Post By TrinityeXchange – Brought From Currency Chatter
Hello my friends. I thought to do a quick piece digging up information from the past that is relevant today regarding the revaluation of the IQD and the plans put in place by the World Bank (hereafter WB) with links for easy reference.
Basically I am attempting to put all the pieces together in a framework that is easy to follow. Special thanks to Yota for posting much (if not all) of this information and deniscanada who brought a particular article to my attention!
Quickly, if anyone goes out to the WB’s website you will find a special project there entitled “Iraq: Banking Sector Reform” whereby the WB designed a specific strategy for Iraq to recover iteself economically. The project approval date – 4/2009 and the end date 6/2013.
Please follow the link on click on the different tabs of the project to get a good overview of how the project progressed. Here is the final report at project end....I strongly recommend a cursory review of it.
Well evidently from recent articles ramping up about the country’s economy being the priority now that the budget is passed, we see the WB back on the scene to help complete what started back in 2009.
That is where this archived 2013 article (honorable to mention to deniscanada for bringing it to my attn) derives from: “World Bank restructure the Rafidian and Rasheed in order to raise the value of the Iraqi Dinar”.
Now I do not believe that the internet translators is doing this article justice and since I have new access to a friend who speaks/writes Arabic, I had him do a thorough interpretation for me while I took notes as best I could. He was very gracious. Here is his interpretation:
World Bank restructures the Rafidian and Rasheed in order to raise the value of the iraqi dinar
Speaker from Baghdad - Minister of Planning, Ali Shukri Sunday
He is saying that the WB announced the implementation of the plans of the WB to restructure the two governmental banks which are the Rasheed and Rafidian (hereafter RR).
The WB has started implementing his plans to restructure the RR and this is an important step and the Min of Finance is welcoming that the WB has started this implementation in this direction because the restructure is going to assure the maximum benefit for the country.
He has a full trust in these two entities because of their human resources with expertise that has accumulated across the life of these two entities and also working together with these two entities to get this implementation done.
The ministry of finance is comfortable that this plan is going to assure the regaining the value of the iraqi dinar among the other foreign currencies. And he says that the financial sector was not working properly because they were focused on consumption projects (or better explained - consumer products.
They were not focused on infrastucture and long term projects). This step is going to be one of multiple steps in the global plan. He says that the investments are going to be in more sectors that are more productive in helping the economy in general.
The WB has confirmed to the GOI that raising the value of the iqd has to be among other priorities and it must happen hand in hand with a comfortable political atmosphere before anything else.
Since the 2nd gulf war the iqd has been devalued as it has never been before to the point of .144 to the usd, and the financial sector was idle until last year.
Takeaways from this article:
· A key indicator for seeing the rise in value of the IQD is the restructuring of RR banks
· The RV is not hocus pocus or pie in the sky thinking but there is actually a project designed by the WB to make it happen
· The project ended 2013 without being completed (obviously both by reviewing the project’s website and b/c our money is still low valued)
· A signal that the plan to rv the currency is being worked is by watching RR shift focus to different types of projects
· The plan to rv the currency MUST coincide with a political environment that is stable
· The IQD is severely undervalued and has been since the 2nd gulf war
Okay so that is a healthy blast from the past (2013 to be exact) but what are we seeing today? The GOI is retooled promoting political solidarity, Maliki was ousted, and Abadi is creating a working government.
The Oil Agreement and passing of 2015 budget evidences that a new environment of political cohesiveness has been created. This is a key component to the RV of the currency.
The WB is back in the news picking up where the stalled project left off. Please revisit the article “World Bank: Economic Situation in Iraq is getting better soon”. (I can hardly hold my excitement here!) In the article it’s stated, “…the bank is now working with the government within the strategy that have been created in partnership with them…”
This refers to the plan devised back in 2009 that was never completed where the revaluation of the IQD was just one step in an overall strategy to revive the economy of Iraq.
Aside from the currency revaluation, the other components to the plan of economic revitalization is stated in the same article “…among those measures activation of investment, agriculture, industry and the private sector, as a committee was formed to monitor the priorities of exchange and identify the doors of government exchange…”
So here we have our indicators and key words to watch for in the planned proliferation of GOI’s economy. We know to watch for articles addressing:
· Investment reform
· Agriculture financing
· Industry creation
· Private sector initiatives
BUT before all of that we know that these things will not go well unless the PRIORITY is accomplished – Revaluation of the IQD & Political reform! These are the two priorities according to the plan submitted to the Finance Committee by the WB, and this is exactly what they are working to address.
There was an article “MENA Quarterly Economic Brief, January 2015: Plunging Oil Prices” (phenomenal report by the way) where the WB remarks that Iraq is facing a “large financing gap”.
In essence they are saying that Iraq’s deficits are growing but a means to fill this growing hole with the necessary capital is minimal.
They mention that Iraq should be headlong into infrastructure rebuilding projects where the labor force is pumping full speed and IQD is gaining momentum but they are focused on averting a crisis instead, “Real GDP growth will decline to about 1.5 percent in 2015, remarkably low for a country that should still be in reconstruction-driven growth.”
More than ever we see the need for Iraq to add value to its currency…there are no other sources to help fill this financial gap.
This is also expressed by the WB in the same report stipulating the need for de-dollarization (multiple currency practice) and being unpegged to the USD, “In 2014, the nominal (far below the real value) exchange rate in the official market remained stable against the U.S. Dollar at 1,166 IQD/1 USD, but the rate in the parallel market increased.
The CBI has recently taken steps to simplify foreign exchange market regulations, but has not eliminated all existing exchange restrictions and the multiple currency practice. With the peg, fiscal policy carries the burden of macroeconomic stabilization, but in this case does not have the space to do so.”
And so when faced with the new global and regional crisis effecting the country, Iraq has really come to limited options to help fill its financial gaps. It appears that currency reform plus political stability is the only recourse.
Lastly, a new article is out “Iraq will soon unveil a plan to save the economic situation” again by the Ministry of Planning who vetted the original plan of the WB to restructure RR in order to revalue the IQD (see above).
What is amazing about this article is that the same language from the WB’s plan is in this plan. It appears that the project created by the WB is back in full swing and completely owned by the GOI. Let’s compare notes.
Ministry of Planning new unveiled 4 year plan:
· Private sector activation
· Investment stimulation
· Alternate sector development
WB’s plan to proliferate Iraq’s economy (please see above for details):
· Private sector initiatives
· Investment reform
· Agriculture financing (alternate sector development)
· Industry creation (alternate sector development)
So the WB’s original project closed out in 2013 (all projects must have a beginning and end date). And now we see a "new plan" unveiled by the Ministry of Planning listing the exact same priorities.
Looks to me like the Ministry of Planning has been meeting with the WB and has simply picked up where the original 2009-2013 project left off.
This tells us folks that we are not hoping for a revaluation according to arbitrary guess work. We have aligned our risks against a predetermined economic strategic plan that was held up by the previous regime but is now back in full swing.
hi-five Here is the link to the WB reform project for Iraq.
Brule Thank you very much, HF. Trinity is a well respected financial mind in Dinarland, and has been for a long time, and very active in the ISX and Iraqi investments. He is a source to be listened to IMO.
Revbo Awesome! Thanks for bringing that, high-five. TX is a really smart guy, and I think he's right on.
From TX's Arabic translator on the article from 2013: "The WB has confirmed to the GOI that raising the value of the iqd has to be among other priorities and it must happen hand in hand with a comfortable political atmosphere before anything else."
This is why the budget was important. For the first time since 2009, there is political stability. The blocs negotiated and got a budget, and there is a spirit of cooperation with Accountability & Justice and National Guard Laws being passed out of the CoM, and HCL and Investment Act soon to be passed.
Their backs are agains the wall with low oil prices, and this is the best opportunity they have ever had to liberate their economy and turn a third world country in to a first world country in record time.
Dr. Gann Thanks Hi Five ok big question how long will this Restructure take anyone know ????
Rissas Dad Revbo, I feel as you do, but there's still the bottleneck which is Parliament. Until they start meeting daily or close to it to get these laws passed, its hard for me to feel that things are really close even though there are signs of that.
It always seems to fall on Parliament, which means waiting on them to work. Things are definately different as they have shown, but they continue to take days off. Maybe if the COMs can send these big laws one on top of another, Jabouri will have them work more. Who knows.
G-Lin Hey rissas dad. I just posted an art. saying there are 3 economic laws attached to the budget. We may see more. I think everything we may need is attached to the budget. ‘
These laws will drive the budget. They are getting it done IMO. Parl. comes back a week from today I believe and who knows what all they will show us between now and then? ;)
hi-five Dr. Gann Thanks Hi Five ok big question how long will this Restructure take anyone know ????
AA -- Much of the restructure has to do with developing the private sector. I really don't see how this can be done without first repricing the currency.
Iraq will have to attract investors, and most of the supplies they need will have to be imported. If Iraq wants to develop the non-oil sector quickly and effeciently, they can do it by increasing their purchasing power (RV).
Also, investors needed to build the non-oil economy will want protection through investment laws, banking laws, etc. These laws are mostly done and are IMO in the final tweaking process.
I do not think the auction cap would be in place if the timing of the currency repricing (RV) was still a ways off. (Whether officially activated yet or not, the low auctions are reeking havic with the dinar market value.)
My personal opinion is that the only way to make sense of what the CBI, GOI, WB and IMF are doing now is to view it through the dinar goggles! And, IMO, we do not have long to wait!
Rockstar Awesome analysis hi-five thanks so much, I absolutely agree with that assessment!
DreamWeaver Hi-Five ... appreciate the post. Entire analysis by TrinityeXchange was excellent, but what tipped it all over into supercalifragilistic for me was Arabic translations spelling out not only the need to RV but that RV is part of WB and Iraq's long-range plan (2009 - 2013 +) for economic growth. I've been kicked back for a while, but I think it's definitely Miller Time.
Remember back in 2013, my first year in investment, there was a 60 page report, 5 year plan, I believe, that was really interesting. The poster drew attention to section on finance--as that was the last part of the plan, I believe--and I'd sure like to revisit that in light of this WB plan. If only I could remember where I filed it. LOL.
DreamWeaver I do have the document in PDF format. Will search for it now that I have the name. Not sure, but think Hi-Five posted document in pdf form originally ... but don't remember as it was a couple of years' back.
Just found these links for document in PDF format, but I'm not sure it is the same document as I remember it being 60 pages. Will post it if I find it. Plan to check this out as well. Best ~ DW
Future of Iraq Project link:
Released in part: http://www2.gwu.edu/~nsarchiv/NSAEBB/NSAEBB198/FOI%20Oil.pdf
Released in full: http://www2.gwu.edu/~nsarchiv/NSAEBB/NSAEBB198/FOI%20Economy%20and%20Infrastructure.pdf