102226
                                        Republic of Iraq

                 Emergency Fiscal Stabilization, Energy Sustainability, and
           State-Owned Enterprise Transparency Development Policy Financing

                                        Chair Summary*

                                       December 17, 2015

        The Executive Directors approved a loan for the Republic of Iraq for the Emergency Fiscal
Stabilization, Energy Sustainability, and State-Owned Enterprise Transparency Development
Policy Financing (DPF) in the amount of US$1.2 billion on the terms and conditions set out in the
President’s Memorandum.

        Directors acknowledged the challenging circumstances that Iraq and its economy are
currently facing, with the impact of the ISIS insurgency being compounded by the sharp fall in oil
prices in an economy that is highly dependent on oil. Directors agreed with staff that Iraq is at a
dangerous crossroads for the security of its people and for regional stability. They expressed
support for the World Bank’s engagement in helping the Government to both improve the
macroeconomic situation and create the conditions for successfully implementing much needed
structural reforms. Directors welcomed the policy actions taken by the Iraqi authorities to date and
encouraged them to maintain the reform stance to support the recovery of the economy in 2016,
enhance the fiscal space to respond to the security crisis, and achieve inclusive growth for all
Iraqis. Directors appreciated the strong coordination and cooperation between the World Bank and
the IMF and encouraged Iraq to establish a strong track record of macroeconomic performance on
the IMF Staff-Monitored Program. They also noted the importance of coordination and monitoring
of assistance from the IMF and the Japan International Cooperation Agency (JICA), which is
essential for success of this operation.

        Directors welcomed the DPF’s integration of key lessons from the 2011 World
Development Report on Conflict, Security and Development to design a conflict-sensitive reform
program. Directors recognized that the DPF is a high risk yet timely operation, noting that the risk
of not engaging would be higher. They noted that this operation reflects the World Bank Group
approach in MENA of taking considered risks to help fragile and/or conflict-affected countries.
Directors welcomed the focus of the operation on improving: (1) expenditure management; (2) the
sustainability of energy supply; and (3) the transparency of state-owned enterprises. They stressed
the importance of successful implementation of reforms supported by the DPF and encouraged a
medium-term engagement to support structural reforms in Iraq. Directors also welcomed the strong
program of technical assistance from the World Bank, IMF, and donors to support reforms, noting
the importance of public financial management and debt and exchange rate management. They
stressed the importance of fiscal space to support social spending over the medium term, including
expenditures on health and social safety nets. Directors also commented on the need to curb gas
flaring. Finally, Directors thanked the Iraq team for their work in a challenging environment.

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*This summary is not an approved record.