Haaba

WASHINGTON, Aug 2, 2007 (AFP) - The International Monetary Fund said it was extending a multimillion-dollar credit deal for Iraq by three months, citing economic progress despite raging violence in the US-occupied country.

The IMF board had approved in March a six-month extension of the standby arrangement, which was first agreed with Iraqi authorities in December 2005 and now stands at an estimated 727.4 million dollars.

'Despite a persistently difficult security environment, the Iraqi authorities have taken important measures to keep their economic program on track,' Takatoshi Kato, the IMF deputy managing director, said.

However, Kato underlined that Iraq's expansion of oil production is lagging and inflation, although declining, remains high.

'Measures to speed up reconstruction and increase investment, especially in the oil sector, are needed,' he said.

'The measures adopted by the authorities to increase the implementation rate of the public investment program are encouraging. Enhancing the protection of oil installations is also important.'

Iraq is a founding member of the Organization of the Petroleum Exporting Countries. This year it is producing 1.98 million barrels of crude a day, the sixth-highest output in the 11-nation cartel.