Iraqi Finance Minister Ali Allawi yesterday presented his argument that his country's predicament is different from that of other post-conflict economies where the Bank and Fund have worked in recent years.
'We have heard that Iraq is not too dissimilar to other transition economies,' Allawi said. 'I would take serious issue with this. The legacy of the last 30 years has had a profound influence not just on the nature of the state, economic institutions and policy-making, but, dare I say, on the world view of the common citizen.'
After dictatorship in the 1970s, war in the 1980s, and sanctions in the 1990s, Allawi said, Iraq found itself deeply entrenched in a statist economy that neither provided a living wage for its people nor charged them for basic services. Three decades of Ba'athism left behind a state with distortions that were 'probably unique'.
Allawi compared Iraq's experience to that of eastern Europe and the Balkans, where the political upheavals were largely driven by popular movements, and resulted in governments committed to economic reform.
By contrast, the American invasion of the country that closed the Ba'athist era 'did not really launch us on a path that was devised by the new governing powers,' Allawi said. 'When the change took place, as the result of very powerful external forces, there was no preparation for it. It was a singular cataclysmic event.'
But most reform agendas that have been floated thus far have failed to recognize this, Allawi said. Instead they have been driven by 'a sense that all we need to do is undertake a few market-driven reforms'.
Some reforms, however, may be important to Iraq's near-term economic well being. Allawi hopes to announce the beginnings of a Stand-By Agreement (SBA) with the IMF this week. That deal will be needed in order to proceed with a Paris Club debt-reduction deal, and would carry Iraq past the end of the year, when the IMFÕs current emergency post-conflict programme expires.
But as IMF Managing Director Rodrigo de Rato put it at a press conference yesterday, 'progress has to continue' in three areas data reporting standards for national and municipal accounts, Central Bank transparency and reduction of fuel subsidies before an SBA can be agreed.