Leaked draft confirmed government plans to devalue the Iraqi dinar and slash benefits for public workers.
Iraq has requested emergency assistance from the International Monetary Fund (IMF) and talks are ongoing between the parties, the IMF said.
Iraqi Finance Minister Ali Allawi told the Bloomberg news agency earlier that Iraq was in talks with the IMF for a $6bn loan package.
“The Iraqi authorities have requested emergency assistance from the IMF under the Rapid Financing Instrument, and indicated their intention to also request a longer-term arrangement with the Fund in support of planned economic reforms,” an IMF representative said late on Sunday in an emailed statement.
“Discussions of the authorities’ request for emergency assistance are ongoing.”
The IMF’s Rapid Financing Instrument (RFI) provides quick financial assistance, which is available to all member countries facing an urgent balance-of-payments need.
Financial assistance under the RFI is provided without the need for a full-fledged programme or review, according to the IMF website.
Iraq may ask for an additional $4bn in low-cost loans through another programme linked to government reforms, Allawi said on Sunday.
Iraq devalued its dinar currency last month after a collapse in global oil prices, an important source of Iraq’s financial resources.
Allawi told Bloomberg that Iraq also planned other types of funding to help plug the budget gap. Once the spending plan was approved, the government would move to issue $5bn in domestic bonds to expand its financial base, he said.
The Organization of the Petroleum Exporting Countries (OPEC) member’s economy has only a small manufacturing base and almost all goods its imports are priced in US dollars. A drop in the value of the dinar makes those imports more expensive.