DUBAI: The International Monetary Fund said Iraq faces lower GDP growth in 2023 and 2024 as a result of lower oil output, including from OPEC+ production cuts, while a large fiscal expansion in the country’s three-year budget posed risks in the medium term.

In a statement on Tuesday following meetings with Iraqi authorities, the IMF welcomed government plans to strengthen public financial management and said Iraq’s central bank had “appropriately” tightened monetary policy.

But it said deep structural reforms in the state-led, hydrocarbons-intensive economy were needed to diversify the economy and achieve sustainable growth.

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“Priorities include creating a level playing field for the private sector through banking and electricity sector reforms, reducing distortions in the labour market, and continuing efforts to enhance governance and reduce corruption,” the statement said.

Iraqi Prime Minister Mohammed Shia al-Sudani has made economic reform a priority but faces an uphill battle in a country where the government is the largest employer and where a creaking bureaucracy and old laws hamper the private sector.