Iraqi Finance Minister Kamil al-Keylani said on Sunday the reforms would spur economic growth, speed Iraq's re-entry into the international community and “significantly advance efforts to build a free and open market economy in Iraq.”
Reforms include liberalising foreign investment, freeing the banking sector, cutting taxes and introducing import tariffs.
“Iraq needs jobs, it needs to have growth,” a senior US official, who declined to be named, told Reuters.
“This isn't just a proposal - this is the law, this is one. This was all signed yesterday,” the US official said.
Keylani said the reforms would be implemented “soon” though would not be drawn on an exact date.
The wide-ranging measures, which end an era of command economic practices under Saddam Hussein and the socialist Baath Party, are aimed at garnering international support in the run up to a donors' conference in Madrid next month.
"The fact that they ban investment in oil resources is good because it sends the message that America was not only after Iraq's oil"
Unidentified Arab foreign minister
Washington's invasion of Iraq, condemned by the majority of the world’s countries as illegal, caused an upsurge in anti-US sentiment in Europe and concern in the Arab world that America sought only to control Iraq's oil resources.
Still, the reforms allow for 100% foreign ownership in all economic areas except natural resources. That means foreign companies cannot control the country's oil.
“The fact that they ban investment in oil resources is good because it sends the message that America was not only after Iraq's oil,” an Arab finance minister who declined to be identified said of the steps.
Further, there will be no screening process - something the Iraqis requested - which makes investment in the war wracked country more alluring to foreigners.
The reforms also include a free transfer of foreign exchange earnings for investors, full central bank independence and relatively free entry for foreign banks into Iraq.
New bank rules were signed in Iraq on Saturday, the US official said. Six foreign banks will get "fast-track" entry into Iraq and full ownership of local banks within five years.
The new laws also cut top tax rates for individuals and corporations to 15% from 45%, the US official said.
Iraq will also charge a 5% surcharge on all imports except for humanitarian goods such as food, medicine and books.