Iraqi officials winning war on inflation (great read)

[The Baghdaddy]

Adster this is great news. I posted the BOE's reccomendations for emerging economies last year and it categorically stated that "Large amounts of foreign currency inevitably require large appreciation of the domestic currency," I have banged on and on about this and now we have confirmation! Great find, thanks!

[MotorDown]

Having more than 100% backup of the dinars allows the CBI to buy up the dinars in circulation (all of them if they wanted to) until the value and the circulation is par with, or higher than, the dollar. The CBI is in complete control because the dollar reserves exceed the value of the dinars and the dollars continue to roll in monthly from oil sales. When you add monetizing the oil even without taking it out of the ground via the big oil co. service contracts you are talking about RVing at any rate that benefits Iraq without fear of inflation or economic collapse. They are in a much better position than any of us would have guessed!

Which probably explains why they have not borrowed from the IMF stand-by agreement. They renewed just in case, but with the price of oil steadily climbing and that money being set aside (IAMB) they have no need for the SBA.

[REITman]

Which probably explains why they have not borrowed from the IMF stand-by agreement. They renewed just in case, but with the price of oil steadily climbing and that money being set aside (IAMB) they have no need for the SBA.

Absolutely MD! With this new, important info it makes me wonder what the RV trigger will be. HCL? Debt?
GCC RV?

[Adster]

Throw this into the works too from 3 weeks ago.


http://www.newspress.com/Top/Article...39690949951504

UN transfers US$161 million from oil-for-food program to Iraq's development fund

EDITH M. LEDERER, Associated Press Writer



February 4, 2008 4:11 PM

UNITED NATIONS (AP) - The United Nations has transferred $161 million from the defunct oil-for-food program to a development program for Iraq, Secretary-General Ban Ki-moon said Monday.

In a letter to the Security Council, Ban said the U.N. will continue to transfer ''unencumbered funds'' to the Development Fund for Iraq as it continues the process of terminating the oil-for-food program, found to be riddled with corruption.

The program, which ran from 1996 to 2003, was aimed at easing Iraqi suffering under U.N. sanctions imposed after Saddam's 1990 invasion of Kuwait. It allowed Iraq to sell oil provided the bulk of the proceeds were used to buy food, medicine and other humanitarian goods and pay war reparations.

But an 18-month investigation led by former Federal Reserve chairman Paul Volcker, found massive corruption in the program. Its final report in October 2005 accused more than 2,200 companies from some 40 countries of colluding with Saddam Hussein's regime to bilk the humanitarian program in Iraq of $1.8 billion.

Ban reported to the Security Council on a meeting in Jordan last month between U.N. officials and representatives of Iraq's Foreign Ministry and Central Bank, aimed at reducing the number of outstanding letters of credit from the oil-for-food program.

As of the end of 2007, he said there were 210 outstanding letters of credit valued at over $656 million. He urged Iraqi ministries to resolve outstanding claims before March 31 and said the working group would meet again in March.

Ban said a reserve of $187 million and a balance of$225 million would be retained in the oil-for-food account until all remaining issues have been resolved.

[MotorDown]

Absolutely MD! With this new, important info it makes me wonder what the RV trigger will be. HCL? Debt?
GCC RV?

The HCL is needed and we all know why. The debt is a big issue, kinda like a bankruptcy, clearing all the debts and BAM!! Then they will be ready for GCC.

[TheEppster]

Maybe the outstanding debt issues can be resolved quickly as well.....

[MotorDown]

Maybe the outstanding debt issues can be resolved quickly as well.....

Should be able to as alot of agreements have been verbally made. It's just a matter of singning on the dotted line.

[TheEppster]

hmmmm... just like the join date, Motor beat me to the punch.

[Adster]

Not convinced Kuwait will ever forgive. Saudi yes. IF Kuwait do not forgive they will have to forge ahead and factor in the $15 billion into their plans.

As for the trigger, if they do indeed intend to monetize the oil and use petro dinars IMO it is the HCL we are waiting on for a reversion. It will be passed before the summer. Again, IMO.

[TheEppster]

Not convinced Kuwait will ever forgive. Saudi yes. IF Kuwait do not forgive they will have to forge ahead without it.

As for the trigger, if they do indeed intend to monetize the oil and use petro dinars IMO it is the HCL we are waiting on for a reversion. It will be passed before the summer. Again, IMO.

The way they're going they'll be able to pay the debt in cash!

[Pecos Billy]

great stuff Adster!!!!

Billy

[MotorDown]

Not convinced Kuwait will ever forgive. Saudi yes. IF Kuwait do not forgive they will have to forge ahead and factor in the $15 billion into their plans.

As for the trigger, if they do indeed intend to monetize the oil and use petro dinars IMO it is the HCL we are waiting on for a reversion. It will be passed before the summer. Again, IMO.

As far as Kuwait, maybe the CBI is waiting to have that extra $15B above and beyond what they need in the coffers. In other words, pocket change.

Everyone knows the HCL is needed for progress in Iraq and they are getting pressured from all sides to get it approved.

[The Baghdaddy]

Not convinced Kuwait will ever forgive. Saudi yes. IF Kuwait do not forgive they will have to forge ahead and factor in the $15 billion into their plans.

As for the trigger, if they do indeed intend to monetize the oil and use petro dinars IMO it is the HCL we are waiting on for a reversion. It will be passed before the summer. Again, IMO.

Taken from one of my old posts. Thought it backed up this thread lovely! Heres the link to the thread:
http://www.investorsiraq.com/showthread.php?p=560577


And heres part of one of the posts taken from the BANK OF ENGLAND! ENJOY!


Old post using BOE case study. To stop significant growth of foreign currency supply on the domestic market (DOLLARS in our case) a considerable APPRECIATION of the national currency would be needed. THINK DE-DOLLARISATION!
http://internationaltrade.suite101.c..._trade_buddies
Much of Iraq's potential as a world oil export leader is unrealized. As George Bush's war rages on, America's trade deficit with Iraq continues to rise.Home to 11% of the world's proven oil reserves, Iraq's 115 billion barrels of crude is second only to those of Saudi Arabia.

Iraq's oil exports accounted for 84% of that country's total exports in 2006. Non-fuel petroleum products generated about 8% of 2006 Iraqi exports, while food and live animals (cattle, sheep, poultry) shipped from Iraq comprised 5%.

Only 20% of Iraq's oil fields have been developed. An even smaller percentage of Iraq's natural gas reserves have been brought into production.

In 2006, Iraq shipped US$32.2 billion worth of exports to the rest of the world while imports amounted to $20.8 billion. Despite a prolonged war and attacks on oil pipelines that further restrict export volumes, Iraq's trade surplus was some $11.4 billion in 2006.Top Countries For Iraqi

[moediac]

Iraqi officials winning war on inflation

Saturday, February 23, 2008 2:56 AM
By WILLIAM g. DEWALD

I haven't been in Iraq for a couple of years but I stay in touch. There is some good news that the media have ignored. Ignored probably is the wrong word: The media simply have been oblivious that inflation in Iraq fell substantially in 2007. This good news is the result of policies by the Central Bank of Iraq.

The consumer price index for Iraq had increased by more than 50 percent in January 2007, compared with prices a year earlier. By contrast, in January this year the 12-month inflation rate was down to only 1.3 percent. That's low even by the standards of major industrial nations. For example, the U.S. consumer price index increased more than 4 percent in 2007.

Iraq's inflation in 2007 was by far its best record in decades. It had averaged about 50 percent a year during much of Saddam Hussein's tenure as dictator, which ended with the onset of the war in April 2003. Iraqis suffered much under him, including the decimation of their currency by inflation. In pre-Saddam days, one Iraqi dinar had exchanged for $3. By the time he was deposed, it took about 2,000 Iraqi dinars to buy $1.

What happened in Iraq to reduce inflation so significantly in 2007? One factor presumably was the U.S. troop surge. Quantifying that effect is almost impossible but it is reasonable that output would increase when people can get to work safely.

The other factor is highly quantifiable: Since 2006, the Iraqi monetary authorities deliberately have pursued an anti-inflationary policy to appreciate the dinar in international currency markets. An appreciation lowers the cost of imports and, in turn, inflation. Since September 2006, the dinar has appreciated 22 percent in terms of the U.S. dollar. Import prices, which more than doubled in 2006, actually fell in 2007. That didn't capture the attention of the media, but don't think that Iraqis didn't notice.

How could Iraq's monetary authorities pull off such a dramatic success? They had established the credibility to appreciate their currency because they had accumulated a lot of dollars held in their own vaults and in overseas deposits. Their stash of dollars had been accumulated since the war began, mainly from oil revenues.

The U.S. dollar holdings now exceed the value of all Iraqi dinars in circulation. In other words, the dinar is more than 100 percent backed by Iraq's official holdings of U.S. dollars. Hence, when the Central Bank of Iraq started buying its own currency in exchange for dollars, the value of the dinar appreciated and import prices came down.

The Central Bank of Iraq implements its exchange-rate policy in its daily foreign-exchange auctions where it buys or sells U.S. dollars for Iraqi dinars. It's not a phony market. On Tuesday, 13 Iraqi commercial banks bought 127.3 million U.S. dollars in exchange for 154 trillion dinars.

Why do Iraqis want so many dollars? Some certainly go under mattresses as a hedge against inflation and political mayhem. Some are used in ordinary cash transactions, particularly for big-ticket items. But most of the dollars are used to finance importation of goods that, despite the terrorist turmoil, continue to be offered in abundance by street vendors and retail shops all over the country, another salient fact about Iraq that the media ignore.

The Central Bank of Iraq has pursued a variety of anti-inflationary policies in addition to their currency-appreciation policy. Treasury bills have been sold in intermittent auctions at interest rates that were increased to more than 20 percent. The Central Bank raised all of its lending and deposit rates corrspondingly and made its required reserves viciously restrictive on the two government-owned commercial banks that are by far the largest financial enterprises in the country. The International Monetary Fund and other foreign advisers have supported the courageous pursuit of these policies in exceedingly difficult circumstances.

The sharp reduction in domestic inflation in 2007 was enough to allow the Central Bank of Iraq to ease its tight policy stance by reducing its lending and deposit rates in January. Core inflation, which excludes transport and fuel, is still running at about a 10 percent annual rate. So it is too soon to declare victory over inflation. Nonetheless, the surge in the international value of the dinar and lower overall inflation have to be gratifying for Iraqis.

William G. Dewald retired from Ohio State University as an economics professor, served as an economist in the U.S. State Department, was director of research at the Federal Reserve Bank of St. Louis and was a U.S. adviser to the Central Bank of Iraq in 2003-05.

http://www.columbusdispatch.com/live...K.html?sid=101

This could also indicate that the Iraq reserve can back the value of dinars in circulation with U.S. dollars. In other words, if Iraq has 30 trillion in circulation, the value of that is 27 billion U.S. dollars. If this is the case, then yes they can back it by more than a 100 percent. I don't think this article is referencing a 1-1 ratio. I'm not trying to play the bad guy here, it just seems more plausible.

[NewUser]

great stuff Adster!!!!

Billy

I agree this is one of the top Posts for the year, BUT IMO the best post of the year will be an announment of the RV 1-1 or better, or any RV

IMO

[Howler]

WOW this is one great thread, doing wonders for my hangover! LOL
The part in red cant be right....is it??????



The Central Bank of Iraq implements its exchange-rate policy in its daily foreign-exchange auctions where it buys or sells U.S. dollars for Iraqi dinars. It's not a phony market. On Tuesday, 13 Iraqi commercial banks bought 127.3 million U.S. dollars in exchange for 154 trillion dinars.

[Shau - Kenshin]

As far as Kuwait, maybe the CBI is waiting to have that extra $15B above and beyond what they need in the coffers. In other words, pocket change.

Everyone knows the HCL is needed for progress in Iraq and they are getting pressured from all sides to get it approved.

But the problem with the HCL is that they have pushed it off to staff off the Americans getting 50 year contracts and only want to do 5 to 10 years at most. They will pass it if they absolutly HAVE to but as of now they dont, the S.O.L. is still getting the oil co's ready to play. And yes, while we ALL want them to, the less American leaning towards deals, the better, they figure.

The issue that is stall the the aggressive appreciation, pre war exchange rate, or RV (in my glorious opinion...) is the LACK of a CONTRACTED DOLLAR WORTH AMOUNT on the stuff in the ground. You cant say that its worth so much if no one wants to come in and PULL it out for you.

I mean, c'mon guys, look at it this way. Whats the value, the CONTRACTED DOLLAR AMOUNT GIVEN TO THE CRUDE. Nada... but we KNOW it is worth tons right? But at this time, RIGHT NOW, there is no dollar amount placed on it. Lets say that they can get 2.6 million barrles out and the current going proce is and even $100. Thats $260 million dollars a day, right? times 365 days a year.

That is $94,900,000,000 a YEAR..... now what will that do to the appreciation of the dinar?

My point is, when they take the contracted dollar amount (tenders) to the bank (World Bank) that IS money in the bank. and what will happen to the currency then? It HAS to go up....HCL or no!

So do we need the HCL? It would be nice.... but Shell will still play ball with or without it, because of the troops on the ground.

[dilligaf]

Absolutely MD! With this new, important info it makes me wonder what the RV trigger will be. HCL? Debt?
GCC RV?

sovereignty!!! Is that article 140?

and HCL

those two...and that's GOT TO BE IT!! IMO.

[yunowu]

Great News !! Thanks for sharing Adster !!

[The Baghdaddy]

But the problem with the HCL is that they have pushed it off to staff off the Americans getting 50 year contracts and only want to do 5 to 10 years at most. They will pass it if they absolutly HAVE to but as of now they dont, the S.O.L. is still getting the oil co's ready to play. And yes, while we ALL want them to, the less American leaning towards deals, the better, they figure.

The issue that is stall the the aggressive appreciation, pre war exchange rate, or RV (in my glorious opinion...) is the LACK of a CONTRACTED DOLLAR WORTH AMOUNT on the stuff in the ground. You cant say that its worth so much if no one wants to come in and PULL it out for you.

I mean, c'mon guys, look at it this way. Whats the value, the CONTRACTED DOLLAR AMOUNT GIVEN TO THE CRUDE. Nada... but we KNOW it is worth tons right? But at this time, RIGHT NOW, there is no dollar amount placed on it. Lets say that they can get 2.6 million barrles out and the current going proce is and even $100. Thats $260 million dollars a day, right? times 365 days a year.

That is $94,900,000,000 a YEAR..... now what will that do to the appreciation of the dinar?

My point is, when they take the contracted dollar amount (tenders) to the bank (World Bank) that IS money in the bank. and what will happen to the currency then? It HAS to go up....HCL or no!

So do we need the HCL? It would be nice.... but Shell will still play ball with or without it, because of the troops on the ground.

In fact this thread is turning rapidly into a great post fest! lol. They do need that HCL though mate do not underestimate the importance of it! They (big oil) will not go in without it! Security is less of an issue, as PSC's have already done feasability studies on securing the fields and the transportation of the oil. The HCL has to happen, if it doesn't nothing else will!