Iraq seeking assistance from IMF and World Bank after oil income slashed by Iran war

Talks commenced during global lenders’ meeting in Washington last month, and are expected to be finalized once a new government assumes power in Baghdad, officials say

WASHINGTON/BAGHDAD, Iraq (Reuters) — Iraqi officials have approached the International Monetary Fund about securing financial assistance as a result of the conflict in the Middle East, a source close to the IMF and an Iraqi government official said on Thursday.

Initial conversations took place during last month’s spring meetings of the IMF and World Bank in Washington, and discussions are ongoing about how much funding Iraq would need and how any loan would be structured, the source close to the IMF said.

An Iraqi official advising on financial policy said Iraq is in preliminary discussions with the IMF and World Bank over a loan to finance the country’s budget, given a sharp revenue shortfall caused by halted oil exports following the Iran war and the closure of the Strait of Hormuz.

The official said the talks were expected to be finalized once a new government is in place.

The war that began on February 28 with a massive US-Israeli bombing campaign against Iran and triggered Tehran’s closure of the Strait of Hormuz has rocked the entire Middle East, wreaking damage on infrastructure and economies.

Iraq has been hard hit by the war, with most of its oil exports — which represent nearly all government income — cut off by the closure ⁠of the critical waterway, which previously carried about one-fifth of the world’s crude oil.

IMF spokeswoman Julie Kozack said the IMF was working with the World Bank and the International Energy Agency to assess the impact of the war on member countries.

Kozack said the Fund was also engaged in active discussions with its members, many of whom were seeking policy advice.

She noted that IMF Managing Director Kristalina Georgieva had said the IMF could see demand from at least 12 countries for $20 billion to $50 billion, but declined to give any details on which countries had requested help.

The World Bank said it generally does not comment on shareholder discussions prior to board approval.

Iraq has the world’s fifth-largest petroleum reserves, and the economy is closely tied to oil exports.

Iraq’s last financial deal with the IMF was a $3.8 billion standby arrangement that expired in July 2019, of which $1.49 billion was drawn, according to the IMF’s website. Iraq owes the global lender $2.39 billion, including some $891 million provided under a rapid financing instrument, the website shows.