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dollarsign
07-20-2013, 12:48 PM
I got an email notification from the IMF at 4:45 pm on Friday, regarding additional information on the recent Article IV consultations with Iraq. Embedded in one was a curious statement.
(Remember, Fiat Currencies do not have to be backed 100%)
In principle,the CBI reserves would be enough to cover the complete Dollarization of the economy".

If the IMF feels this is true, then the inverse must also be true, the CBI reserves must be enough to cover complete de-dollarization, equality. Those of us who've been around long enough, know that the goal is de-dollarization, both in Iraq, and the IMF.
There are two IMF documents that were released on their homepage on Friday, the statement I referenced is in document CR13217.PDF

$

haggisbasher
07-20-2013, 02:38 PM
I say that the IMF and a hand full of international power houses just waiting to get in to Iraq and are going to force the CBI & Maliki's hand very soon with the IQD, very encouraging read.
BAM and its on the Forex as a fully floating currency after a very quick reval.

millionairetobe71
08-04-2013, 04:28 AM
I got an email notification from the IMF at 4:45 pm on Friday, regarding additional information on the recent Article IV consultations with Iraq. Embedded in one was a curious statement.
(Remember, Fiat Currencies do not have to be backed 100%)
In principle,the CBI reserves would be enough to cover the complete Dollarization of the economy".

If the IMF feels this is true, then the inverse must also be true, the CBI reserves must be enough to cover complete de-dollarization, equality. Those of us who've been around long enough, know that the goal is de-dollarization, both in Iraq, and the IMF.
There are two IMF documents that were released on their homepage on Friday, the statement I referenced is in document CR13217.PDF

$

Do you have the link to the document? I would like to read it.....otherwise, it sounds like we will be waiting for a much longer time phase
.....

ETA
10-09-2013, 08:24 PM
Nice find dollarsign we shall wait, hope all is well with you. can you add a little more of what you might think is happening and your personal opinion

English Bob
10-10-2013, 08:33 AM
Do you have the link to the document? I would like to read it.....otherwise, it sounds like we will be waiting for a much longer time phase
.....


Here you go
http://www.imf.org/external/pubs/ft/scr/2013/cr13217.pdf

EB

English Bob
10-10-2013, 08:59 AM
Page 33/34

Skipping through this document does not give me a warm fuzzy feeling there are allot of negatives in this document.



Monetary measures: Particularly in countries with open capital accounts, the reserve
coverage of the monetary base is useful to reflect the foreign exchange demand
potentially arising from the conversion of commercial bank deposits. The coverage of
foreign exchange deposits indicates the capacity to meet the banking system’s liquidity
needs in case of a crisis. In Iraq, owing to the high level of reserves and the limited financial development, end-2012 CBI net foreign exchange reserves covered 122 percent of
reserve money and 104 percent of broad money, or approximately four times foreign
exchange deposits. In principle, therefore, the CBI reserves would be enough to cover the
complete dollarization of the economy. Additionally, a large part of deposits are owned by
government agencies and state-owned enterprises, making them less vulnerable to
confidence crises.

Exchange rate developments and assessment
7. The real effective exchange rate has appreciated over the last three years. Since the
2009 Article IV consultation (from end-2009 to end-2012), the real and nominal effective exchange
rates have appreciated 12 and 7 percent respectively. Higher inflation in Iraq relative to its trading
partners has contributed to a 5 percent real appreciation over this period. As a result of this
dynamics, the real effective exchange rate was at end-2012 at about the level of end-2008. With the
central bank the main source of funds to the foreign exchange market, foreign exchange auction
regulations have led to a widening of the spread between the official and parallel foreign exchange
rates from mid-2011 onwards. Using parallel market foreign exchange rates, the real appreciation
from end-2009 to end-2012 was 8 percent. The share of foreign currency transacted on the parallel
market has varied over time, but it is likely to be relatively small. The weighted real effective
exchange rate is therefore likely to be closer to the rate based on the official exchange rate than that
based on the parallel market exchange rate.



EB

English Bob
10-10-2013, 09:02 AM
10. The external sustainability approach confirms the broad alignment of the exchange
rate with fundamentals. Estimates using this methodology suggest that the current account
norm is a surplus of 3 percent of GDP. In comparison, under the staff’s baseline medium term
baseline projection, the average current account surplus is 4 percent of GDP. Therefore, the
estimated undervaluation of the real exchange rate is close to 10 percent. Given the large
margins of errors, these calculations suggest that the real exchange rate is in line with economic
fundamentals.

English Bob
10-10-2013, 09:03 AM
11. In the medium term, the increase in
oil revenues might lead to an appreciation
of the real exchange rate. In the short run, a
major determinant of the real exchange rate is
the international price of oil. During 2009 the
oil price collapse forced a depreciation of the
real exchange rate. As oil prices subsequently
recovered, so did the real exchange rate. In a
medium term perspective, the real exchange
rate is also heavily influenced by the level of oil
production in addition to the international oil
price. As oil production is currently ramping up,
the equilibrium real exchange rate may be appreciating notwithstanding the weakening of oil
prices. On the other hand, the current spread between the official and parallel exchange rates
may be suggestive of underlying fragilities that could warrant a real depreciation of the official rate.

English Bob
10-10-2013, 09:05 AM
Staff assessment: High
- Large increases in current
spending would lead to
monetary financing of the
fiscal deficit and use of
central bank reserves for
fiscal purposes (which is
currently forbidden by law),
and possibly higher inflation
and currency depreciation.
- Intervention in foreign
exchange auctions results in
a shortage of foreign
exchange and lack of
confidence in the CBI’s
ability to support the
exchange rate which
ultimately would lead to
pressures to depreciate the
dinar.

English Bob
10-10-2013, 09:06 AM
Staff assessment: High
- As oil revenues account for
over 90 percent of
government revenues, a
sharp decline in oil prices
results in lower fiscal
revenues.
- A fiscal crisis may ensue in
case the government does
not cut spending and may
lead to an exchange rate
depreciation.

English Bob
10-10-2013, 09:09 AM
Appendix III. Iraq: Debt Sustainability Analysis
1. Iraq’s external debt burden continues to ease owing to progress in regularizing
Saddam-era external claims. As of end-2012, total external debt was $60 billion (28 percent of
GDP). In 2010, an agreement with China extinguished $6.7 billion out of total claims of $8.5 billion
and rescheduled the remainder balance on terms broadly comparable to those of the Paris Club. In
2011, $0.1 billion of small claim commercial debt (i.e., original individual claims below $35 million)
was extinguished through deep-discount buy-back operations and in 2012 Algeria agreed to cancel
fully its claims of $0.4 billion. With these operations, an estimated $42 billion of claims to non-Paris
Club bilaterals and small claim commercial creditors remains to be restructured.
2. As of end-2012, total restructured and new external debt amounted to $18.2 billion
(8.5 percent of GDP). Current and prospective disbursements are fairly limited (the World Bank and
Japan International Cooperation Agency are the main partners) and it is expected that net external
public sector financing remain negative over the medium term. Under the staff’s baseline scenario, it
is assumed that remaining previous-regime bilateral claims are regularized and rescheduled on Paris
Club-comparable terms in 2013 and remaining small claim commercial debt are bought back in
2014. By end-2018, total debt is projected to be $20.9 billion (5.6 percent of GDP).

3. External debt service is projected at about $2–3 billion annually over the medium
term. The debt service to exports ratio will double from 1.5 percent in 2013 to 3 percent in 2014
owing to repurchases to the Fund and assuming the regularization of remaining previous-regime
debt. Thereafter, the debt service ratio will gradually revert back to 1.5 percent. The debt service
ratio is vulnerable to an oil price or oil production shock, which would have to be extraordinarily
large to compromise the capacity to service timely the debt given Iraq’s large reserves.
4. The public sector’s total domestic obligations have increased significantly since 2009,
but so have its domestic financial assets. Total obligations increased from ID 5.2 trillion at end-
2009 to ID 16.2 trillion at end-2012 (6.5 percent of GDP). The obligations are composed of (1) T-bills
held by the banking system and bank loans totaling ID 7.5 trillion; and (2) government-guaranteed
loans by state-owned banks to state-owned enterprises totaling ID 8.6 trillion. Given the financial
difficulties in the state-owned enterprise sector, the likelihood that these guarantees will be called is
very high. Public sector commercial bank deposits—ID 40.5 trillion at end-2012—exceed
comfortably the stock of government- and government-guaranteed financial liabilities.

5. Domestic debt service is projected at about ID 2 trillion annually over the medium
term. Under the staff’s baseline scenario—which assumes the rolling over of T-bills, and no new
borrowing and issuance of government-guaranteed loans—domestic obligations will decline to just
ID 5.7 trillion (1.3 percent of GDP) by end–2018

English Bob
10-10-2013, 09:14 AM
Exchange Arrangement
The CBI has been conducting foreign exchange auction on a daily basis since October 4, 2003. The
CBI followed a policy of exchange rate stability which has translated in a de facto peg of the
exchange rate since early 2004. However, from November 2006 until end 2008, the CBI allowed the
exchange rate to gradually appreciate. As a result, the exchange rate arrangement of Iraq was
reclassified to the category of crawling peg effective November 1, 2006. Since the start of 2009, the
CBI returned to its earlier policy of maintaining a stable dinar. Consequently, the exchange rate
arrangement of Iraq was reclassified effective January 1, 2009 as a stabilized arrangement.
Iraq continues to avail itself of the transitional arrangements under Article XIV. Eight exchange
restrictions (plus one exchange restriction maintained for national or international security) and one
multiple currency practice (MCP) are subject to IMF jurisdiction and approval. The exchange
restrictions are (i) the limitation that corporates can purchase foreign exchange in the auction for
import transactions only; (ii) limitation on the availability of foreign exchange cash for individuals
(i.e., one request per month); 
(iii) maximum limits on the availability of foreign exchange cash in the
auction for banks;
(iv) maximum limits on the availability of foreign exchange cash in the auction for money transfer companies and money exchange bureaus; (v) the requirement to pay all obligations
and debts to the government before proceeds of investments of investors, and salaries and other
compensation of non-Iraqi employees may be transferred out of Iraq; (vi) the requirement to submit
a tax certificate and a letter of non-objection stating that the companies do not owe any taxes to the
government before non-Iraqi companies may transfer proceeds of current international transactions
out of the country; (vii) the requirement that before non-Iraqis may transfer proceeds in excess of ID
15 million out of Iraq, the banks are required to give due consideration of legal obligations of these
persons with respect to official entities, which must be settled before allowing any transfer; and
(viii) an Iraqi balance owed to Jordan under an inoperative bilateral payments agreement. In
addition, one exchange restriction maintained for security reasons should be notified to the IMF
under the framework of Decision 144-(52/51). The MCP arises from the absence of a mechanism to
ensure that the official exchange rate and the market exchange rate do not deviate by more than
2 percent.


This measure gives rise to an exchange restriction because the limitation of one request per month constitutes a
governmental limitation on the availability of foreign exchange for payments and transfers by individuals for current
international transactions, e.g., basic allocations for tourist or business travel abroad, family living expenses, etc.
Furthermore, because of the limitation on the availability of foreign exchange in the non-cash auction to corporates
and only for trade transactions, individuals who need to make payments and transfers for current international
transactions beyond the maximum limit have no alternative means or channels to get access to foreign exchange,
except for resorting to informal sources.

This measure gives rise to an exchange restriction because the maximum cap constitutes a governmental limitation
on the availability of foreign exchange for certain payments and transfers, e.g., repatriation of certain investment
income by nonresidents, including remittances of profits, dividends or interest. Because of the limitation on the
availability of foreign exchange in the non-cash auction by corporates to only trade transactions, they would have no
other means or channels to get access to such foreign exchange beyond the maximum limits, except for resorting to
informal sources.

English Bob
10-10-2013, 09:24 AM
IMF Executive Board Concludes 2013 Article IV Consultation with Iraq


On May 13, 2013, the Executive Board of the International Monetary Fund (IMF) concluded the
Article IV consultation with Iraq.5


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 3



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.

English Bob
10-10-2013, 09:28 AM
Statement by A. Shakour Shaalan, Executive Director for Iraq
May 13, 2013

Background

1. On behalf of the Iraqi authorities, I thank staff for their engagement and the constructive
Article IV Consultation discussions. The authorities highly value the views of the Fund on Iraq’s
economic policies and appreciate the valuable technical assistance they receive from staff in support
of their stabilization and reform efforts.

2. Notwithstanding very challenging security and political conditions, Iraq’s economic
performance was strong in the past two years. GDP growth picked up to over 8 percent, reflecting
higher oil production and buoyant growth in the non-oil economy. Inflation remained low. The
fiscal balance recorded surpluses and sizable external reserves were accumulated.

3. Notwithstanding these favorable developments and the prospects of continued high growth
in the medium term─driven by developments in the oil sector─the Iraqi economy continues to face
challenges and risks. These include mainly a deteriorating political and security situation, volatility
in oil prices, and constraints in administrative capacity.

Fiscal Policies and Reforms

4. In 2013, the authorities plan a more gradual fiscal consolidation than in the two previous
years, with the fiscal surplus estimated at 1.6 percent of GDP. They also intend to put in place a
medium-term fiscal strategy program that would cover more than three years. With oil revenues
soaring, political pressures to increase current spending are growing. In March 2013 parliament
approved a final budget that includes unfunded commitments, but implies a deficit that is less than
in some previous years. While the government recognizes the need to redistribute part of the oil
wealth among the population, it is also aware of financing constraints and the importance of
maintaining fiscal buffers. Accordingly, the actual execution of the budget will aim at meeting
priority social and investment spending, while maintaining fiscal buffers.

5. In particular, the government intends to limit spending growth in subsidies for energy
producers, rationalize transfers to state-owned enterprises and to the universal Public Distribution
System, and contain the increase in public-sector employment. These measures would help maintain
the fiscal buffers at the Development Fund for Iraq (DFI) at about six months of salaries and
pensions. They would also enable full execution of investment projects in the oil sector, while
keeping non-oil sector capital spending constant in nominal terms, in line with implementation
capacity.

Monetary and Exchange Rate Policies

6. The authorities agree with staff that the stability of the exchange rate has provided a
valuable anchor for inflation expectations in an uncertain environment. They intend to maintain
exchange rate stability in the foreseeable future.

7. In 2011, the central bank of Iraq (CBI) started limiting foreign exchange supply to address
concerns related to money laundering and financing of terrorism. To do so, it enforced existing
exchange restrictions and introduced new restrictions. With the central bank the main source of
funds to the foreign exchange market, foreign exchange auction regulations have led to a widening
of the spread between the official and parallel foreign exchange rates. In the absence of sufficient
capacity of the financial sector to implement Anti-Money Laundering and Combating Financing of
Terrorism (AML/CFT) preventive measures, the CBI finds it necessary to restrict the supply of
foreign currency to restrain illicit uses of foreign exchange.

8. The CBI is committed to progressively liberalize the foreign exchange market as capacity to
prevent AML/CFT is developed. It has recently taken steps to simplify foreign exchange market
regulations and this has led to the elimination of many exchange restrictions. The CBI is working
closely with staff on complying with Article VIII of the Fund’s Articles of Agreement, as well as
eliminating the remaining exchange restrictions and the multiple currency practice.
Structural Reforms

9. Continued capacity constraints, compounded by the difficult political and security situation,
have slowed progress in structural reforms. Nonetheless, progress was made in the area of public
financial management, with the adoption of a government Chart of Accounts. The authorities also
confirmed their commitment to adopt a single treasury account. They will pursue efforts to fully put
in place an Integrated Financial Management Information System, which would help improve
budgeting, budget execution, spending controls, debt management, and fiscal reporting. With regard
to banking sector reforms, effective measures were taken to clean-up the balance sheets of the two
largest state-owned banks, Rafidain and Rasheed, of legacy external debt, losses related to the war,
valuation losses, and costs associated with issuing the new Iraqi currency. Continued progress is
being made in improving transparency in the oil sector as Iraq became a full member of the
Extractive Industries Transparency Initiative in December 2012.

10. The authorities appreciate staff’s work on sovereign wealth fund options. They concur with
staff’s view that the DFI is a successful and transparent fiscal institution, which helped Iraq mitigate
the effects of negative oil price shocks. They consider that the DFI has been operating as a de facto
stabilization fund, allowing the government to accumulate reserves through strong fiscal
performance in boom years, and financing spending when oil revenues fall short.

11. Staff notes that growth prospects hinge on implementing a prudent policy mix, enhancing
service delivery, rebuilding infrastructure and strengthening the business environment. The
authorities fully share this assessment. They are aware that promoting the non-oil private sector is
crucial as the employment model based on the public sector is reaching its limits. In an effort to
address Iraq’s growth and development needs, the Ministry of Planning prepared a five-year
National Development Plan following an extensive consultative process. The plan is now being
discussed by the Cabinet.

Screaming Eagle
10-10-2013, 11:37 AM
Thanks for the facts EB, over and over again they state the wish to keep the dinar stable at its official rate, "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".

6. The authorities agree with staff that the stability of the exchange rate has provided a
valuable anchor for inflation expectations in an uncertain environment. They intend to maintain
exchange rate stability in the foreseeable future.

dollarsign
10-10-2013, 04:14 PM
Amid these views, Enas Mohamed, deputy director at Naseem Al Shemal Brokerage Company, told Al-Monitor that the stock market will be harmed the most by a change of currency and the deletion of zeros. The price of a share is one dinar, so currently 1,000 dinars are equal to 1,000 shares. Following the deletion of zeros, the new dinar will be equal to 1,000 shares, which would further confuse the stock market, which is already muddled as a result of the security situation.
http://www.iraq-businessnews.com/2013/10/03/economists-divided-over-deletion-of-zeros/2/

dinar_dude
10-10-2013, 10:16 PM
That'd be just fine with me - give me 1,000 shares per new dinar!


Amid these views, Enas Mohamed, deputy director at Naseem Al Shemal Brokerage Company, told Al-Monitor that the stock market will be harmed the most by a change of currency and the deletion of zeros. The price of a share is one dinar, so currently 1,000 dinars are equal to 1,000 shares. Following the deletion of zeros, the new dinar will be equal to 1,000 shares, which would further confuse the stock market, which is already muddled as a result of the security situation.
http://www.iraq-businessnews.com/2013/10/03/economists-divided-over-deletion-of-zeros/2/