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(We at Recaps wish to thank OOTW & Butifldrm for their very labored and in depth work on this lengthy informative post - We are happy to share with our readers - We appreciate all of our contributors and readers)
Wealthwatch Tuesday Night OOTW Chat 1-12-16 Part 1 of 4
Donnie: 1/12/2016 0:00 BAGHDAD Shaima Rashid expressed Security Committee and Parliamentary Defense, its intention to approve the Interior Ministry Act during the next legislative term, stressing that the law to withdraw from the ministry to add paragraphs suit the current phase,
as shown committee of parliamentary power, oil and gas law, the most prominent laws that the Commission intends to approval, at a time when the House resumes the second legislative term sessions, on Tuesday of next week, corresponding to January 19.
Donnie: Legal and parliamentary directed the Interior Ministry to pass .., oil and gas alsabaah.iq/ArticleShow.a...
Doug_W: I sure hope it passes the HCL Doug_W: ‹@Donnie› ty that IS great news
OOTW: THANK YOU SCZIN11 OOTW: www.wealthwatch.world/sho...
OOTW: THIS IS A LETTER OF INTENT PUBLISHED TODAY AT THE IMF SITE
OOTW: I WILL POST CONTENT IN TWO TICS
OOTW: i cannot copy or paste this hang on
OOTW: Page 1 International Monetary Fund Iraq and the IMF Press Release: IMF Managing Director Approves a Staff- Monitored Program for Iraq January 12, 2016 Country’s Policy Intentions Documents E-Mail Notification Subscribe or Modify your subscription Iraq: Letter of Intent, Memorandum of Economic and Financial Policies, and Technical Memorandum of Understanding December 22, 2015
The following item is a Letter of Intent and a Memorandum of Economic Policies of the government of Iraq. It is being made available on the IMF website by agreement with the member as a service to users of the IMF website. This memorandum describes the policies that Iraq is implementing in the framework of a staff-monitored program.
A members's staff-monitored program is an informal and flexible instrument for dialogue between the IMF staff and a member on its economic policies. A staff-monitored program is not supported by the use of the Fund's financial resources; nor is it subject to the endorsement of the Executive Board of the IMF
OOTW: THEN WE HAVE THIS FROM THE IMF AS WELL www.imf.org/external/pubs...
OOTW: 20. The government will gradually remove remaining exchange restrictions and multiple currency practice (MCP) with a view to eliminating exchange rate distortions (MEFP, ¶19). Such a move towards acceptance of the obligations under Article VIII of the IMF’s Articles of Agreement will send a positive signal to the investment community that Iraq is committed to maintain an exchange system that is free of restrictions and MCP for current international transactions and thus facilitate creation of a favorable business climate.
As a first step, the government will, by end-February 2016, amend the Investment Law, or issue clarifying implementing regulations, to remove the limitation on transfer of investment proceeds that gives rise to an exchange restriction, as recommended by a recent technical assistance mission of the IMF.
OOTW: WOAH OOTW: Exchange Arrangement Iraq’s de jure and de facto exchange rate arrangements have been retroactively reclassified to a conventional peg arrangement, effective January 15, 2012.
The Central Bank Law provides the Board of the CBI with power to formulate exchange rate policy, and the Board has maintained its policy to keep the official exchange rate at 1,166 per U.S. dollar since January 15, 2012. The CBI stands ready to provide foreign exchange at the official exchange rate plus commissions for permissible transactions through its daily auctions (allocations), establishing a peg. However, because certain transactions are excluded from the access to the CBI auctions, many transactions take place at parallel market exchange rates.
The CBI publishes the daily volume of the auction allocation on its website. Iraq continues to avail itself of the transitional arrangements under Article XIV, Section 2 but no longer maintains any exchange restrictions or multiple currency practices subject to Article XIV, Section 2, and currently maintains three exchange restrictions and one multiple currency practice (MCP) subject to Fund approval under Article VIII, Sections 2(a) and 3.
OOTW: WTH IS THIS? OOTW: October 2008 Article VIII acceptance
OOTW: AND AGAIN HERE
OOTW: October 2012 Article VIII acceptance and AML/CFT technical assistance
OOTW: PERHAPS JUST AN ACCEPTANCE OF ART VIII GUIDANCE NOT IMPLEMENTATION
Doug_W: fingers crossed
OOTW: SO THIS PDF IS STATING THAT IRAQ ACCEPTED ARTICLE VIII IN 2008 AND 2012 AND THAT THE 2012 ACCEPTANCE ALSO CONTAINED GUIDANCE TOWARDS COUNTERFEITING AND ANTI MONEY LAUNDERING
OOTW: OKAY AND COMBATING THE FINANCE OF TERRORISM OOTW: THAT'S "CFT"
OOTW: OKAY I'M GOING TO START FROM THE BEGINNING OOTW: THIS WILL BE LENGTHY
OOTW: January 12, 2016 IMF Managing Director Approves a Staff-Monitored Program for Iraq The Managing Director of the International Monetary Fund (IMF) approved a StaffMonitored Program (SMP) 1 for Iraq covering the period of November 2015-December, 2016, on which the authorities and staff had reached ad-referendum agreement in November 2015 (see Press Release No. 15/509). Iraq is facing a double shock arising from ISIS attacks and the sharp drop in global oil prices.
The conflict is hurting the non-oil economy through destruction of infrastructure and assets, disruptions in trade, and deterioration of investor confidence.
The impact of the oil price decline—already felt in 2014—intensified in 2015, affecting the budget, the external sector, and medium-term growth potential. The authorities are responding to the crisis with a mix of fiscal adjustment and financing.
OOTW: To help address the present and urgent balance of payments and budget needs triggered by the ISIS attacks and the collapse in oil prices, the authorities have also requested an SMP to establish a track record of policy credibility to pave the way to a possible Fund financing arrangement.
Under the SMP, the authorities will implement fiscal consolidation that will contain public expenditure in line with available revenue and financing, and aim to reduce the non-oil primary deficit by US$20 billion or 12 percent of non-oil GDP between 2013 and 2016.
Under the SMP, agreement has also been reached on measures to strengthen public financial management, anti-money laundering and countering the financing of terrorism (AML/CFT), and financial sector stability.
OOTW: SMP = SELF MONITORING PROGRAM
OOTW: The IMF has assisted Iraq in strengthening economic institutions and in providing advice to the government on economic policies and reforms for more than a decade. IMF staff will work closely with the authorities to monitor progress in the implementation of their economic program. In addition, the IMF will continue to provide technical assistance to support Iraq’s capacity-building efforts and its reform program
OOTW: 1 An SMP is an informal agreement between country authorities and Fund staff to monitor the implementation of the authorities’ economic program. SMPs do not entail financial assistance or endorsement by the IMF Executive Board.
OOTW: KEY ISSUES Context: Iraq is facing a double shock arising from the ISIS attacks and the sharp drop in global oil prices. The conflict is hurting the non-oil economy through destruction of infrastructure and assets, disruptions in trade, and deterioration of investor confidence.
The impact of the oil price decline—already felt in 2014—has fully unfolded in 2015, affecting the budget, the external sector, and medium-term growth potential. The authorities are responding to the crisis with a mix of fiscal adjustment and financing, maintaining their commitment to the exchange rate peg.
OOTW: BREAK - IRAQ IS TRYING TO ADDRESS THIS - BY PREPARING FOR PRIVATE SECTOR DEVELOPMENT/ LAUNCHING - OF WHICH I GAVE A CHAT TODAY - FORWARD PROGRESS ON THIS
OOTW: RETAINING THEIR PEG TO THE DOLLAR
OOTW: Staff-Monitored Program: To help address the present and urgent balance of payments and budget needs triggered by the ISIS attacks and the collapse in oil prices, the authorities have requested a Staff-Monitored Program (SMP) to establish a track record of policy credibility to pave the way to a possible Fund financing arrangement.
Outlook and Risks: Assuming a resolution of the conflict in the coming years and a pickup in oil production together with the envisaged modest recovery in oil prices, the baseline medium-term outlook still looks positive.
Under improved security conditions, the macroeconomic scenario would continue to be driven by the expansion in oil revenue, assuming implementation of oil investment to increase oil production, and by fiscal adjustment. But risks remain very high, arising primarily from a further fall in oil prices, worsening of the conflict, political tensions, or poor policy implementation.
OOTW: "But risks remain very high, arising primarily from a further fall in oil prices, worsening of the conflict, political tensions, or poor policy implementation."
OOTW: Key Policy Recommendations: In 2015-16, strong fiscal consolidation is needed to address the fall in oil revenues and contain central bank financing of the budget and associated losses in foreign exchange reserves.
The exchange rate peg remains appropriate, provided that the authorities implement the fiscal consolidation programmed under the SMP. Public Financial Management needs to be overhauled in order to improve the quality of spending and the authorities’ control over budget execution. Banking supervision needs to be strengthened in order to monitor and contain the damage inflicted by the crisis on the banking system.
OOTW: Discussions took place in Amman during October 27—November 11, 2015.
OOTW: BACKGROUND: IRAQ IS FACING AN ACUTE FISCAL AND BALANCE OF PAYMENTS CRISIS 1. The economy has been hit hard by the collapse in oil prices and the ISIS attacks.
The external environment has worsened since the latest Article IV consultation1 mainly owing to further weakening of global oil prices. The ongoing armed conflict with ISIS continues to strain the country’s resources and is resulting in new waves of internally displaced people.
OOTW: A. Background 2. Iraqi forces are making progress in retaking territories controlled by ISIS. In October, Iraqi forces and their allies recaptured most of the country’s largest oil refinery in Baiji, a strategic city between Baghdad and Mosul.
In November, Kurdish forces took control of towns and sections of highway around Sinjar, between Mosul and the border with Syria. In December, the Iraqi forces and their allies launched a major offensive to retake control of Ramadi, west of Baghdad.
OOTW: 3. The ISIS attacks has boosted the number of internally displaced persons—estimated at 4 million people at end-June 2015 (Memorandum of Economic and Financial Policies—MEFP, ¶3). Close to 10 million Iraqis (almost one third of the population) including 250,000 Syrian refugees need humanitarian assistance.
OOTW: 4. In response to escalating protests across the country fueled by massive electricity outages, Prime Minister Abadi proposed a series of significant administrative reforms in August (MEFP, ¶4). Parliament approved a number of these measures, including reducing the cabinet from 33 to 22 members,
eliminating three vice-president and three deputy prime minister positions, addressing tax evasion, implementing customs at border points including within KRG, reducing security budgets and lowering pension ceilings and salaries for some officials.
Nonetheless, Iraqis have continued to protest against the lack of progress to implement these measures to date and demanded decisive steps to address widespread corruption, inefficiency, and low quality of government services.
OOTW: B. Recent Economic Developments 5. Oil production, located in areas under control of the Iraqi government and the KRG, is holding well. For the first 11 months of 2015, it increased by 14 percent and oil exports increased by 23 percent year-on-year.
Northern oil exports accelerated in line with the oil revenue sharing agreement between the federal government and the Kurdistan Regional Government (KRG) until June, when the KRG, dissatisfied with the size of the federal transfers, drastically reduced oil supply to the State Oil Marketing Organization (SOMO) and increased its independent sales to finance its expenditure.
2 In November, oil production and exports reached all time highs of, respectively, 4.2 and 4 million barrels per day (mbpd). Exports by the federal government reached 3.4 mbpd and KRG exports 0.6 mbpd
OOTW: 6. Non-oil activity in the part of the country that is not occupied by ISIS dropped by 8 percent year-on-year during the first semester of 2015.
The fall was particularly high in construction (-64 percent), manufacturing (-20 percent) and business services (-57 percent). The government has no information on economic activity in the ISIS-controlled territories.
7. At end-October 2015, y-o-y consumer price inflation (CPI) was low at 1.6 percent, but is likely underestimated because CPI coverage excludes areas occupied by ISIS.
OOTW: 8. Broad money stayed flat at end June year-on-year and reserve money contracted by 13 percent at end-September 2015 likely reflecting lower government spending and weakening non-oil economic activity.
9. The balance of payments registered a deficit during the first ten months of the year which was financed by the use of foreign exchange reserves. Gross foreign exchange reserves of the Central Bank of Iraq (CBI) stood at $59 billion (10 months of imports of goods and services) at end-October compared to $67 billion (13 months of imports of goods and services) at end-2014.
OOTW: THIS IS WHY THEY HAVE TO GET THEIR PRIVATE SECTOR LAUNCHED
OOTW: BUTI REMINDED ME WE DNT HAVE STATISTICS WHILE MALIKI WAS IN OFFICE BECAUSE HIS REGIME THOUGHT IT WAS BETTER THAN THE IMF LOL
OOTW: THEY DIDN'T REPORT THEM
OOTW: 10. The spread between the official and the parallel foreign exchange market rate receded to around 2 percentage points since August from as high as 16 percentage points in June, as a result of the elimination of the obligation to pay custom duty and income tax payments when buying foreign exchange.
11. Public expenditure was compressed owing to the tight financing constraints (Tables 2-4). During the first eight months of the year, total spending was about 30 percent lower than the path assumed in the budget.
Both oil and non-oil investment bore the brunt of the fiscal consolidation during the first eight months of the year but the authorities have cleared all outstanding arrears to international oil companies (IOCs) in an amount of $3.5 billion and reached
OOTW: 2 Under the agreement between the KRG and the federal government, the revenue from the oil extracted in KRG accrues to the federal government and the federal government makes transfers to the KRG equivalent to 17 percent of a subset of total expenditure.
OOTW: (THATS A FOOTNOTE)
OOTW: agreement with them on the level of oil investment in 2015 and 2016 that will increase oil production. The resulting deficit of ID 11 trillion (5 percent of GDP) was financed mostly by the issuance of T-bills subscribed by the state-owned banks Rasheed and Rafidain, out which 4 trillion was refinanced at the discount window of the Central Bank of Iraq (CBI).
The deficit was also financed by the accumulation of domestic arrears estimated at ID 5 trillion (2.5 percent of GDP) at end-April 2015, and a loan of $1.2 billion under the Rapid Financing Instrument (RFI) approved by the IMF Executive Board on July 29, 2015.
OOTW: 12. The government decided to postpone the issuance of Eurobonds. As part of the preparation to issue Eurobonds to help finance the large fiscal deficit, the Fitch Ratings agency gave a sovereign rating of B- to Iraq.
In light of the lack of appetite shown by investors for the proposed Eurobonds during a road show in London and New York in September and the high interest rate required (11.5 percent), the government decided to postpone the issuance of $2 billion it planned in 2015.
OOTW: BUTI REMINDED ME THAT WHEN THE STATEMENT REGARDING ISSUING BONDS CAME OUT, THEY STATED THEY WOULD BE SOLD IN DOLLARS, AND WE SEE IN THIS REPORT THEY WERE TO BE SOLD IN EUROBONDS
OOTW: C. Outlook 13. In spite of further weakening global oil prices, the fiscal and balance of payments outlooks have improved since the last Article IV consultation assessment owing to a larger than projected fiscal consolidation (¶11, Text Table 1 and Tables 1–7).
An increase of oil production by 10 percent of GDP will allow real GDP to grow by 1.5 percent in 2015, in spite of a further weakening of non-oil activity on the back of lower capital spending (¶¶5 and 10 and Table 1).4 In 2016, real GDP growth should rebound to 11 percent thanks to the projected 20 percent increase in oil production,5 despite flat non-oil GDP.
OOTW: SO THE GOOD NEWS IS THAT ACCDNG TO IMF THEIR GDP SHOULD REBOUND TO 11% DUE TO 20% PROJECTED INCREASE IN OIL PRODUCTION TY BUTI - YES, THIS IS GOOD NEWS
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