World Bank issues USD1.2 billion loan to Iraq

The World Bank and Iraq signed an agreement on Thursday for a $ 1.2 billion loan to help offset the fall in oil prices and security costs associated with the fight against the Islamic State.

Iraq’s Ambassador to the United States, Lukman Faily penned the agreement at the World Bank headquarters in Washington D.C. alongside the Bank’s Iraq Country Director, Ferid Belhaj.

Iraq’s state finances are heavily dependent on oil revenues, which have sunk as oil prices have plunged. At the same time, Baghdad has ramped up military spending in its battle against the hardline Islamic State group, which has killed and displaced thousands, and destroyed services and infrastructure.

The aim of the emergency loan was to help rebuild and return basic services for citizens, the World Bank has said.

The budget support loan will be disbursed in a single tranche and should be available to Iraq before the end of the year, said Ferid Belhaj, who is also the director for the Mashreq region, which includes Iraq, Lebanon, Jordan, Syria and Iran.

“Iraq is going through a difficult time. Iraq is facing the twin shock of free falling oil prices and fragility caused by the violence that ISIS is imposing on the country. So Iraq today is managing a very delicate situation and is in tremendous need for support from his partners,” said Belhaj

The cost of not helping Iraq during this time of crisis, is too high to contemplate, said Belhaj.

“And the government of Iraq is performing something that very few governments can perform — going about deep structural reforms in the middle of a crisis that is threatening its mere existence. And for us this operation is laden with risks, absolutely true. But at the same time we counterweigh those risks with the cost off not engaged,” he said.

Belhaj said Iraq had committed to undertake economic reforms to fix structural distortions that had dragged on its economy even before the current crisis.

These include efforts to make state-owned enterprises more efficient, improve management in the energy sector and reduce the dominance of state-owned commercial banks

This loan sends the right signal to the Iraqi people, said Iraqi ambassador Faily.

“I think there will be a significant change in some of the sectors which this loan will contribute to and also and in relation to our own deficit in relation to infrastructure. You have to bear in mind we are conducting a war and the most of the focus of the financially is toward the war efforts and making sure that we get rid of ISIS one and for all. So to that effect I think it’s an important contribution, certainly it’s a right signal to give to the Iraqis and certainly the Iraqis are saying we would like to have this international partnership with international organizations,” he said.

Iraq has been fighting back after Islamic State overran a third of the country in 2014. The jihadists still hold territory in Iraq, including the second city Mosul, and swathes of neighboring Syria.

The new loan takes World Bank lending to Iraq to nearly $2 billion, including $355 million for improving transport and road safety and $350 million agreed in July to support the reconstruction of areas affected by Islamic State violence.