April 16, 2015
WASHINGTON,— The Iraqi government has agreed for the first time to issue $5 billion in debt, the government’s finance minister said Wednesday, part of package of assistance and policy changes leaders are pushing to address its $25 billion budget deficit.
“We’ve suffered a double shock—both the rise of [the Islamic State] in Iraq last year but also the fall of oil prices,” Iraqi Finance Minister Hoshyar Zebari told a group of reporters here.
He said the government had agreed internally to issue the $5 billion in debt to raise cash, working with bankers from Citigroup Inc. and Deutsche Bank. He wouldn’t disclose how much Iraqi leaders were willing to pay to borrow the money or what type of debt the government planned to issue, saying he was “not in a state now to expose all our cards.”
Mr. Zebari was part of a team of Iraqi officials who traveled to Washington this week to meet with top U.S. officials with a range of requests. Parts of Iraq are in a state of chaos, with the Islamic State militant group controlling Mosul and a range of other areas.
Mr. Zebari didn’t try to sugarcoat problems in the Iraqi economy, saying twice that it was “dysfunctional.”
“Iraq has 172 state-owned companies,” he said. “They are all in absolute failure, or 90% of them. They employ 550,000 workers. The government has to pay them.” He said the government spends $3.5 billion each month paying government employees, about 40% of the nation’s budget.
Iraq is also seeking an aid package from the International Monetary Fund that could total as much as $700 million, Mr. Zebari said.
He said the IMF is insisting that the Iraqi government take more steps to cut spending, something he said was currently under review.
Mr. Zebari also said the Iraqi government was in talks with the Federal Reserve and the World Bank about setting up a credit line to help the government access cash. He didn’t say if Iraq was consulting with the Fed on this matter or actually seeking financial assistance.
In another change, he said Iraq was planning to push oil companies to restructure oil services contracts in the country so the Iraqi government doesn’t have to absorb the brunt of the fall in oil prices.
“The services contracts are not helpful,” he said.
Even though it would be the country’s first-ever bond issuance, Mr. Zebari said he was confident it would go smoothly, with lots of interest from investors.
“We have been bombarded by requests from all over,” he said. “The prospects are good…We are short on cash, but we are rich in assets.”
By Damian Paletta
[You must be registered and logged in to see this link.]