Iraq's Economic Future Looks Bright, Says Imf

Prospects for the Iraqi economy look promising for this year, the International Monetary Fund said yesterday, but warned that growth depended on political progress and a waning of the violence still raging across the country.

On a day that saw a suicide bomber kill 10 Shias worshiping at a mosque in Diyala province, northeast of Baghdad, at the center of a US offensive against al-Qaida and other insurgents, the IMF said the economy would grow at a healthy rate - if security improved enough to boost oil production and investment.

Meanwhile, Ban Ki-moon, the UN secretary general, called for speedier progress towards political reconciliation following a reduction in violence attributed to the US troop "surge" strategy and mounting Sunni opposition to al-Qaida.

"In order to sustain recent improvements in the security situation, similar improvements in the political arena are needed," Ban said in a report to the security council. "To date, the political process has not shown the degree of progress that many had hoped for."

Last week the Baghdad government passed a law allowing former low-ranking members of the Ba'ath party to reclaim government posts and pensions. But key cabinet posts have been empty since six Sunni ministers quit prime minister Nouri al-Maliki's government last August to protest against his perceived Shia bias. Kurds remain in the government and differences persist over key legislation to share Iraq's oil revenues and settle control of Kirkuk, claimed by the Kurds.

Ban's report to the council echoed the message the US secretary of state, Condoleezza Rice, gave during her visit to Baghdad this week.

Mohsin Khan, the IMF director for the Middle East, said Iraqi oil production was forecast to climb by 200,000 barrels a day to 2.2m barrels a day in 2008.

Higher oil output would push growth up to 7% or higher in 2008 and 2009, from 1.3% in 2007.

High oil prices, which hit $100 (£51) a barrel recently, have offset production shortfalls and boosted currency reserves by nearly $7bn. By the end of 2007, reserves were $27bn, $6bn higher than projected. Last December, the IMF approved a 15-month $744m loan agreement for Iraq, to help maintain economic and financial stability, and facilitate higher investment and production in the oil sector.

Yesterday's suicide bombing in Diyala's capital, Baquba, was the province's second in two days. The bomber detonated explosives among men performing the rites for the Ashura holiday, the most important festival in Shia Islam. Traffic is banned from Baghdad and southern provinces for the next 10 days.