Iraq eyes IMF loan

Iraq is considering securing a loan of up to $7 billion from the International Monetary Fund if it signs an agreement for a third stand-by facility, the country's finance minister told Reuters on Monday.Iraq is currently in talks with the IMF, and Finance Minister Bayan Jabor said he expected the country may need to borrow between $5 billion and $7 billion for investment in its electricity, oil, education and health sectors.

Rebuilding Iraq's tattered infrastructure after years of war and sanctions and providing jobs and services are seen as key to keeping a lid on dissent now that violence is at its lowest level since US troops invaded in 2003.

"The Finance Ministry and the IMF are in contact ... to study the possibility of arranging a new stand-by arrangement (SBA) or memorandum of understanding," Jabor said, referring to the term for an IMF lending facility.

Iraq has had two previous arrangements with the IMF of less than $1 billion each, set up without the expectation Iraq would draw on the funds given strong oil revenues in recent years. The IMF also offers fiscal advice as part of the financing deals.

However, Iraq has had to cut its 2009 budget three times to $58.6 billion due to tumbling oil revenues.

Jabor has warned of a financial crisis in 2010 if oil exports - from which Iraq earns almost all its revenues - do not rise, or oil prices remain subdued.

Oil prices have fallen about two thirds from a peak of $147 a barrel last summer, and Iraqi oil exports have fallen to an average of 1.8 million barrels per day (bpd) from a peak of 2 million last May, a level on which the initial budget was based.

"I think at the end of 2009 and beginning of 2010 Iraq will need $5 billion to $7 billion," Jabor said.

He said the figure would be subject to the result of planned Iraqi sovereign bond sales, and on whether parliament and the cabinet approved the stand-by agreement.

Jabor said Iraq had received a draft proposal from the IMF, but said there was no deadline to strike a deal.

He said lawmakers had their reservations.

"In the government and parliament there is hesitation regarding the SBA with the IMF because of the 'tough' conditions," Jabor said.

He declined to say what these conditions might be, but said there was sensitivity to any conditions that would dictate oil or currency policy, for example.

The amount borrowed from the IMF would depend on planned Iraqi sovereign bond sales worth up to $5 billion, but there was no timeframe or pricing outlook. Jabor said the term of the bonds would be one year, but that could be extended. (Reuters)