(Bloomberg) — Iraq is in talks with the Worldwide Financial Fund for a $6 billion mortgage to prop up its ailing financial system, Finance Minister Ali Allawi mentioned in an interview in Baghdad.OPEC’s second-largest producer forecasts a 2021 price range deficit of 71 trillion dinars ($49 billion). As soon as the spending plan is accepted by parliament, Iraq can apply for $2 billion in fast financing from a particular IMF mechanism set as much as assist Covid-battered economies, Allawi mentioned.Baghdad can ask for an extra $4 billion in low-cost loans by one other program linked to authorities reforms, he mentioned on Thursday.Whereas the IMF help can solely cowl a fraction of the deficit, it may reduce Iraq’s depletion of its overseas reserves. Final 12 months, the federal government borrowed greater than $25 billion from the central financial institution to pay public sector salaries and meet different monetary necessities. It additionally devalued its forex by essentially the most on file to scale back strain on public funds, and struck a $2 billion “prepayment deal” with a Chinese language firm through which oil was in impact used as safety for a mortgage.Iraq additionally plans different forms of funding to assist plug the price range hole. As soon as the spending plan is accepted, the federal government may also transfer to problem $5 billion in home bonds to develop its monetary base, Allawi mentioned.“Worldwide loans are considerably costly,” he mentioned. “I don’t know if there’s urge for food to purchase Iraqi bonds. Going again to those markets now could be a bit tough.”Swelling Iraqi Oil Gross sales Imply Hassle for OPEC+ Output Talks Iraq’s dollar-bond yields common 8.3%, one of many highest ranges for any authorities globally, in response to Bloomberg Barclays indexes.Iraq’s financial system has been reeling since world oil costs collapsed over the coronavirus pandemic. Whereas there was some aid as power costs recovered, the nation continues to be struggling to cowl its prices and hold widespread hardship from deepening. Final 12 months it exceeded manufacturing limits agreed with different oil exporters to lift much-needed money, although it has scheduled a compensation plan.Allawi mentioned Iraq will honor the quota as a result of it helps to chop the chance of value collapse. And he lauded Saudi Arabia’s shock output lower this month, which helped oil costs to rise.Iraq’s price range deficit might slender by 25% this 12 months if oil costs stay round their present ranges of $55 a barrel, Allawi mentioned.Oil Tops $50 With Saudis Pledging a Shock Unilateral CutThe IMF expects Iraq’s financial system shrank 12% in 2020 — greater than another OPEC member below a manufacturing quota. It noticed the price range deficit at 22% of gross home product.(Provides economist remark.)For extra articles like this, please go to us at bloomberg.comSubscribe now to remain forward with essentially the most trusted enterprise information supply.©2021 Bloomberg L.P.