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The International Monetary Fund on Wednesday approved a 3.6-billion-dollar loan to Iraq to help the war-torn country meet pressing financial needs.
The IMF executive board approved the two-year so-called Stand-By Arrangement for Iraq "to cover the country's balance of payments needs" after the economy was hit hard by falling oil prices in 2009, the Washington-based institution said.
About 455 million dollars were made immediately available to the Iraqi authorities.
Declining oil prices last year left Iraq, heavily dependent on oil exports, with a public deficit of 20 percent of economic output, Ron van Rooden, IMF mission chief in Iraq, said in a conference call with reporters.
The IMF-supported program is aimed at reducing the budget gap to 19 percent of GDP in 2010 and 6.0 percent in 2011, and posting a budget surplus in 2012.
"It's clearly a challenging program," he added.
Van Rooden said that by containing government spending at current levels and catching up on much-needed infrastructure investments, the fiscal gap will be financed by the new IMF loan, the World Bank and other donors.
The IMF and Iraqi authorities late last year had discussed a five-billion-dollar loan, when oil prices were lower than they are now, he said.
A rise in oil prices has helped trim the country's financial needs.
The IMF official noted that Iraq's 2010 budget assumes an oil price of 62.50 dollars a barrel. The benchmark New York futures contract closed Wednesday at 80 dollars.
Iraq currently produces 2.4 million barrels of oil per day, of which around two million barrels per day are exported, and its oil earnings account for 85 percent of state revenues.
The country has the world's third-largest proven oil reserves, behind Saudi Arabia and Iran, with an estimated 115 billion barrels.
The financial shortfall in Iraq's budget comes at a difficult time for Iraq as the nation of 29 million people struggles to emerge from a brutal sectarian conflict triggered by the 2003 US-led invasion.
The new IMF loan follows a 15-month program supported by a Stand-By Arrangement at the time valued at 744 million dollars approved on December 20, 2007, which expired on March 18, 2009.
The successor loan is designed to support Iraq's economic program through February 23, 2012.
