A very good sign when Saleh is talking international government bond sales, as he is in this article:
LINK: Saleh appearance: Iraq can be classified as credit through government bonds
Big corporations and governments will have bond sales for many reasons but sometimes they use this tool of raising money (taking a loan) to pay off existing debt, as a means of a debt consolidation tool.
Well it looks like Iraq is about to enter the global bond market as soon as they get their official credit rating, which could be any day now. According to this article the process started last year but no credit rating could be placed on Iraq because they were considered to still be a threat to the international peace and security.
Read More Link On Right
Now that Chapter VII has been moved to Chapter VI and those days, we hope are things of the past we see Iraq preparing themselves for the global market.
Selling bonds is considered taking out a loan as defined in Wikipedia and has options on how these bonds are paid off at maturity:
QUOTE: Although bonds are usually discussed in terms of a government 'selling' a bond, what is really happening is that a government is taking out a loan against the ability of its population to return that loan over time through taxes.
QUOTE: Government bonds are usually referred to as risk-free bonds, because the government can raise taxes or create additional currency in order to redeem the bond at maturity.
Link: Government bond
Deferring debt is exactly what Iraq needs but it must be arranged first.
By raising money this way, it takes the responsibility off the oil revenue to pay debt payments or whatever they use it for, which assents that money can then be used for other projects.
The purpose of a free market economy for Iraq or any country is to build the private sectors which then increases Iraq's tax revenue and could put repayment on taxation over a longer period of time.
OR, they could create additional currency (post currency reform) in order to redeem these bonds at maturity, as I point this part out again:
QUOTE: or create additional currency in order to redeem the bond at maturity
See, IF they were to use those funds to pay off other debt, let's say Kuwait's $11 billion for example, then they can get released completely from that last remaining piece of the puzzle that lingers over Iraq from Chapter VII, which in return will give Iraq their own protection of their own assets as a real full sovereign state, no more US protection required.
BTW, Iraq can't enter the global market and be under the protection of another sovereign country, if you can't control your own funds in your own country how can you be taken seriously in the global stage?
The answer is, they can't, and it just makes common sense that they need these debts arranged before they can play with the big boys, in the big playground.
They may not do what I just described, but when this country of Iraq continues to have a surplus of budget funds year after year and doesn't have a cash flow issue, then it makes aperson wonder what the big picture is.
Also, remember that the last we heard about the Standby Agreement from the IMF was; Iraq has not needed to borrow much from this fund because they can't even spend all their budget funds in a calendar year, thus the surplus last year and the last two years before that.
The question should be, why Iraq just did not use their assets to pay Kuwait off, we know they have other liquid assets that they could use other than their nations hard currency reserves? Unless they want all their assets to justify something much larger.
Regardless, Iraq once again is showing signs of re-entering the global market and that Folks is good for us investors.
They need a convertible currency to also play in that big playground, to be able to exchange their dinar with other countries’ currencies, so they can accomplish transactions like bond sales, dinar exchanged through market makers, other countries stock markets, etc....
See this link for more information on: Currency Convertibility
Bond sales are used to stabilize economies and offer protection to investors as well.
Have a great day, Stryker