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Iraq PM Says Cannot Cut Public Pay To Suit IMF

Iraqi Prime Minister Nuri al-Maliki (file photo)
BAGHDAD (Reuters) -- Iraqi Prime Minister Nuri al-Maliki has said Iraq cannot meet what he said was an IMF request to cut public sector pay, as the country negotiates a $5.5 billion loan with the institution.

Iraq has said it is seeking a $5.5 billion International Monetary Fund program over 18 months, which would be the largest IMF financing agreement with the new Iraqi administration.

"The IMF called on us to reduce Iraqi salaries. We cannot in fact cut salaries," al-Maliki told a meeting of businessmen in Baghdad that was broadcast on local TV stations, although he did not explicitly say this was a condition for the loan.

Iraq supports a huge public sector and al-Maliki said 74 percent of the nation's budget is spent on public sector pay.

As an alternative to cutting salaries, he said, the country would seek to get its public finances in order by developing oil revenues, through efforts to woo foreign oil majors into Iraq.

He cited negotiations over contracts with Japan's Nippon Oil Corp, China's National Petroleum Corporation (CNPC) and BP as evidence Iraq was serious.

Iraq relies on oil exports for more than 95 percent of state revenues and desperately needs funds to rebuild the country after years of sectarian conflict and insurgency triggered by the 2003 U.S. invasion.

An IMF program would signal confidence in the government's economic plans as the country also courts foreign investors, but last week a senior adviser to Iraq's central bank said he doubted Iraq could meet IMF conditions for the loan.

There have been two previous IMF arrangements of less than $1 billion each.