The story: A pledge by the International Monetary Fund (IMF) to provide assistance has put Iraq's Prime Minister Ali Al-Zaidi’s economic policy in the spotlight. Days after Zaidi defended devaluing the Iraqi dinar to avoid further borrowing, the IMF’s managing director reportedly said that Baghdad had approached the fund for a potential program. The contrast has revived debate in Iraq over the IMF’s past engagements with Iraq, and their cost.

The coverage: At the IMF’s 2026 Annual Meetings with the World Bank in Bangkok on Oct. 17, the fund’s managing director, Kristalina Georgieva, pledged to back Iraq “very firmly” and promised “both money and policy support.”

  • According to the Abu Dhabi-based outlet The National, Georgieva also said Baghdad had approached the fund for a potential program.

This seemed to clash with Zaidi’s earlier statements. Defending the dinar’s devaluation before the parliament on Oct. 8, the premier had claimed it would let the state keep paying salaries without further borrowing.

  • That gap has drawn criticism. On Oct. 18, Iraqi opposition politician Mustafa Al-Dulaimi alleged that pressure from ruling parties had overridden Zaidi’s resistance to taking loans to fund Iraq’s budget.

Following Georgieva’s comments, Iraqi economists have warned that any deal to secure IMF money would come with conditions that could cut deep into public spending.

  • On Oct. 17, economic researcher Ziad Al-Hashimi argued on Twitter/X that borrowing from the IMF would undercut the government’s justification for the devaluation. Once the first payment arrives, he wrote, IMF “recommendations” tend to become “binding conditions and dictates.”

  • The following day, the researcher explained that the fund pays out a loan in installments, each released only after agreed reforms are carried out, in his words “no money without reform.”

Others spelled out what those reforms could mean for ordinary Iraqis.

  • In an Oct. 17 Facebook post, economist Nabil Al-Marsoumi predicted “strict measures to limit the wage bill” and enforced collection of electricity bills. Speaking to the leftist newspaper Al-Mada the next day, he warned of “reducing or abolishing the ration card,” the state food subsidy.

  • Financial expert Ali Dadoush told the Baghdad-based Shafaq News on Oct. 18 that a loan would likely bring spending cuts, new taxes, higher fees “such as property registration and traffic fees” and an end to subsidies on energy and some ration items.

  • The same day, economist Imad Abd Al-Latif Salim wrote that he expects the government’s commitments to the fund to include “cutting the number of state employees and their salary burden,” pension reform and a weaker dinar.

Central Bank of Iraq advisor and spokesperson Mahmoud Dagher defended the potential conditions such a loan would carry.

  • In a televised interview on Oct. 20, he said “the fund is not a charity,” and argued that subsidies and the ration card should go “to the eligible only.”

The context/analysis: Baghdad’s contacts with the IMF are not new. Iraq began preliminary talks with the IMF on a loan to finance its budget in April, at the fund’s spring meetings, Reuters reported on May 14.

  • That was before Zaidi’s government took office in mid-May. The premier’s economic advisor, Mazhar Muhammad Salih, said on May 23 that no formal request had yet been made. Georgieva’s Oct. 17 comments suggest one has since been made.

Baghdad’s need for outside money has grown since the Feb. 28 outbreak of the Israeli-US war on Iran, which has disrupted Iraq’s oil exports through the Strait of Hormuz. Finance ministry data reported on Oct. 21 showed a 30.4T IQD (23B USD) deficit in the first eight months of 2026.

  • Zaidi’s Oct. 7 dinar devaluation has also proven controversial, even before the loan request was reported. The policy raised the official dollar rate by 15%, to 1,520 IQD, increasing the dinar value of Iraq’s oil revenue.

Iraq has signed six arrangements with the IMF since 2004, and its two largest loans, agreed in 2010 and 2016, both stalled before Baghdad had drawn half the money.

  • The 5.34B USD loan of July 2016 required a hiring freeze outside security, health and education, cuts to the wage and pension bills and higher electricity tariffs.

  • In 2019, the IMF said the program “went off track after the second review in August 2017,” as “structural fiscal measures were reversed or not enacted.” The 2019 budget had already raised current spending by 27%, partly on a larger public payroll.

Those cuts are the bargain any new loan is likely to involve. Marsoumi estimated on Oct. 17 that a possible loan would carry interest of no more than 1.25%, but he and other economists expect the cost to fall on the payroll of Iraq’s largest employer, the state.

  • Wages and pensions cost the government 78.6T IQD (59.5B USD) in 2024, about half of all public spending, according to IMF figures.

  • In its May 2025 review of Iraq’s economy, the IMF called for “comprehensive wage bill reforms,” changes to public hiring, electricity tariff increases and better targeting of the food ration.

The trade-off is contested well beyond Iraq. A 2019 study of 135 countries found that reforms mandated by the IMF “increase income inequality in borrowing countries.”

  • The fund has defended itself against such claims, saying its programs protect social spending. However, the same 2019 IMF review conceded that the minimum targets the fund sets for such spending are “not sufficiently enforced.”

The future: Any IMF deal will have to survive Iraq’s contentious politics as well as negotiations over its terms. Zaidi would also need to win support from governing parties for cuts to the jobs and subsidies their voters rely on.

  • Patriotic Union of Kurdistan (PUK) MP Delan Ghafoor, a member of the parliamentary finance committee, said on Oct. 20 that officials handling Iraq’s financial file would be summoned to explain the reported IMF loan request and alternatives to borrowing.

  • Dagher has also recalled that the 2016 program collapsed after a change of government brought populist decisions. The IMF may now seek firmer guarantees before releasing money.

  • Recovering oil exports could ease the pressure. Iraqi Oil Minister Basim Mohammed Khudair announced on Oct. 19 that exports had returned to more than 3.4M barrels per day in October, around the level before the Israeli-US war on Iran began on Feb. 28.