Takatoshi Kato, the IMF’s deputy managing director said the Iraqi government had successfully kept to an agreed economic programme during 2006 and 2007, despite the security situation and political instability. A range of economic reforms have been put in place, with increased interest rates curbing inflation. The new loan is designed to support the continuation of the programme up to March 2009.

Kato emphasised that the security situation is still hampering vital further reforms required to continue the progress of the last year.

“Although the security situation has showed signs of improvement in recent months, it remains a major obstacle for investment and reconstruction, hampering oil production and economic growth,” he said.

“Also, much remains to be done to modernise financial management of the government and the central bank, and to reform the banking system.”