Sunday, October 14, 2007

Favorable trends in Iraq

October 14, 2007

Favorable trends in Iraq

Greg Richards
We are seeing favorable trends in a variety of figures of importance from Iraq:
  1. USAID puts out weekly progress reports on Iraq. If you click on the most recent report and scroll down several pages to Section 4 - Electricity Overview - you see something very interesting. Which is that electricity is finally on an upward trend and is now at a record post-war level. The trend is modest and the level is still much too low -- note the 7.1 hours of electricity from the grid in Baghdad, for instance -- but the year to year numbers are now positive. It appears that this may be a dividend from the harmony that we are starting to see in the Sunni provinces around Baghdad.
  2. If you scroll on further to Section 5 - Crude Oil Production - you see that production at about 2.3 million barrels per day is modestly above the goal of 2.1 million barrels. I.e., the insurgency is not able to shut off oil production, even if oil growth is modest.
  3. If you clock on the website for the Central Bank of Iraq (CBI), go to Key Statistics and scroll down to the bottom of the spreadsheet you see the table for inflation. At the beginning of this year, inflation was 66%. In the last three months - June, July, August - inflation declined: 46%, 30%, 20%
  4. With the high interest rate policy of the CBI, the value of the Iraqi dinar continues to improve. It has increased 11% this year against the dollar and 20% since last fall.
  5. The Iraq Stock Exchange is up 50% year-to-date and is holding its 30% surge of mid-summer.
We don't want to forget the estimated 2 million internal and 2 million external refugees in Iraq, nor the estimated 50% unemployment rate. However, in his interview on Charlie Rose, David Kilcullen observed that political progress in Iraq will be "alchemy" not "engineering" meaning that progress cannot be laid out in a mechanical fashion. To use a different image, progress in Iraq will very likely be a "jelling" of different components into a whole. I think this will be true of economic life in Iraq as well. To determine if this is happening, we need to monitor as many figures of merit as we can, such as the five points above.

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