BAGHDAD, Jan 5 (Reuters): US officials expect Iraq to make further cuts in subsidies that will generate more unpopular fuel price increases this year, and are also urging the new government to make a quick start on privatisation.
"Over the course of the year we will see probably more increases," Thomas Delare, a senior economic official in the US embassy, told a Baghdad news conference Wednesday, referring to fuel price rises first implemented last month.
By the end of the year, however, he stressed that reductions in fuel subsidies, pressed on Iraq by the International Monetary Fund (IMF), would still leave heating, cooking and vehicle fuel cheaper than in neighbouring countries.
The doubling and tripling of fuel prices has provoked protests and some violence. Delare said he suspected some of the trouble was caused by black market profiteers deliberately trying to sabotage the reform.
He said reducing subsidies, and with them the corruption that sees subsidised fuel being smuggled out of Iraq by black marketeers, was vital to improving government finances and would enable the country to invest in public services.
The extensive subsidisation of basic food supplies through a state rationing system dating from the days of international sanctions would also have to be addressed in future but was not part of the IMF programme for this year, he noted.
Many Iraqis survive on almost-free food rations. Delare said Iraq would have to conduct a full census to determine how many people would need continued support just to sustain themselves, and that domestic agriculture should be revived before the rationing system could be cut back.
Privatisation of state firms, many of them moribund since the collapse of Saddam Hussein's Baathist command economy, was also a priority, said Delare.
Asked about the absence of such economic reform policies from the programmes of the major parties set to control the government following last month's election, he said expected the debate on economic policy to begin once parliament convened.