for example through an exchange of
checks).
c. Some companies in the sector are inefficient and will need to be reformed.
 Stronger compliance for payments of electricity bills. The MoE should start strengthening its
monitoring capacity, including over state entities which continue to fail to pay their dues. This
should be done in close coordination and collaboration with the ministerial cabinet and legal
apparatus, as well as enforcement through stringent penalties for non-compliance/evasion
(including with the support of the Ministry of Interior).
 Investment in the electricity sector. Given limited available resources to invest in new
infrastructure and power plants, a portion of subsidies saved should be devoted to support
investment.
 Cooperation and coordination with other state entities. Strengthened cooperation among
MoF, MoE and the Ministry of Planning on the choice and implementation of electricity-related
investment projects and its funding options, would be crucial to ensure effective execution,
follow-up, and to prevent recurrence of mismatches in investment spending between
production, transmission and distribution phases.
 Renewable energy sources and integration with regional electricity networks. The
authorities should continue exploring how best gains from renewable energy can be harnessed,
and consider prospects of integration in regional energy markets to raise electric power
provision to adequacy levels (e.g., link with GCC electricity grid) and exploring synergies across
other regions (such as links with the European Union to harness the different peak load times
between the regions, provided such connections are viable and feasible).

32. IRAQ
30 INTERNATIONAL MONETARY FUND
References
Arab Future Energy Index (AFEX), 2015, Regional Center for Renewable Energy and Energy Efficiency
(RCREEE).
International Monetary Fund, 2014, “Subsidy Reform in the Middle East and North Africa: Recent
Progress and Challenges Ahead,” (Washington: IMF, Middle East and Central Asia Department).
———, 2015a, “Fiscal Monitor: Now is the Time—Fiscal Policies for Sustainable Growth,”
(Washington: IMF, Fiscal Affairs Department).
———, 2015b, “Saudi Arabia: Tackling Emerging Economic Challenges to Sustain Growth,”
(Washington: IMF, Middle East and Central Asia Department)
USAID, 2006, “Iraq in Perspective—An Analysis of What Does and What Does Not work in a
Transitional State: How to Make Subsidy Reform Work in a Transitional State.”
United Nations, 2014, “Food and Agriculture Organization (FAO), Food and Agriculture Policy
Decisions: Trends, Emerging Issues and Policy Alignments since the 2007/08 Food Security
Crisis.”
World Bank, COSIT, and KRSO, 2007, Household Socio-Economic Survey, Iraq.
———, 2011, Iraq: Rationalization of the Universal Public Distribution System. Concept Note
———, 2014, “Republic of Iraq: Public Expenditure Review—Toward More Efficient Spending For
Better Service Delivery.”

33. © 2015 International Monetary Fund
IMF Country Report No. 15/235
IRAQ
2015 ARTICLE IV CONSULTATION AND REQUEST FOR
PURCHASE UNDER THE RAPID FINANCING
INSTRUMENT—PRESS RELEASE; STAFF REPORT; AND
STATEMENT BY THE EXECUTIVE DIRECTOR FOR IRAQ
In the context of the Staff Report for the 2015 Article IV Consultation and Request for
Purchase Under the Rapid Financing Instrument, the following documents have been
released and are included in this package:
 Press Releases including a statement by the Chair of the Executive Board and
summarizing the views of the Executive Board as expressed during its July 29, 2015
consideration of the staff report on issues related to the Article IV Consultation and
Request for Purchase Under the Rapid Financing Instrument.
 The Staff Report prepared by a staff team of the IMF for the Executive Board’s
consideration on July 29, 2015, following discussions that ended on June 5, 2015, with
the officials of Iraq on economic developments and policies. Based on information
available at the time of these discussions, the staff report was completed on
July 10, 2015.
 An Informational Annex prepared by the IMF staff.
 A Staff Supplement updating information on recent developments.
 A Statement by the Executive Director for Iraq.
The document listed below will be separately released.
Selected Issues*
The IMF’s transparency policy allows for the deletion of market-sensitive information and
premature disclosure of the authorities’ policy intentions in published staff reports and
other documents.
Copies of this report are available to the public from
International Monetary Fund  Publication Services
PO Box 92780  Washington, D.C. 20090
Telephone: (202) 623-7430  Fax: (202) 623-7201
E-mail: publications@imf.org Web: http://www.imf.org
Price: $18.00 per printed copy
International Monetary Fund
Washington, D.C.
August 2015

34. Press Release No. 15/382
FOR IMMEDIATE RELEASE
August 18, 2015
IMF Executive Board Concludes 2015 Article IV Consultation with Iraq
On July 29, the Executive Board of the International Monetary Fund (IMF) concluded the 2015
Article IV consultation1
with Iraq.
Iraq is facing a double shock arising from the ISIS insurgency and the plunge in global oil prices.
In 2014, real GDP contracted by 2.1 percent mainly due to the impact of the conflict, while oil
production and exports increased slightly compared to 2013. This year, overall economic activity
is expected to see a modest recovery of 0.5 percent thanks to oil sector expansion, while non-oil
activity is expected to contract further.
The decline in oil prices has driven the decline of Iraq’s international reserves (including the
Development Fund for Iraq) from $84 billion at end-2013 to $67 billion at end-2014. Fiscal
pressures are intensifying, with the government deficit expected to expand from 5.3 percent of
GDP last year to 18.4 percent of GDP in 2015 due to continuing weak oil prices and rising
humanitarian and security spending.
The authorities have appropriately maintained the exchange rate peg. Liberalization steps taken
by the Central Bank of Iraq led to a decline in the parallel market spread to less than 2 percent by
end-2014. The imposition of new restrictions triggered significant market volatility and a sharply
wider spread in the first months of this year, but their recent removal has helped narrow the
spread back to 4 percent by July.
Medium term growth prospects remain positive, though less favorable than before the crisis.
Growth will be driven by the projected ramp-up in oil production and the rebound in non-oil
growth supported by the expected improvement in security and implementation of structural
reform. Risks remain very high, however, arising primarily from an escalation of the conflict,
political tensions, and poor policy implementation.
1
Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually
every year. A staff team visits the country, collects economic and financial information, and discusses with officials
the country's economic developments and policies. On return to headquarters, the staff prepares a report, which
forms the basis for discussion by the Executive Board.
International Monetary Fund
700 19th
Street, NW
Washington, D. C. 20431 USA

35. 2
The Fund is supporting Iraq through a disbursement under the Rapid Financing Instrument in the
amount of SDR 891.3 million ($1.242 billion), equivalent to 75 percent of quota2
.
Executive Board Assessment3
Directors noted the severity of the double shock facing Iraq as a result of the continuing ISIS
insurgency and the global oil price decline. The risks remain very high, emanating from an
extension of the conflict, political tensions, weak policy implementation, and further shocks from
oil markets. In this context, Directors noted that the steps taken by the authorities are in the right
direction, but urged further determined efforts to address the large financing gap and maintain
the momentum for reforms.
Directors welcomed the 2015 budget as a good step toward addressing pressures from lower oil
revenues amid higher humanitarian and security spending, and commended the introduction of
new revenue measures. While recognizing that the current adjustment plans may be socially and
politically challenging, Directors saw a need for additional measures to help close the large
financing gap and build fiscal buffers. Some Directors expressed disappointment over the delay
in implementing the electricity tariff reform. In this regard, Directors welcomed the authorities’
commitment to implement the reform as soon as possible or adopt compensatory fiscal measures.
They also recommended expenditure rationalization while safeguarding priority social and
capital spending and making social safety nets more efficient. Directors urged the authorities to
tap domestic markets and seek further external financial support, while avoiding the buildup of
domestic and external arrears. Over the medium term, strengthening public financial and debt
management will be crucial.
Directors noted that indirect central bank financing of the government is necessary at this
juncture given the lack of other sources of financing, but stressed that this should not become a
recurring source of financing. They, therefore, welcomed the authorities’ intention to firmly limit
such support and clarify the terms of the related financial operations between the central bank,
the state-owned banks, and the government. Directors supported the authorities’ commitment to
maintain the exchange rate peg, which has served as a sound nominal anchor for Iraq. They also
welcomed the steps taken to liberalize the foreign exchange market and urged the removal of
remaining exchange restrictions and multiple currency practice as external conditions evolve.
2
The Executive Board approved the Rapid Financing Instrument for Iraq on July 29, 2015 (see Press Release
No. 15/363)
3
At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of
Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers
used in summings up can be found here: http://www.imf.org/external/np/sec/misc/qualifiers.htm.

36. 3
Directors underscored the risks from rising tensions in the banking system arising from the
impact of the crisis on the assets and activity of private banks, and the increasing role of
state-owned banks in financing the government. In this regard, they welcomed the steps taken to
strengthen banking supervision and the authorities’ commitment to press ahead with the
restructuring of Rasheed and Rafidain banks. Directors emphasized the importance of bringing
Iraq’s frameworks for combating corruption, money laundering, and terrorism financing in line
with international standards and implementing them effectively.
Directors welcomed the authorities’ recognition of the need to maintain the momentum on
restructuring the economy despite the current difficulties, and emphasized the importance of
staying committed to reforms. They highlighted the need to diversify the economy and improve
the resilience and inclusiveness of economic growth. They supported the focus on strengthening
fiscal institutions, completing the transition to a market economy through further private banking
sector development and state-owned enterprise restructuring, and improving the business
environment, governance, and the labor market. In this context, they noted the need for Fund
technical assistance in strengthening Iraq’s institutions. Recognizing the difficult circumstances,
Directors agreed that a realistic implementation timeline is important, while pressing ahead with
high-priority reforms. Looking ahead, a forward-looking policy framework could help the
adjustment process and allow the authorities to build a track record of strong policy
implementation.

37. 4
Table 1. Iraq: Selected Economic and Financial Indicators, 2012–20
(Quota: SDR 1,188.4 million / 0.5 percent of total)
(Population: 33.4 million; 2013)
(Poverty rate: 23 percent, 2014)
(Main export: Crude oil)
2012 2013 2014 2015 2016 2017 2018 2019 2020
Actual Actual Prel. Proj. Proj. Proj. Proj. Proj. Proj.
Economic growth and prices
Real GDP (percentage change) 13.9 6.6 -2.1 0.5 7.6 8.1 7.6 7.5 7.1
Non-oil real GDP (percentage change) 15.0 10.2 -8.8 -11.2 2.0 3.0 4.0 5.0 5.0
GDP deflator (percentage change) 2.7 0.1 -1.8 -22.4 5.1 3.6 2.6 1.7 1.3
GDP per capita (US$) 6,693 6,957 6,520 4,960 5,470 5,971 6,421 6,843 7,241
GDP (in US$ billion) 218.0 232.5 223.5 174.4 197.3 220.9 243.7 266.4 289.1
Oil production (mbpd) 1/ 3.0 3.0 3.1 3.4 3.8 4.3 4.7 5.1 5.5
Oil exports (mbpd) 2/ 2.4 2.4 2.5 3.1 3.3 3.6 3.8 4.1 4.4
Iraq oil export prices (US$ pb) 106.7 102.9 97.0 54.7 62.0 67.1 69.9 71.0 71.5
Consumer price inflation (percentage change; end of period) 3.6 3.1 1.6 3.0 3.0 3.0 3.0 3.0 3.0
Consumer price inflation (percentage change; average) 6.1 1.9 2.2 2.1 3.0 3.0 3.0 3.0 3.0
(In percent of GDP)
National Accounts
Gross domestic investment 22.1 27.0 26.1 29.8 27.3 25.8 26.0 25.2 25.9
Of which: public 13.2 17.6 19.0 21.6 19.7 18.6 19.1 18.3 19.1
Gross domestic consumption 69.4 69.5 74.7 78.5 77.1 73.3 72.0 72.6 72.3
Of which: public 20.7 21.2 19.0 25.9 23.1 21.3 20.2 19.4 18.7
Gross national savings 28.8 28.3 23.3 21.3 20.4 26.4 27.9 27.4 27.8
Of which: public 17.9 11.6 13.7 3.4 9.6 15.7 18.3 19.9 22.9
Saving - Investment balance 6.7 1.3 -2.8 -8.6 -6.9 0.6 1.8 2.2 1.9
(In percent of GDP, unless otherwise indicated)
Public Finance
Government revenue and grants 47.0 42.6 40.1 40.8 43.3 44.4 45.0 44.8 46.6
Government oil revenue 43.4 39.0 37.8 35.9 38.7 40.0 40.7 40.6 42.4
Government non-oil revenue 4.0 3.6 2.3 4.8 4.6 4.4 4.3 4.2 4.2
Grants 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Expenditure, of which: 42.9 48.4 45.4 59.2 53.6 47.6 46.1 43.8 43.2
Current expenditure 29.7 30.9 26.4 37.6 33.9 29.0 27.0 25.4 24.1
Capital expenditure 13.2 17.6 19.0 21.6 19.7 18.6 19.1 18.3 19.1
Primary fiscal balance 4.5 -5.5 -5.0 -17.4 -8.9 -1.2 0.8 2.8 5.0
Overall fiscal balance (including grants) 4.1 -5.8 -5.3 -18.4 -10.3 -3.2 -1.1 1.0 3.5
Non-oil primary fiscal balance (percent of non-oil GDP) -64.0 -68.7 -60.0 -68.6 -61.8 -59.0 -58.6 -55.6 -55.4
Memorandum items:
Tax revenue/non-oil GDP (in percent) 2.1 2.0 1.8 3.6 3.8 3.8 3.8 3.8 3.8
Development Fund of Iraq/MoF US$ account (in US$ billions) 3/ 18.1 6.5 0.9 1.0 1.0 1.0 1.0 1.0 6.3
Total government debt (in percent of GDP) 34.7 31.9 38.9 70.0 74.0 68.7 63.3 57.0 49.1
Total government debt (in US$ billion) 75.7 74.3 87.0 122.1 145.9 151.8 154.4 151.9 141.9
External government debt (in percent of GDP) 27.7 25.5 28.8 37.0 35.5 31.0 26.6 22.8 19.8
External government debt (in US$ billion) 60.3 59.2 64.3 64.5 69.9 68.4 64.9 60.9 57.4
(In percent, unless otherwise indicated)
Monetary indicators
Growth in reserve money 8.3 12.6 -9.6 -1.0 -6.5 10.0 10.0 10.0 10.1
Growth in broad money 3.4 16.7 3.6 17.5 8.7 13.5 12.7 11.1 10.3
Policy interest rate (end of period) 6.0 6.0 6.0 … … … … … …
(In percent of GDP, unless otherwise indicated)
External sector
Current account 6.7 1.3 -2.8 -8.6 -6.9 0.6 1.8 2.2 1.9
Trade balance 14.3 9.5 6.6 -1.3 2.6 7.1 8.2 8.4 8.4
Exports of goods 43.2 38.5 37.4 35.6 38.3 39.6 40.4 40.2 42.1
Imports of goods -28.9 -29.0 -30.9 -36.9 -35.8 -32.6 -32.2 -31.9 -33.7
Overall external balance 4.4 -1.3 -7.6 -13.6 -7.9 0.1 1.7 2.7 2.5
Gross reserves (in US$ billion) 4/ 69.3 77.8 66.7 50.4 41.5 41.7 45.6 52.8 60.0
In months of imports of goods and services 9.8 10.4 9.9 6.9 5.5 5.1 5.2 5.2 5.2
Exchange rate (dinar per US$; period average) 1,166 1,166 1,166 … … … … … …
Real effective exchange rate (percent change, end of period) 5/ -1.7 6.5 4.6 … … … … … …
Sources: Iraqi authorities; and Fund staff estimates and projections.
1/ Does not reflect KRG production during 2013 and 2014.
2/ Reflects KRG exports through State Organization for Marketing Oil (SOMO).
3/ Reflects the balances of the Development Fund of Iraq which were moved from the Federal Reserve Bank of New York to the CBI as a US$ account
(US$ balances from oil revenues) in May 2014.
4/ Starting 2014 includes US$ account balances from oil revenues.
5/ Positive means appreciation.

38. Press Release No.15/363
FOR IMMEDIATE RELEASE
July 30, 2015
IMF Executive Board Approves US$1.24 Billion in Financial Support for Iraq
On July 29, 2015, the Executive Board of the International Monetary Fund (IMF) approved
SDR 891.3 million (about US$1.24 billion or 75 percent of quota) for Iraq under the Rapid
Financing Instrument (RFI)1
. The purpose of this financial assistance is to help Iraq address
present and urgent balance of payment and budget needs in 2015 related to the ISIS
insurgency and a decline in oil prices. The IMF financing will support the authorities’ current
economic program, which includes fiscal adjustment measures and structural reforms.
Following the Executive Board’s discussion of Iraq, Mr. Mitsuhiro Furusawa, IMF Deputy
Managing Director and Acting Chair of the Board, issued the following statement:
“The twin shocks faced by Iraq from the ISIS insurgency and the drop in global oil prices
have severely widened the government deficit and caused a decline in international reserves.
The authorities’ policies to deal with the shocks, including sizable fiscal adjustment and
maintenance of the exchange rate peg, go in the right direction. Access under the IMF’s
Rapid Financing Instrument will help address Iraq’s urgent balance of payments and budget
needs. However, large fiscal and external financing gaps remain.
“The large financing gap calls for the rigorous implementation of the authorities’ policies,
but also additional fiscal adjustment measures and identification of domestic and internal
financing. In this context, it will be important to implement the new electricity tariff schedule
as soon as possible, or adopt compensatory measures. Looking ahead, the authorities should
lay the ground for medium-term structural reforms that would better support macroeconomic
policy management and boost the economy’s resilience to shocks.”
1
The RFI provides rapid and low-access financial assistance to member countries facing an urgent balance of
payments need, without the need to have a full-fledged program in place. It can provide support to meet a broad
range of urgent needs, including those arising from commodity price shocks, natural disasters, conflict and post-
conflict situations, and emergencies resulting from fragility. Access under the RFI is limited to 75 percent of
quota per year and 150 percent of quota on a cumulative basis. Financial assistance under the RFI is provided in
the form of outright purchases without the need for a full-fledged program or reviews.
International Monetary Fund
Washington, D.C. 20431 USA

39. IRAQ
STAFF REPORT FOR THE 2015 ARTICLE IV CONSULTATION
AND REQUEST FOR PURCHASE UNDER THE RAPID
FINANCING INSTRUMENT
KEY ISSUES
Context: Iraq is facing a double shock arising from the ISIS insurgency and the sharp drop
in global oil prices. The conflict is hurting the non-oil economy through destruction of
infrastructure and assets, disruptions in trade, and deterioration of investor confidence. The
impact of the oil price decline—already felt in 2014—will fully unfold in 2015, affecting the
budget, the external sector, and medium-term growth potential. The authorities are
responding to the crisis through mix of fiscal adjustment and financing, maintaining their
commitment to the exchange rate peg.
Rapid Financing Instrument: To help address the present and urgent balance of payment
and budget needs triggered by the ISIS insurgency and the collapse in oil prices, the
authorities have requested financial assistance under the Rapid Financing Instrument (RFI)
for 50 percent of quota (SDR 594.2 million).
Outlook and Risks: Assuming a resolution of the conflict in the coming years, the baseline
medium-term outlook still looks positive, even though it would be significantly less
favorable than at the time of the 2013 Article IV report. Under much improved security
conditions, the macroeconomic scenario would continue to be driven by the expansion in oil
production and non-oil sector growth, assuming the implementation of structural reform to
diversify the economy and support private sector development. But risks remain very high,
arising primarily from a worsening of the conflict, political tensions, and poor policy
implementation.
Key Article IV Policy Recommendations:
 In 2015, strong fiscal consolidation is needed to address the fall in oil revenues and
contain central bank financing to the budget.
 In the medium term, continued fiscal discipline, supported by stronger public financial
management, will be essential to raise investment and eventually rebuild fiscal buffers.
 The exchange rate peg remains appropriate, but the authorities should press ahead
with the gradual liberalization of the foreign exchange market.
 Close monitoring of the financial sector is warranted in light of the impact of the
conflict, the state-owned banks’ financing of the budget, and AML/CFT shortcomings.
 The authorities should continue to pursue medium-term structural reform, including:
strengthening public financial management and governance and streamlining public
spending; improving the business environment and restructuring state-owned
enterprises; and promoting private sector job creation.
July 10, 2015

40. IRAQ
2 INTERNATIONAL MONETARY FUND
Approved By
Aasim M. Husain and
Taline Koranchelian
Discussions took place in Amman during March 6–15 and May 26–
June 5, 2015. Staff representatives comprised C. Sdralevich (head),
K. Gvenetadze (advance team lead), A. Hegazy (all MCD), C. Blair,
C. El Khoury (all LEG), C. Baba (MCM), C. Kneer (SPR), M. Al Nasaa
(Resident Representative). M. Choueiri (Senior Advisor, OED) joined
the missions. M. Orihuela-Quintanilla and Y. Liu assisted in the
preparation of the report.
CONTENTS
Glossary ____________________________________________________________________________________________4
BACKGROUND: A DOUBLE-EDGED CRISIS _____________________________________________________ 5
A. Crisis Triggers ___________________________________________________________________________________5
B. Recent Developments and Short-Term Outlook_________________________________________________7
C. Medium-Term Outlook and Risks _____________________________________________________________ 12
ECONOMIC POLICIES TO ADDRESS THE CRISIS _______________________________________________ 15
A. Managing the Fiscal Crisis _____________________________________________________________________ 15
B. Addressing External Pressures _________________________________________________________________ 17
C. Monitoring Financial Risks_____________________________________________________________________ 19
STRUCTURAL REFORM FOR DIVERSIFIED, INCLUSIVE GROWTH_____________________________ 22
A. Stronger Institutions to Support Fiscal Discipline and Oil Revenue Management_____________ 22
B. A Diversified Economy and a Bigger Role for the Private Sector ______________________________ 24
C. More Inclusive Growth_________________________________________________________________________ 26
PURCHASE UNDER THE RAPID FINANCING INSTRUMENT __________________________________ 27
STAFF APPRAISAL ______________________________________________________________________________ 29
BOXES
1. Humanitarian Conditions in Iraq_________________________________________________________________6
2. Why Oil Production and Exports Have Held Up Despite the Conflict ____________________________8
3. Strengthening the Anti-Money Laundering and Combating the Financing of Terrorism
(AML/CFT) and Anti-Corruption Frameworks in Iraq _________________________________________ 21
4. Subsidy Systems in Iraq________________________________________________________________________ 23

41. IRAQ
INTERNATIONAL MONETARY FUND 3
FIGURES
1. Macroeconomic Indicators ____________________________________________________________________ 11
2. Downside Scenario (20 percent lower oil price in 2016) vs. Baseline __________________________ 14
3. Business Environment and Governance Indicators_____________________________________________ 25
TABLES
1. Selected Economic and Financial Indicators, 2012–20 _________________________________________ 32
2. Central Government Fiscal Accounts, 2012–20 (In trillions of ID) ______________________________ 33
3. Central Government Fiscal Accounts, 2012–20 (In percent of GDP) ___________________________ 34
4. Central Bank Balance Sheet, 2012–16__________________________________________________________ 35
5. Monetary Survey, 2012–16 ____________________________________________________________________ 36
6. Balance of Payments, 2012–20_________________________________________________________________ 37
7. External Financing Requirements and Sources, 2015–17 ______________________________________ 38
8. Indicators of Fund Credit, 2012–20 ____________________________________________________________ 39
ANNEXES
I. Risk Assessment Matrix_________________________________________________________________________ 49
II. External Assessment ___________________________________________________________________________ 51
III. Public and External Debt Sustainability Analysis (DSA)________________________________________ 53
APPENDIX
I. Letter of Intent _________________________________________________________________________________ 40

42. IRAQ
4 INTERNATIONAL MONETARY FUND
Glossary
AML/CFT Anti Money Laundering/Combating the Financing of Terrorism
CAMELS Capital Adequacy, Assets, Management Capacity, Earnings,
Liquidity, Sensitivity
CBI Central Bank of Iraq
CPI Consumer Price Index
DSA Debt Sustainability Analysis
DFI Development Fund for Iraq
EBA-lite External Balance Assessment
GDP Gross Domestic Product
GST General Sales Tax
ID Iraqi Dinar
IDP Internally Displaced Persons
IFMIS Integrated Financial Management Information System
IOCs International Oil Companies
IMF International Monetary Fund
ISIS Islamic State of Iraq and Syria
KRG Kurdistan Regional Government
Mbpd million barrels per day
MCP Multiple Currency Practice
MENAFATF Middle East and North Africa Financial Action Task Force
MOF Ministry of Finance
MOU Memorandum of Understanding
OPEC Organization of the Petroleum Exporting Countries
PDS Public Distribution System
PFM Public Financial Management
RFI Rapid Financing Instrument
SMP Staff Monitored Program
USAID United States Agency for International Development

43. IRAQ
INTERNATIONAL MONETARY FUND 5
BACKGROUND: A DOUBLE-EDGED CRISIS
A. Crisis Triggers
1. Iraq is facing an existential threat from the ISIS insurgency and a large external shock
from the collapse in oil prices. The insurgency that started in June 2014 is putting the political and
social structure of the country under unprecedented stress. Almost simultaneously, the Iraqi
economy—highly dependent on hydrocarbons—has been hit by the fastest decline in oil prices in
five years, with severe consequences for its external position, budget revenues and fiscal space.
2. One year into the conflict, ISIS remains
firmly entrenched in Iraq. Since last summer,
government forces have retaken some of the ISIS-
controlled territory, but progress has been slow and
the recent loss of the key city of Ramadi shows that
the fight against ISIS is likely to be protracted. The
conflict has also created a humanitarian crisis
(Box 1).
3. As the insurgency was expanding, world
oil prices started a dramatic decline. Its impact on
Iraq has been particularly intense given Iraq’s
extreme dependence on oil. In 2014, oil exports
represented almost 100 percent of total exports; oil
sector GDP was more than 50 percent of the total
(with much of the non-oil activity indirectly driven
by oil revenues); and oil exports constituted over
93 percent of government revenues.
4. The two shocks are affecting all aspects
of the Iraqi economy:
 Medium-term oil sector prospects have
worsened as the government focuses on the
war effort and oil prices are expected to remain low—but in the short term the oil sector
performance has proved more resilient than expected;
 Non-oil activity has been harmed by the violence, particularly in the ISIS-controlled areas, but
also in the rest of Iraq as productive assets and infrastructure have been destroyed, internal and
external trade disrupted, and the confidence of households and investors undermined. In
addition, lower oil revenue is leading to a compression of government spending, particularly
investment, further dragging down the economy.
40
60
80
100
120
500
1000
1500
2000
2500
3000
Civilian deaths from violence
APSP oil prices (US$/barrel, RHS)
Double Shock – ISIS insurgency and Declining
Oil Prices
Sources: Iraq Body Count Database; and Bloomberg.
Start of ISIS
insurgency.
0
20
40
60
80
100
Sources: Iraqi authorities; IMF WEO Database; and IMF staff calculations.
Budget Oil Dependency, 2014
(Oil revenue in percent of total government revenue)