The Ongoing Budget Saga
I am now told that parliament will hold discussions on the budget this Thursday 10/9.
I now need to discuss the holdup in dealing with the budget and why it is taking so darn long to vote on and open the 2014 budget. There is much concern in the dinar investment community and many believe the RV is dependent on the budget being passed and opened. So I will clarify. But like most issues there simply is not a short answer (if you truly want to understand the hold up).
Where do I start? This is complicated but I will address this issue and summarize it for you the best I can. To truly understand this budget delay we must understand the root of the issues. There are no short answers.
First let me say that in the past, post-war Iraq had very little control over the allocation of funds from their oil revenues. Due to the war their oil revenues were placed in a holding account (escrow account) outside of Iraq and controlled by the IMF. This was done to insure they could not buy weapons to be used against the coalition forces occupying Iraq at the time. This is common practice in post- war torn countries.
Once most of Chapter 7 sanctions were lifted these funds now became the property of Iraq and thus get handed back to the country. This money now is in the hundreds of billions of dollars in these accounts. Also there are additional funds too confiscated from Saddam accounts throughout the world that were frozen and will be released back to Iraq.
So how did Iraq survive? In past years, prior to 2014, Iraq simply proposed a line item budget and submitted it to the IMF for approval. Once the IMF reviewed it and saw that it was clean the money was released to the CBI. The CBI then has a special account where it could disperse the funds to other banks throughout Iraq that were used to work directly with paying out contractors or loading electronic cards for government payments.
They found that the more they used electronic banking the less money could be stolen and lost as unaccountable. Corruption was huge. Total allocated funds were seldom never used up entirely since some of the funds were earmarked for the revaluation project and other project that have not yet completed. These funds were rolled up into supplementing the next year’s budget amount but for these same projects. So the uncompleted projects just keep rolling over along with the funding for them. Projects like housing, water purification plants, electrical stations, sewage lines, new schools and hospitals, etc. The question as to why these projects did not get completed is another topic but we know why (it is called the 8 year Maliki syndrome…lol…)
So now we come upon the 2014 budget. Based on what I just said can you now see the dilemma in controlling this 2014 budget? This budge is huge and they also know now the make up of the new government and really, really want to kick start the economy by releasing these funds to finally complete these projects.
Can you imagine the impact on their economy when they do this? - hundreds of billions (this is in USD not at the 1166 rate) being allocated all of a sudden into the economy. This will directly impact not just the Iraq economy but indirectly other countries too where much of the contract work comes from. For instance USA, Japan, China and many EU countries have already signed contracts for this work. They are just waiting for stability and the means to do business in Iraq (the green light).
The Spider’s Web is Weaved
Looking at three main issues facing Iraq:
1) Security needed for the contractors and banks;
2) rid of the government corruption;
3) the fear factor (a road not traveled)
These factors are all interconnected and can’t be separated in their implementation.
As we know ISIS has taken control of many of the provinces or has the potential to do so. The future is uncertain. Oh- there is the uncertainty factor! How do insurance companies or bonding agencies work under such conditions on these very costly projects? So how do you allocate millions if not billions to a province if it will only get into the hands of ISIS? The answer is you don’t.
Okay so you don’t fund that providence then and move on to other safer one. But what if ISIS then overruns that providence that was secure just days ago?
You simply can’t control the future unless they get this security issue resolved and ensure the funds will not get into the hands of the terrorists or corrupt politicians. So do you think they will need a competent and honest Security and Defense ministers in place first to ensure the issues with ISIS and the new slotted weapon purchases (also in the budget) are used appropriately? Oh…wait a second….did I hear Defense minister? Could this be why it is taking so long to get this minister seated. Could the budget possibly be connected to this event too?
Next there needs to be some house cleaning in the government too. It includes new anti-corruption laws especially when working inside the ministry of Interior. This department handles the contracting and is the liaison between the government, the local banks and the CBI. Oh…wait one second….did you say Interior ministry? Do you now see why it is taking so long to get a good candidate seated and confirmed in this ministry. Could this also be connected with the budget?
Are you connecting the dots in this big picture yet? Work with me on this….will you?
Some of these new laws are already written and are in the Erbil Agreement as I keep harping on so much. These are now rolled over in the 20 Unity Reforms I also mentioned many times. People it is ALL INTERCONNECTED !
Let me now address the FEAR factor. What do I mean by this?
Well the fear I am referring to is the fear of the government having control of literally hundreds of billions of dollars (in USD) for the first time as a new nation. Yes as I mentioned above this is the first budget they do not need a line item accountability with the IMF. This new government is very aware of the past corruption. Much of this corruption has gone on so long unchallenged that it has become a part of normal business practices in the government. This all has to end and end now, says the new prime minister Abadi.
Second there is the unknown. They have never chartered down this road before. When this budget is opened there will be literally an explosion (no pun intended…lol…) of contractors and investors coming into Iraq. The country must be safe and they will know shortly afterwards if all their new banking rules, electronic systems and upgrades can work with the international community financial institutions for there will be global transfers of huge amounts on payments for work being completed in contracts, investors building and stocking news stores, shopping malls, museums, utility projects, you name it…etc. Did I mention the billions to be made off the tariffs and how the IMF set them up on the electronic global billing system (need an international currency for the system to work) . I mentioned this in more detail in one of my last post early this year.
Do you now see how it all ties together like a spider’s web. It is complicated. So many of you investors want the RV and think it so simple. You make statements like -How hard can it be for them just to just pass the budget and spend it? Can you see now this is not that simple.
Oh and did I mention that to pull all this off ….they will need an international currency and have it revalued to a true asset backed rate thus a true market value.
MARKET RATES FOR IRAQI NEIGHBORING COUNTRIES: (as of 10/6)
Iraq (Dinar) - 1 IQD = 1166 USD(provisional post-war rate)
Saudi Arabia (Riyal) - 1 SAR = .27 USD
Jordan (Dinar) - 1 JOD = 1.41 USD
Syria (Pound) - 1 SYP = .006 USD(beginning of hyperinflation due to war)
Turkey (Lira) - 1 TRY = .44 USD
Kuwait (Dinar) - 1 KWD = 3.46 USD
Iran (Rial) - 1 IRR = .000037 USD (experiencing severe hyperinflation due to embargo)
Can you see now that enormous wealth is being poured down the toilet everyday they leave the IQD currency at the artificial rate of 1166. Just look at the value of Kuwait cuurency. Kuwait has much less resources than Iraq however the political management of the country has not yet caught up to the financial. It is lagging behind. This is part of the “stabilization” of the country that is needed.
So today I send you an update. Sorry no RV happening today. I want to emphasize however that events in Iraq could happen suddenly and there is often a lag in sending the news west so things could be changing as I write this news letter.
We continue to wait once again for the controversial ministers to be seated. You know how amazing this one event is connected to so many other issues and events (i.e. security, budget and reforms implementation). They are all interconnected and like the spiders web. They are all driving each other (interdependent on each other). Do you now see why this is being delayed so long? Even “long” in really is not that long as it is only a couple weeks now.
I compare the interconnectivity of these ongoing events to a spiders web. Did you ever wonder how this very sophisticated device of the spider works? The spider sets his web and then lays back and waits. The spider awaits and senses even a tiny touch anywhere on the web, then it knows it’s dinner time…..lol….
But if there should be hole, a gap in the web, it’s prey then sneaks through and it misses it’s meal. Iraq now has to close it’s gaps (corruption) to capture it’s meal (prosperity). I sense this is literally Iraq’s last chance. If this is not done correctly this time around favor with the international community will be lost and the advantages they gained will be gone forever.
This spider’s analogy is true to what we are now experiencing with the last steps to forming the new government of Iraq. When I say “formed” many of you I see are still confused. You think I have fooled you since I said that once it was formed we would see the RV happen. You listened to the main stream news media and they told you it was formed weeks ago. I have not tricked you. I just want to tell you the truth that is all. You have you ideal of “formed” and I have mine.
But I then told you what truly happened behind the scenes and why they intentionally put temporary candidates in place for the Defense and Interior (and a few other ministries) knowing darn well they would be rejected in the confirmation process. Then according to their law, they can still declare the government as “fully” formed yet leave these as proxy ministers until they get new, more qualified candidates confirmed.
I also explained to you the importance of why they desperately needed to do this to meet the constitutional deadline. Since they still argued over the candidates for these positions, they formulated a plan. It worked and everyone was happy as a result. Please go back and re-read my past 5 posts. This is an ongoing saga please catch up in your reading….lol….
Can you now see (using the spider’s web analogy) when the government will truly be completely (fully) formed and stable and what I mean by this statement.
I make this analogy because the events going on now in Iraq are complicated and everything is closely interconnected and interdependent like the spider’s web.
As spectators we want desperately to peg a single event to the RV. We want to have a pin point date and a target. It is human nature to feel this way.
If you want this then watch for these events I bring to you in my news letters. Keep track of them and watch and read articles. This is as close as anyone can get to any date. Google the titles and research. The news is all there for the taking.
You also now know more about this budget issue and the seating these last ministers and why it is taking so long. It is all not some secret conspiracy to hold up the RV. The RV is a matter of course and is not driving anything. Did you hear me? It is not the driving force!
The RV is a byproduct of progress not a driving factor. When Iraq gets to a certain point they will have no choice but to go international. It will happen when they are ready to do international business such as via banking, capital, contracting, foreign investors, or new ventures. They will have to talk the same financial language to the rest of the world. They will literally lose not billions but trillions if they do not do so when the timing is right. We now have events to watch to see when this time is near.
I have shown you the rates of neighboring countries to Iraq. So you tell me how can they prosper in the future when they must deal with their neighbors when they have no currency? In reality their neighbors will also be the rest of the international community too not just immediate geographical neighbors. Can you also see some currency growth opportunities too in other currencies of the neighboring countries? hint..hint..hint..
Then when can we expect the RV?
All I will say is what I have been saying all along in that we wait for a formal (global) announcement to the public that the Iraq government is now FULLY formed and seated.
I want to emphasize once again this final announcement of the IQD going international will not happen until the USA feels the country of Iraq and its government is stable, non-sectarian and is a functional government. This is has been the plan all along. They may have wavered a bit on how the plan was implemented but the overall plan guidelines have not changed. This I know now as fact not rumor.
Peace and Luv To Ya All,