[stop-imf] To please IMF, Iraq plans on reducing state subsidies

[Robert Weissman]

    *Middle East North Africa Financial Network
http://www.menafn.com/qn_news_story_s.asp?StoryId=97305#top

Iraq plans on reducing state subsidies*

*MENAFN <http://www.menafn.com> - 25/06/2005*


(MENAFN) Iraq is working to reduce state handouts that consume more than
80 percent of its gross domestic product in its drive to qualify for
debt relief and IMF support, Reuters reported.

In an interview, Iraq's central bank's chief economist said that Iraq is
committed to phasing out subsidies built-up over decades as the
oil-based economy became more centralized.

Discontent over high unemployment and low standards of living and
tensions between the majority Shiite and minority Sunni sects have
already raised concerns that daily attacks may turn into civil war. Iraq
has agreed to restructure the subsidies system, not scrap it altogether,
in meetings with donors and creditors, the economist said.

He was speaking after a conference organized by the United States and
the European Union to discuss ways to stabilize Iraq and activate
billions of dollars of international aid promised two years ago. More
than 95 percent of the $15 billion non-American aide pledged, mainly
from Japan and Europe, had not been committed because the level of
violence had prevented work being done. Disagreements between donors and
slow economic reforms in Iraq making project management difficult had
also stemmed the aide flow.

Iraq expanded handouts and subsidies to help people cope with crushing
sanctions imposed by the United Nations from 1990-2003, which
contributed to the economic collapse of the country with the world's
second largest world reserves. This came on top of $120 billion of debt
mostly accumulated in the 1980s to finance an eight-year war with Iran.