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Monday, July 8, 2013
With Chapter 7 Lifted, Iraq Regains Control of Its Own Economy
by RUDAW 21 hours ago
According to Iraq’s energy plan, oil exports are expected to reach six million barrels per day (bpd) by 2017. AFP photo
By Goran Mustafa
ERBIL, Kurdistan Region – The lifting of Chapter 7 sanctions last month can be considered one of Iraq’s biggest achievements since the ouster of Saddam Hussein a decade ago, allowing Baghdad to regain control over its own currency, oil and economy.
Chapter 7, imposed on Iraq by the UN Security Council after Saddam’s invasion of Kuwait in 1991, froze all Iraqi assets in international banks, ordering they be used to compensate victims of the aggression. Besides placing limits on use of its wealth, the sanctions also placed limits on the Iraqi military.
One of the biggest advantages of the lifting of the sanctions is the return of all frozen assets to the Iraqi government, estimated at $82 billion, according to Central Bank data. Its return will not only revitalize the economy, it will strengthen the value of the Iraqi dinar and increase its purchasing power.
A few hours after Chapter 7 was lifted, the value of Iraqi dinar increased against other currencies. The exchange rate of dinar is fixed against the dollar, but its value continues to rise. Saif Al-Halafi, an economic and banking expert, expects that the dinar will probably replace the dollar for investments, and that as demand for the dinar rises, so will its value.
With Chapter 7 lifted, Iraq also can independently handle its oil revenues without UN supervision.
“The lifting of Chapter 7 against Iraq will enable it to regain independence in its oil policy, and Iraq again can become an important regional and international energy player,” said economic expert, Dr. Rebwar Khinsi. Iraq plans to emerge as one of the world’s biggest oil exporters in 12 years.
According to Iraq’s energy plan, oil exports are expected to reach six million barrels per day (bpd) by 2017, elevating the federal budget to $216 billion dollars. The plan aims for exports of nine million barrels bpd by 2020, raising the budget to $324 billion dollars. In 2025, the federal budget will reach 432 million dollars, if Iraq succeeds to export 12 million barrels of oil per day.
Under George Bush’s administration the US government agreed to keep $50 billion belonging to Iraq in America, and Barack Obama’s administration continues to do the same. An estimated $7.8 billion dollars are blocked in Jordan and Lebanon, and a huge amount of capital belonging to Iraqi Airways remains frozen in Kuwait and Jordan.
The United Nations Security Council forced Iraq to compensate Kuwait for an estimated $52 billion. Following the first Gulf War, Iraq did not have an independent economic policy, with all of its income administered by Iraq’s development program and supervised by the UN. Five percent of Iraq’s annual oil revenue was allocated to compensating Kuwait.
So far, Iraq has paid $41 billion dollars to Kuwait. According to Iraqi Foreign Minister Hoosyar Zebari, Baghdad is committed to paying the rest of the remaining $11 billion in compensation to Kuwait, and expects to pay off all of its debts by 2015.
According to Iraq’s energy plan, oil exports are expected to reach six million barrels per day (bpd) by 2017. AFP photo
By Goran Mustafa
ERBIL, Kurdistan Region – The lifting of Chapter 7 sanctions last month can be considered one of Iraq’s biggest achievements since the ouster of Saddam Hussein a decade ago, allowing Baghdad to regain control over its own currency, oil and economy.
Chapter 7, imposed on Iraq by the UN Security Council after Saddam’s invasion of Kuwait in 1991, froze all Iraqi assets in international banks, ordering they be used to compensate victims of the aggression. Besides placing limits on use of its wealth, the sanctions also placed limits on the Iraqi military.
One of the biggest advantages of the lifting of the sanctions is the return of all frozen assets to the Iraqi government, estimated at $82 billion, according to Central Bank data. Its return will not only revitalize the economy, it will strengthen the value of the Iraqi dinar and increase its purchasing power.
A few hours after Chapter 7 was lifted, the value of Iraqi dinar increased against other currencies. The exchange rate of dinar is fixed against the dollar, but its value continues to rise. Saif Al-Halafi, an economic and banking expert, expects that the dinar will probably replace the dollar for investments, and that as demand for the dinar rises, so will its value.
With Chapter 7 lifted, Iraq also can independently handle its oil revenues without UN supervision.
“The lifting of Chapter 7 against Iraq will enable it to regain independence in its oil policy, and Iraq again can become an important regional and international energy player,” said economic expert, Dr. Rebwar Khinsi. Iraq plans to emerge as one of the world’s biggest oil exporters in 12 years.
According to Iraq’s energy plan, oil exports are expected to reach six million barrels per day (bpd) by 2017, elevating the federal budget to $216 billion dollars. The plan aims for exports of nine million barrels bpd by 2020, raising the budget to $324 billion dollars. In 2025, the federal budget will reach 432 million dollars, if Iraq succeeds to export 12 million barrels of oil per day.
Under George Bush’s administration the US government agreed to keep $50 billion belonging to Iraq in America, and Barack Obama’s administration continues to do the same. An estimated $7.8 billion dollars are blocked in Jordan and Lebanon, and a huge amount of capital belonging to Iraqi Airways remains frozen in Kuwait and Jordan.
The United Nations Security Council forced Iraq to compensate Kuwait for an estimated $52 billion. Following the first Gulf War, Iraq did not have an independent economic policy, with all of its income administered by Iraq’s development program and supervised by the UN. Five percent of Iraq’s annual oil revenue was allocated to compensating Kuwait.
So far, Iraq has paid $41 billion dollars to Kuwait. According to Iraqi Foreign Minister Hoosyar Zebari, Baghdad is committed to paying the rest of the remaining $11 billion in compensation to Kuwait, and expects to pay off all of its debts by 2015.Tuesday, May 21, 2013
IMF Executive Board Concludes 2013 Article IV Consultation with Iraq
Public Information Notice (PIN) No. 13/58
May 21, 2013
On May 13, 2013, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Iraq.1
Background
Iraq is exceptionally rich in oil, but its economy suffers from severe structural weaknesses, such as a small non-oil sector, a dominating role of the government in all areas of the economy, and a poor business environment. Nevertheless, partly thanks to the increase in oil production since 2003, Iraq has achieved a rise in GDP per capita from $1,300 in 2004 to $6,300 in 2012 in a very difficult security and political context. During this period, Fund program engagement with Iraq was instrumental in maintaining macroeconomic stability—even though progress on structural reforms and job creation was mixed.
Recent macroeconomic developments have been broadly positive. Economic growth has reached 8.4 percent in 2012 and is expected to rise to 9 percent in 2013 as oil production increases to 3.3 million barrels per day (mbpd). Inflation has declined from about 6 percent at end-2011 to 3.6 percent at the end of last year, and should increase only slightly in 2013. International reserves of the Central Bank of Iraq (CBI) rose from $61 billion at end-2011 to $70 billion at end-2012, and fiscal reserves held at the Development Fund for Iraq (DFI) have increased from $16.5 billion to $18 billion.
Thanks to higher-than-expected oil revenues and the under-execution of the investment budget, fiscal surpluses reached almost 5 percent of GDP in 2011 and 4 percent in 2012. However, with a break-even oil price of about $100, fiscal performance is very vulnerable to oil revenue shocks—either from oil price declines or export shortfalls. Furthermore, fiscal discipline weakened over the past two years, with poor budget planning and execution, large off-budget spending, and low investment execution rates. The 2013 budget includes large unfunded commitments, increasing fiscal risks, including the possible depletion of fiscal reserves, if the budget were to be fully executed.
The policy of a de facto peg to the U.S. dollar provides a key nominal anchor to the economy, and the nominal exchange rate in the official market has remained stable since 2010. However, since late 2011, the authorities enforced existing exchange restrictions and introduced new restrictions in response to concerns about money laundering and illegal foreign exchange outflows related to the increased demand for foreign exchange. As a result, the spread between the official rate and the parallel market rate—which had been up to that point below 2 percent—started to climb, passing 9 percent in May 2013.
Over the medium term, Iraq’s macroeconomic outlook will continue to be driven by developments in the oil sector. Staff projects that oil production will rise gradually by about 400-500 thousand barrels per day per year, reaching 5.7 mbpd by 2018. Overall, growth is projected to remain above 8 percent and inflation at 5–6 percent over the medium term.
Risks to the macroeconomic outlook remain high. They include (a) weak policy implementation, particularly in the fiscal area; (b) further deterioration of the political and security situation; (c) a larger-than-projected decline in global oil prices; and (d) delays in developing Iraq’s oil fields and oil export capacity, possibly due to security issues but also insufficient investment in oil infrastructure. These risks can translate into lower oil revenues, deterioration in the fiscal position, pressures to use CBI reserves for fiscal purposes, and higher inflation.
Executive Board Assessment
Executive Directors commended the authorities for maintaining macroeconomic stability in a difficult security and political environment. With risks remaining high, including from oil price volatility, they stressed the need to build fiscal buffers and further strengthen the institutional framework. They urged the authorities to step up reforms to develop the private non oil sector to help generate employment and inclusive growth.
Directors emphasized the need to implement sustainable fiscal policies and address risks from oil revenue volatility. Rationalizing current spending—including public employment, energy subsidies, the Public Distribution System, and transfers to state owned enterprises—is needed to create space for priority social spending and public investment and to accumulate buffers. Enhancing public financial management and avoiding quasi fiscal operations by the state owned banks are also crucial. Directors noted that fiscal rules could provide a framework for fiscal policy over the medium term.
Directors supported the objective of the Central Bank of Iraq (CBI) to liberalize the foreign exchange market and the recent steps to simplify market regulations. Further measures are needed to liberalize fully the supply of foreign currency, with the objective of lowering the exchange rate spread, removing distortions, and complying with Article VIII of the Fund’s Articles of Agreement. Directors considered that strengthening the Anti Money Laundering/Combating the Financing of Terrorism (AML/CFT) framework, in line with the Middle East and North Africa Financial Action Task Force (MENA FATF) recommendations and FATF standards, would be more effective than restricting foreign exchange in curbing money laundering and terrorist financing.
Directors agreed that a stable exchange rate, supported by a high level of international reserves, provides a valuable anchor in an uncertain environment. They agreed that the two tier architecture of prudent management of CBI reserves and use of the Development Fund for Iraq (DFI) as a de facto oil stabilization fund is appropriate. They urged the authorities to continue to rely on the DFI to help stabilize government spending and ensure oil revenue transparency.
Directors highlighted the importance of a stable financial sector in developing the private sector and diversifying the economy, and were encouraged by recent progress in strengthening banking supervision and restructuring the Rasheed and Rafidain banks. They encouraged the authorities to ensure a level playing field for public and private banks by opening to private banks access to government business.
More broadly, Directors emphasized that fostering growth in the private non oil sector requires improving the business environment, investing in infrastructure and social capital, reforming state owned enterprises, and enhancing public service delivery. Judicious use of the country’s oil wealth can help address these pressing challenges. Improving the authorities’ capacity to implement reforms will also be critical.
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1 Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board. At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summings up can be found here:http://www.imf.org/external/np/sec/misc/qualifiers.htm.
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Friday, March 22, 2013
IMF Mission Concludes Article IV Discussions with Iraq
Press Release No. 13/87
March 21, 2013
March 21, 2013
An International Monetary Fund (IMF) mission, led by Mr. Carlo Sdralevich, met with an official Iraqi delegation headed by the Acting Minister of Finance, Dr. Ali Al Shukri, in Amman, Jordan, during March 2-12, 2013 to conduct the Article IV Consultation discussion. The IMF mission met with the Acting Minister of Finance, the Acting Governor of the Central Bank of Iraq (CBI), head of the Board of Supreme Audit, AbdulBasit Al Turki Said, and other Iraqi officials from the ministries of finance, planning, and oil, and representatives from the Central Bank and the Board of Supreme Audit. The team also met with representatives from the Iraqi banking and business community.
At the conclusion of the mission, Mr. Sdralevich made the following statement:
“Following the recent expiration of the Stand-By Arrangement with Iraq approved in 2010, the IMF is committed to continue close collaboration with Iraq to support its development and help the government improve the social conditions and employment opportunities of Iraqi citizens.
“Despite a difficult security and political environment, Iraq managed to maintain macroeconomic stability over the past two years. On the back of rising oil production and robust non-oil activity, economic growth has remained strong at about 8 percent in 2012. We expect activity to accelerate further to 9 percent in 2013, as oil production increases from just under 3 million barrels per day (mbpd) in 2012 to 3.3 mbpd in 2013. In 2012, inflation was contained at 6 percent, and we project it to decline slightly next year. On account of strong oil proceeds, CBI reserves reached US$70 billion at the end of 2012, while the Development Fund for Iraq (DFI) rose to US$18 billion.
“While we welcome the achievement of a budget surplus of about 4 percent of GDP in 2012, largely due higher-than expected oil revenues, the execution of the 2013 budget should be aligned with available financing and provide for the accumulation of adequate fiscal buffers in the DFI, which suggests to target a budget surplus in 2013. Public financial management should be strengthened, notably by phasing out off-budgetary spending practices and reliance on state-owned bank financing to support public enterprises. Approval of additional spending commitments during the fiscal year should also be avoided.
“Financial sector policies are improving, but more remains to be done. The CBI’s ongoing efforts to refine monetary policy instruments, strengthen banking supervision, and accelerate the restructuring of the banking system are crucial. In this respect, the recent steps to clean up the balance sheets of Rasheed and Rafidain in preparation for their restructuring and recapitalization are key. The CBI should also take measures to gradually liberalize the provision of foreign exchange through its auctions, with the objective of avoiding in future the turbulence experienced by the market in the past year.
“Iraq will need to address serious medium-term challenges in order to be able to create the conditions for high and sustainable growth that is necessary to improve the living standards of its people. The economy continues to suffer from severe structural weaknesses such as a small nonoil sector, high unemployment, public sector dominance, and a weak business environment. In this context, we discussed the role of economic policies in leveraging Iraq’s potential and creating an enabling environment.
“With regard to the fiscal sector, the budget must be managed carefully to maintain macroeconomic stability, meet Iraq’s large social and investment needs while continuing to accumulate buffers to address oil market volatility, and ensure medium-term fiscal sustainability. At the same time, Iraq needs to strengthen fiscal institutions and public financial management to make sure that the large oil revenues are used effectively and transparently.
“Developing a stronger financial sector development will require moving away from the current model in which weak state-owned banks dominate the financial sector and enjoy favorable treatment vis-a-vis private banks. A solid banking system that can support growth and employment will require the full financial and operational restructuring of state-owned banks and creating a level playing field for both private and public banks.
“Finally, while oil-growth is projected to remain high over the coming years, boosting non-oil private sector growth will need a long-term government strategy centered on improving the business environment and opening up opportunities for the private sector.”
IMF EXTERNAL RELATIONS DEPARTMENT
| Public Affairs | Media Relations | |||
|---|---|---|---|---|
| E-mail: | publicaffairs@imf.org | E-mail: | media@imf.org | |
| Fax: | 202-623-6220 | Phone: | 202-623-7100 | |
http://www.imf.org/external/np/sec/pr/2013/pr1387.htm
Tuesday, May 22, 2012
Parliament Financial Commission (PFC) is discussing to cancel zeros from iraqi dinar
May 08, 2012
- The statement, also added that the foreign currency transfer will be also discussed, in addition other matters connected with the Iraqi currency dinar.
- Earlier Iraqi Cabinet decided to postpone cancellation of from the dinar and to form a committee to investigate the fluctuations in the Iraqi dinar currency and its effects on national economy and dinar rate.
- The cancellation of the zeros from dinar, announced earlier by the Iraqi Central Bank, was disapproved by many Iraqi economic experts, who believe that Iraq was not ready for such a move because it lacked political and security stability, in addition to the economic.
http://www.edinarfinancial.net/news/?quer=&nm=05&ny=2012&nn=754
Friday, April 13, 2012
Iraq halts plans to cut zeros off dinar currency-cabinet
* Cabinet says stops plans to redenominate dinar "until further notice"
* Iraq has over 30 trillion Iraqi dinars in circulation
* Plan to trim zeros not seen as a priority
By Aseel Kami
BAGHDAD, April 12 (Reuters) - Iraq has decided to hold off on a plan to knock three zeros off the nominal value of bank notes of its currency because it does not believe the economic climate is suitable, the cabinet secretary said on Thursday.
The central bank said last August it planned to redenominate the Iraqi dinar to simplify financial transactions in an economy that is still heavily centralised and dominated by oil, and where deals are often carried out in cash.
The proposal to restructure the dinar to bring more liquidity into the market has been awaiting parliamentary approval since last year.
On Thursday, a statement on the website of the cabinet secretary said the cabinet had decided to halt all procedures relating to the redenomination of the dinar "until further notice".
"The economic committee discussed this issue and so did cabinet ... There is a possibility that it could cause some problems in the economic situation. Besides that, this operation is so big that cabinet sees circumstances are not right to control this," cabinet secretary Ali al-Alaq told Reuters.
Iraq is slowly getting back on its feet after years of war and sanctions. Oil accounts for 95 percent of government revenues and the country's banking system is still highly underdeveloped.
HUGE PROCESS
The central bank has kept the dinar fixed at 1,170 dinars to the dollar in its daily auction but it recently moved to revalue the dinar slightly to 1,166 dinars after demand for the U.S. currency soared.
The central bank said it also had to tighten regulations over who can participate in the auctions as Iraqi traders sought to snap up dollars for resale in neighbouring Syria and Iran, both under Western economic sanctions.
Sales of dollars in currency auctions held by Iraq's central bank rose as high as $400 million on some days in December from a previous average of $150 million, according to central bank data.
"We have more than 30 trillion dinars in circulation. To withdraw this amount from the market and then to examine them and to dispose of them is a huge process. Even the technical and the monetary capabilities to control a process like this, we consider as insufficient and it is not seen as a priority currently," Alaq said.
The central bank says Iraq's large foreign reserves, which have risen to a record $60 billion on the back of high oil prices, will shield it from any damage to its financial system on the national level.
Monday, January 30, 2012
USD IQD - US Dollar Iraqi Dinar Rates
Jan 30, 2012
This could get interesting. An announcement that they will raise the value of the Iraqi dinar against the dollar.
Not sure where they are getting their information from, but I have noticed that there is movement again with the rates of the IQD.
Also, read some interesting articles about the oil production surpassing the output of Saudi oil within the next few months, and the military contract with the US in negotiations.
Anyways, who really knows what is going to happen with the IQD??? All I know is that the hope for revaluation has given me the *false hope* to hang tough through this economically horrendous times.
Here is the link for the Forex site referenced above.
Good luck to all, and hope for a revaluation within this lifetime...
Thursday, August 18, 2011
FreeTheDinar.org - Website to shape Iraqi Monetary Policy
FreeTheDinar.org Announces Creation of Website to shape Iraqi Monetary Policy to Include a Plan for Repatriation of Iraqi Dinar Paper Currency Held by Foreigners
PRWEB.COM Newswire
San Diego, CA (PRWEB) August 18, 2011
http://www.freethedinar.org has created a central repository of contact information for organizations and individuals who can shape Iraqi monetary policy. Several recent announcements by the Central Bank of Iraq to completely restructure the Iraqi Dinar have heightened new investor interest in the currency. Iraq’s Central Bank has detailed its general plan for the Dinar that when completed will reflect a Dinar with a value approximately equal to one U.S. Dollar with entirely new redenominated banknotes in circulation. However, certain parts of the story remain untold.
David Pratt of http://www.DinarFund.org has called for the Central Bank of Iraq to reveal its plan for the importation of all Iraqi Dinar paper currency purchased and accumulated by thousands of U. S. citizens the last seven years from the offices and branches of several international banks and registered currency dealers here in the United States.
“We are encouraging people holding this paper to contact the Central Bank of Iraq or anyone who may be in a position to influence Iraq’s monetary policy. We want leadership in the Central Bank to acknowledge these Dinars and display the existence of structures within their master plan designed specifically to facilitate the efficient and orderly repatriation of this currency,” says David Pratt.
William Burbank of BB&M International Corporation, operator of the AmIraq Fund agrees and goes on to state: “individuals who purchased paper currency, often in small denominations were investing in Iraq in its darkest hour. It seems only fair that the Bank of Iraq institute policies that allow them to participate in the growth of the Dinar’s value”. Mr. Burbank went on to state “At this point in time we are awaiting approval of the Central Bank’s recommendations by the Iraqi Parliament and this is the time when policy can be influenced or introduced to protect the paper currency holders.”
It is important to note that only the holders of paper currency outside of Iraq may be impacted by the current ambiguity. Investors holding equity shares, dinar denominated bank deposits and other financial instruments inside of Iraqi are not in question.
To assist holders of Iraqi Dinar paper currency, a dedicated interactive website is available which contains contributed contact information for organizations and key individuals that may have influence in the creation of new policies and procedures being crafted at this time in Parliament. The best time to make changes is before the finalization and execution of any currency exchange program.
Please go to http://www.freethedinar.org to access these links and build momentum by spreading the word.
###
Read the full story at http://www.prweb.com/releases/Iraqi/Dinar/prweb8727787.htm
Wednesday, July 27, 2011
Is The Iraqi Dinar Worthless Paper Or Maker Of Millionaires?
50 dinars, what's it worth?
Dozens of people have signed up for tax consultations with me over the years looking for a windfall profit on the U.S. government revaluation of the Iraqi dinars back into U.S. dollars. In other words, these were people holding dinars who were hoping they could exchange them for dollars again.
Most dinar investors are current and ex-military, warzone contractors and now speculators. A cottage industry of promoters has sprung up on the Internet promising dinar “get rich” schemes. Many have invested, say, $5,000 and they hope to make millions. I’ve always thought it was a scam, as it sounded too good to be true.
These people ask me about their potential large tax bills. Most hope for long-term capital gains tax rates, currently up to 15 percent. I have to give them the bad news: holding physical currency is considered ordinary gain or loss in Section 988 (foreign currency transactions). Unlike forex traders, who don’t hold physical currency and don’t take or make delivery, they can’t file a capital gains election to opt out of Section 988 and into short- and long-term capital gains treatment.
That means no lower 60/40 futures tax rate either (Section 1256). At least, it’s not considered a personal loss which otherwise can’t be deducted, as is the case when a person returns from a vacation and exchanges his left over currency from that trip. Investors in dinars can deduct ordinary losses in Section 988, but few expect a loss.
Lords of Finance: The Bankers Who Broke the World by Liaquat Ahamed is about how the four leading central bankers from the U.S., U.K., France and Germany navigated in and out of WWI and financed recoveries and German reparations. These central bankers went off and on the gold and new dollar standards by manipulating their exchange and interest rates and much more. This is how money and power (military and otherwise) go hand in hand.
Our current situation begs the question: Did the Bush administration plan on, and is the Obama administration still considering, paying for part or all of the Iraq war by collecting taxes from the revaluation of the dinar?
If this scheme has any resemblance of reality, it could be an interesting revenue raiser for the government, and I know the government is hunting for revenue raisers and closing of tax loopholes.
Maybe the story here is just that it’s a scam. But, if rumors in the marketplace are true, and the dinar does revalue and allow conversion for most to pre-war levels, what are the ramifications for the government, Iraq, the military, investors and taxpayers? Also, what’s holding up the revaluation? Can Iraq handle it?
It does sound like a happy ending which makes me suspicious. How much tax revenue do U.S., state and local governments stand to collect? How many former and current military personnel and contractors stand to become millionaires overnight?
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