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Baghdad, Iraq

According to Iraq’s finance minister Hoshiya Zebari, the agreement could unlock $15bn more in international assistance over the next three years as other donors gain confidence.

The IMF estimates that the country’s financing gap will reach $17bn this year, and has been working with the government and other donors including the World Bank and G7 countries to address the shortfall.

Christian Josz, mission chief for Iraq, explained that the country has been “hit hard” by the ongoing conflict with ISIS, which continues to strain Iraq’s resources and has resulted in the displacement of over 4 million people.

He said the steep fall in oil prices has also dealt a blow to the balance of payments and budget. Oil income used to account for 95% of government revenues in Iraq, a major OPEC exporter.

Josz said the programme was intended to address these “urgent balance of payments needs”.

It aims to bring spending in line with the lower oil prices, which fell from $103 per barrel at the end of 2013 to $22-23 per barrel earlier this year.

Debt sustainability, measures to protect the poor, stronger public financial management and anti-corruption measures are also on the agenda.

However, some measures required by the IMF, including subsidy cuts and tax hikes, are unpopular, and there is speculation that Baghdad may struggle to push them through.

Without improvements, observers say the populace is unlikely to accept having to pay more for poor quality public services and fear a repeat of last summer’s protests, sparked when power outages and substandard water quality exacerbated a heat wave.

However, the IMF’s executive board still needs to approve the bailout package, which will be contingent on implementation of some of these measures.