The finance committee in the Iraqi Council of Representatives warned on Wednesday about the deterioration of the Iraqi economy due to the low exchange rate of the dinar to the US dollar, assuring that proposals are underway to get the country back on its feet, reports AKnews.

According to AKnews, the Iraqi dinar hit its lowest exchange rate in three years against the US dollar, at a selling rate of 1290 dinars per dollar on Tuesday. On the othe hand, some online sources still show it trading in the range 1160 to 1165.

Committee member Shawrash Mustafa said the committee began to study the deterioration of the Iraqi dinar exchange rate and put in place several proposals to halt the crisis. He did not say what these proposals were, but that they will be delivered to the Ministry of Finance and Iraqi Central Bank (ICB).

The ICB has issued strict regulations on its sale of dollars, due to restrictions on trade with both Iran and Syria.

Azzaman reports that the dinar’s depreciation has prompted the Central Bank to intervene by increasing supply of dollars and withdrawing dinars from the market. The operation is supported by estimated foreign currency reserves of $62 billion, which Central Bank Deputy Governor Mudher Saleh said is sufficient to cover 120% of the value of local currency in circulation at current exchange rate.

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The Financial Times reports that Iraq’s central bank has tightened its clampdown on its sales of dollars, amid fears that buyers are using them to launder money and skirt international sanctions on neighbouring Iran and Syria.
The bank unveiled new rules on Monday to force customers to prove their identities by supplying tax records and import licences. Its deputy governor, Mudher Salih Kasim, told the FT, “Iraq is liberal and the two countries next door are under sanctions. You can see the consequences are very bad: this is spillover.”
The Iranian rial is now trading at 16,000 to the dollar, versus 12,500 in December.
Demand for dollars is as high as $400m and $450m a day, more than double some estimates of the legitimate need, may be due to criminality and Iraqi middle men settling debts on behalf of clients in Iran and Syria.
The new rules will compel all commercial buyers of dollars at the central bank’s near-daily auctions to produce tax clearance certificates and, from 30th June, papers to prove they are allowed to import the goods they say they are using the money to buy.
In February, the central bank asked dealers to submit cheques rather than cash, in order to identify currency buyers, but this largely failed because purchasers were simply hiring third parties such as “porters from the street” to open bank accounts on their behalf.
One currency dealer told The National, “I don’t have the right to ask my client what he is going to do with the dollars when he takes it from my shop. It’s almost impossible to track where the money is going, because the currency has been taken to the street.”
(Sources: Financial Times, The National)

 

Investment companies will be exempted from paying duties on good entering Iraq under the new customs law, according to a report from AKnews.
Finance Minister Rafie al-Issawi [Rafie al-Esawi, Rafi Hiyad al-Issawi, Rafia al-Issawi], pictured, said last week that the new bill will be adopted on 1st June, 2012, having been postponed twice in the past.
Abdul-Abbas al-Saedi, a member of the Iraqi government Economy and Energy Commission, told AKnews that Investment Law No. 13 of 2006, which excludes investors in Iraq from paying taxes and customs duties, will be included in the law.
This does not conflict with the law of investment and will help to attract investors, he added.
“The customs rate will differ between goods, where it will be higher for complementary goods and cars. There will be other ratios for food and construction materials,” said Saedi.
The new customs law, approved by the Presidency Council of Iraq last year and passed by the Council of Representatives, will cancel:
The customs law No. 77 for the year 1955.
The law of the disbanded Interim Coalition Authority No. 54 for the year 2004 (the policy of trade liberalization of 2004).
The order of Coalition Authority No. 38 of 2003 (the Iraq reconstruction tax and its amendments).
(Source: AKnews)

 

The World Bank says it expects Iraq’s gross domestic product (GDP) to grow by 12.6 percent in 2012, and 10.2 percent in 2013, following a growth of 9.6 percent last year.

If achieved, this would give a compound growth of 36 percent in just three years.
This follows a downward revision of growth expectations for the world as a whole, with the global economy expected to expand 2.5 and 3.1 percent in 2012 and 2013 (3.4 and 4 percent when calculated using purchasing power parity weights), versus the 3.6 percent projected in June for both years.

The World Bank says it expects Iraq’s gross domestic product (GDP) to grow by 12.6 percent in 2012, and 10.2 percent in 2013, following a growth of 9.6 percent last year.If achieved, this would give a compound growth of 36 percent in just three years.

This follows a downward revision of growth expectations for the world as a whole, with the global economy expected to expand 2.5 and 3.1 percent in 2012 and 2013 (3.4 and 4 percent when calculated using purchasing power parity weights), versus the 3.6 percent projected in June for both years.

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The Iraqi dinar is the official currency of Iraq. The nation remains mostly isolated from international monetary markets. The country has no genuine sovereign credit, there’s little demand for its currency which stays thinly traded. All Iraqi property, such as its currency are viewed as currently being a very great risk. The Iraqi dinar value, or the Iraqi dinar exchange rate, is effectively decided through the central bank via it’s US dollar auctions.

The Iraq dinar was originally introduced in 1932 when Iraq grew to become independent from British rule. The dinar changed the Indian rupee that had been introduced by the British following winning management of Iraq from Turkey in WWI. The Iraqi dinar has been a managed or controlled money throughout its life.

The Iraqi Dinar is issued by the national central bank. The dinar value includes a long history as being a controlled unit of currency. Rarely, if ever, has the money been permitted to float freely. Upon its introduction, one Iraqi dinar was made equal to 13.5 rupees and pegged to the British pound. It remained pegged towards the pound until 1959 when its peg was switched to the dollar. The Iraqi money continues to be pegged to the US dollar.

Following the first Gulf War and the imposition of UN economic sanctions, financial circumstances within Iraq worsened sharply. By 1993, inflation had rocketed to an amazing annual rate of more than one thousand %, unemployment was at a massive 50 percent and also the Iraqi dinar exchange rate dropped considerably. Throughout 1994, it required about 2,500 dinars to buy one US dollar. To support the Iraqi dinar, various measures had been launched in 1996 such as new laws allowing Iraqi residents to own overseas money bank accounts.

Subsequent to the second Gulf conflict, new arrangements were created to be effective on fifteen October 2003 to issue a new Iraqi dinar and to control the Iraqi dinar exchange rate. Because those new arrangements were launched, the Iraqi Dinar Valuehas steadily been elevated. The current exchange rate is 1,170 dinars for one US dollar.

Figures printed by the Central Intelligence Agency (CIA) in its World Fact Book show the quantity of Iraqi dinars required to purchase one US greenback was at 1,475 dinars in 2005, 1,466 in 2006, 1,255 in 2007, 1,176 in 2008 and 1,170 in 2009. All indicators point to the currently prevailing exchange rate steadily increasing in the not too distant future.

Iraq is wealthy in raw oil, now possessing the second biggest level of confirmed crude oil reserves after Saudi Arabia. Iraq lately quantified its proven raw oil reserves at 143 billion barrels, compared to Saudi Arabia with 265 billion barrels of proven reserves. More importantly, these reserves are easily available and as a result the oil has a low cost to manufacture. About 95% of Iraq export income is generated from crude oil or oil derivative commodities.

As political security strengthens, and the economy restores efficiencies, crude oil output will rise and nationwide wealth should spread broadly among the Iraqi people, the Iraqi dinar worth might be anticipated to strengthen significantly over its present level.

Just like most currencies in the world currently, the Iraqi dinar value is vital to those who do business internationally. The opportunities available to those who are considering investing means tracking the Iraqi dinar exchange rate consistently.

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The Iraqi dinar is presently the topic of much supposition. The political instance in Iraq has long been unstable lately and war has guided Iraq into a very weak economic state. There was an occasion when one dinar was equal to 3 Us Dollars but now it has devalued a lot that 1 US Dollar now equals 1,170 dinars.
Right after the alienation of American troops from Iraq, individuals of Iraq anticipated to find some harmony but the failed elections of March 2010 trigger deeper uncertainty. The deadlock among two political parties in pursuit of the premiership has delayed all political improvement. In all this turmoil investors see a bright side.

Speculations are that once Iraq stabilizes and the economic system comes back on the right track the Dinar may get back its lost worth. That could only happen after it’s let out in the open market. At this time, this currency can only be bought from private retailers since commercial banking institutions stopped having it. This is because the dinar has not been listed on foreign currency, so banks do not wish to keep it. It is just when the dealing of dinar start publically, their value might be based upon the industry factors.

And so, the billion dollar concern here is when will the Iraqi dinar be traded publically?
It is a issue that can’t be resolved properly and only presumptions can be produced given that a lot of aspects are involved here. Even so, there are a few indicators to when this might happen. The first constructive indication will be the formation of a steady government in Iraq. The dinar was last available in industrial banking institutions in 2004. After that because of uncertainty banks stopped dealing in dinar.
Today, Iraq is plagued by war and territorial hostility. The war has left the country fragile, unstable and with very low man power. How can the government cope with all these issues right after the complete revulsion of American soldiers and will it be competent to guard its borders? All of these aspects will directly affect the need for Iraqi dinar on the market. The nation has vast oil reserves and that’s one of the most hopeful and beneficial portion of all. As soon as offers are made with foreign businesses and business regains its formal position the economy is bound to improve.

The Iraqi overall economy is intending to secure gradually yet continuously. It is increasing self-confidence in investors of Iraqi currency. The revaluation of Iraqi currency greatly relies on the Development Fund for Iraq (DFI). Iraq pleaded that increased funding must be given, at least for one more year yet this plea was refused by UNSC and alternatively a 6 month protection was offered. Therefore it is envisioned that things may settle down and stabilize within the end of 2011.

Anybody interested in buying Iraqi currency would have to speak to foreign currency traders. Several sellers are exchanging dinar for silver, gold or any other metals and gemstones. And when affairs come out as expected and then the Iraqi dinar regains its forfeited worth the buyers may benefit greatly.

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26/10/2011 | (Voice of Iraq)– – Sumerian News / MP from the Sadrist movement Bahaa al-Araji, Wednesday, central bank governor confirmed the possibility of curtailment amounts of imports of Iraqi oil for distribution to the Iraqi people, adding that Iraq’s economy will improve after the withdrawal of U.S. troops from the country.

Iraq Currency (De La Rue Print - Old)

Iraq Currency (De La Rue)

They said in a joint press conference held at the parliament building with MPs representing different political blocs and the Governor of the Central Bank and attended by “Alsumaria News”, “Among the many topics discussed by the deputies representing the mass of the free and the rule of law and the Iraqi List Iraqi and white with the Iraqi Central Bank Governor issue of giving a share of the oil resources of the people, “noting that” the central bank governor confirmed the possibility of curtailment amounts of imports of Iraqi oil for distribution to the Iraqi people and the application of the subject. ”

Referred to the cleric Moqtada al-Sadr, select, on 5 September 2011 , three conditions for the postponement of the demonstration, millions demand for better services to give the people’s share of the oil and the appointment of at least 50 thousand people in government departments, as well as provide power generators capacity fuel is free, and when he said that those conditions is the last chance for the government, reiterated his refusal to drop the Maliki’s government.

Araji said that “the Governor of the Bank pointed to the positive issue of the deletion of zeros and its impact on the economic situation,” adding that “the governor stressed that” the economy will rebound after the withdrawal of U.S. troops from the country because foreign companies will come to the Iraqi market. ”

The Central Bank of Iraq, said in twenty-fifth of September 2011 to 2013, will delete the zeros and the currency exchange. The Iraqi Central Bank Governor Sinan Shabibi, announced at a meeting of independent bodies with Prime Minister Nuri al-Maliki, which was held in (June 19, 2011), his willingness to create all the supplies to replace the Iraqi currency.

According to the announcement by “Hayat Newspaper” on August 19, 2011, Warka Bank will soon merge with Standard Chartered Bank and will reach the target capital set by the Iraqi Central Bank (CBI) of raising the capital for all private banks to ID250bn (around $214mn) before the end of 2013. The Executive Director of Warka Bank (BWAI), Mohammed al-Samarrai announced that the merger has reached its final stages between the two banks, and this will put the bank in a very strong position and give the ability to finance major projects. He stressed that the integration of the bank with a giant foreign corporation will increase the confidence of customers, the government and the CBI.

The central bank called Iraqi private banks to merge with each other, to ensure the composition of large amounts of capital to facilitate the financing activities and to enhance the confidence of the citizens. A source from the Union of Iraqi Banks stated that private banks will refuse to merge, as they are family banks, and not financial institutions. These families want to sit on the throne of a financial institution and do not want to share it with partners. The source explained that the first merger will be agreed between four private banks, noting that there is no solution other than the integration of these banks, as it is obliged to submit financial statements by the end of 2013.

The Iraqi Banking sector comprises of 49 Iraqi and foreign financial institutions. Seven of them are state banks five of which are specialist in industrial, commercial and housing sectors. Seven of the 42 private banks are operating as foreign banks through a branch in Iraq. These banks are Arab Banking Corporation (Bahrain), T.C. Agricultural Bank (Turkey), Is Bank (Turkey), Bank Melli Iran, Byblos Bank (Lebanon), Intercontinental Bank (Lebanon), Bank of Beirut & the Arab Countries. Separately, 12 of the 42 private banks are Islamic banks.

We will follow the developments about the announcement and report them as they occur.

 

On July 15, Harlow International, a British construction company, held a ribbon-cutting ceremony for the re-opening of the famous Al-Rasheed Hotel in Baghdad’s Green Zone.

The hotel, renovated with the help of a $65m budget, was made famous in the 1991 Gulf War as a base for television reporters and later became a favoured home of businessmen and diplomats alike.

But at the same time, just a matter of miles away, two car bombs killed seven people and an American soldier was shot dead by gunmen who had opened fire at an army headquarters.

Iraq “remains an extraordinarily dangerous place to work”, Stuart Bowen, the US Special Inspector General for Iraq Reconstruction, admitted in a recent report, adding that the country is less safe than it was a year ago due to unabated corruption and violence.

Unsurprisingly, when investors think of Iraq, they most probably think of risk. After two decades of conflict, to outsiders, the Middle Eastern country is perhaps not the most hospitable place to do business. But in reality, the rebuilding of Iraq – and the by-products that will spring from that process – could yet prove to be one of the biggest global investment opportunities to arise in the last half-century.

As it stands, Iraq rates as one of the worst places in the world to do business, languishing at 166th out of 183 countries, according to a World Bank report.

For starting a business it ranks even lower, at 174th. That hasn’t stopped a flurry of British businesses doing just that, however. In late June, retailer Mothercare announced its decision to launch its first shop in the country in Arbil, the capital of semi-autonomous Kurdistan in the north. And just two weeks ago, UK-based Afren made a £360m investment in proven oil fields – its first in the country.

Robin Ord-Smith, UK Trade and Investment’s (UKTI) Iraq director, says he is contacted by 10 to 15 British companies every week asking for advice on how to make the move, while for Kurdistan – which enjoys greater stability – the number of enquiries can be double that.

Could it be that Iraq is firmly open for business again? For some of the more hardy investors in the oil and energy sector, the truth is that it was never really closed.

UK oil major BP started drilling in Iraq in 1927 while the country was under British mandate, and only stopped when the domestic government’s 1972 nationalisation of oil pushed out Western oil companies. Iraqi unions vowed at the time to never again allow foreign companies take control of their most important economic resource.

But just four years after the 2003 invasion, the reformed Iraqi government reopened the oil sector to foreign investors, and in 2008 Baghdad signed its first petroleum deal with China’s National Petroleum Corporation and opened the way for British groups.

Since coalition forces announced a winding down of operations in Iraq, many more UK oil firms have widened competition. Last month, oil explorer Afren announced it was making a “strategic entry” into Kurdistan’s Barda Rash field, marking the group’s first major acquisition outside its specialist area of Nigeria.

Galib Virani, associate director, said Afren chose to strike while the iron is hot: “The deal would not be here for too much longer… It’s a relationship deal, we’ve got a good relationship with the government and an early-mover advantage.”

Joining the oil rush, Dublin-headquartered oil and gas firm Petroceltic also stepped investment up a gear last month after buying a 20pc share in two giant exploration blocks in Iraq.

As the country with the third-largest oil reserves in the world, Iraq’s economy is dominated by the oil industry, which traditionally provides more than 90pc of foreign exchange earnings.

The foreign investment law passed shortly after the 2003 invasion now permits 100pc foreign ownership of businesses in all sectors except oil and mineral extraction. Foreign-owned retailing businesses must provide a $100,000 (£61,000) bond before conducting business in Iraq but, largely, the law tries to establish an equality between foreigners and Iraqis on all terms of commercial interaction.

As a result of the legislative reforms, foreign investment has grown from $3.87bn to $42.67bn in the past eight years. And with the government’s coffers swelling, Iraq’s planning minister, Ali Al-Shukri, is on record as saying he is looking to raise its 2012 investment budget to as much as $51bn.

Look outside the oil sector, however, and high operational risks continue to discourage all but the most daring investors. Those in pharmaceuticals who chose to live with the risks have been rewarded with a substantially higher health-care budget. Iraq spent $3.8bn on rebuilding its health-care sector last year, and the ministry of health is said to enjoy the third-largest government budget allocation.

GlaxoSmithKline (GSK) has been the leading British pharmaceutical supplier in Iraq for more than 20 years, and until now was almost exclusively supplying medicines and vaccines to the Iraqi ministry of health. As The Sunday Telegraph reports today , GSK has just signed one of its first deals with a private sector company to manufacture products in Iraq and plans to set up its first local business in the country since the invasion by year-end.

Mohammed Zafrullah, vice- president of GSK in the Gulf Near East, said: “Historically, 100pc of [Iraq’s health-care] products were sourced through the ministry of health, but since the fall of Saddam Hussein the department has taken steps to open up the private sector, which is great for companies like us who have the expertise.”

He said progress was slowed in the last four years by the security situation, but in the past 18 months he has seen a causal link between increasing stability and industry competition.

London-based pharmaceutical company Hikma, which saw sales in Iraq grow to $16m last year, agrees that the Iraqi health market is recovering, and it is keen to play a leading role in that recovery.

“Iraq has clearly been operating in a period of political turmoil for some time,” a spokesman said. “Nevertheless, it offers excellent growth opportunities. At the moment, the market is relatively unregulated, which has allowed for a high level of unauthorised products. We see this as an excellent opportunity. As stricter regulations come into force, we expect to benefit from this.”

GSK and Hikma are not the only ones to capitalise on the gap in the market. At a time when Mothercare is closing 110 of its shops in the UK, its decision to open one in Arbil may seem to come at an odd time. But the baby goods retailer, which has teamed up with long-time Middle East franchise partner Alshaya, is no stranger to the region – its first branch opened in Kuwait in 1984.

A Mothercare spokesman said it would not enter into a country unless there was a good opportunity for growth. “We are going into the northern region in Kurdistan because it is the most peaceful part of the country and there’s a real need for retailers like ours, but there are no plans to go into Baghdad or any more challenging environments,” he said.

“We choose to move to countries like Iraq, but only with franchise partners as they have the contacts and the local knowledge and know how the system works. We capitalise on their expertise and so cut down on some of the bureaucracy.”

John Drake, risk consultant with UK-based security firm AKE Intelligence, says it is no surprise Mothercare has moved to Kurdistan.

“I would be shocked if they had chosen somewhere like Baghdad, but Arbil is a logical place to branch out,” he said.

“Iraq’s a very import-reliant country now – a lot of their factories, which were once heavily subsidised, are now redundant. So there is definitely potential for the retail sector to move in, but it’s a risk and logistically difficult. With small outlets they don’t have high turnover and so may not be worth the risk, whereas larger sectors, like the oil and gas sector, they have more buying power for the necessary security measures. For many retailers, doing business in Iraq is still a long way away. For firms that brave it, they will own a big slice of the industry there.”

But behind the success story lies a counter-narrative, one that reminds us the war has not quite yet been won. The security situation can at times be as fragile as the country’s economy. Figures compiled by AKE Intelligence show a spike in the number of attacks over the past three months.

Over that period, it was not unusual for some of Iraq’s major cities to see up to four suicide attacks in a single day, by insurgents unhappy at the perceived slow rate of the withdrawal of troops. Since the start of the US-led invasion, a mix of militias, foreign fighters and all-Iraqi groups have launched attacks on foreign troops and the post-Saddam government, fighting for self-determination and sovereignty in Iraq.

But the recent return of a more traditional civil airline industry has also gone some way to help improve consumer confidence. In 2009, only six foreign commercial airlines operated in Iraq, whereas today that figure is around 28.

AKE’s Drake, who regularly visits Baghdad for work, said that for the first time in years businesses are holding meetings not just in the international Green Zone, but in the traditionally less safe Red Zone as well.

Part of the revival in UK interest in the region may be the result of a visit in April 2009, when UKTI organised the first official British trade mission to Baghdad and Basra for more than 20 years, with representatives from 23 major British companies. Despite this apparent renaissance however, British companies have been seen to be slow to get in on the investment opportunities in Iraq, even lagging behind countries that opposed the war, such as France.

Last year, French companies accounted for 9.9pc of the foreign commercial activity in Iraq, compared with 2.8pc for British companies, according to Dunia Frontier Consultants, which specialises in emerging markets.

Chris Frost, founder board member of the Iraq Britain Business Council and a partner at PricewaterhouseCoopers, says he senses a frustration among Iraqis that the UK hasn’t woken up to the wealth of opportunities. “When I speak to people in Iraq they are very keen to be able to buy the kind of products they are buying directly from British companies,” he said.

“At the moment, there are a lot of goods they buy that are made in Britain that they are buying through intermediaries in the Middle East who are essentially acting as agents. They would far rather that British companies came and sold the products directly, particularly in relation to luxury goods.”

The Foreign Office is trying hard to encourage British businesses to make the leap. The British Ambassador to Iraq, Michael Aron, says the investment environment remains challenging, but supporting British businesses in Iraq is a priority for this Government.

“Opportunities to invest in Iraq are growing fast and British companies are becoming increasingly prominent here. We will continue to do what we can to help them succeed,” he said.

Risk analyst Drake says British firms could well become the biggest benefactor in the country’s boom time. “Iraqis do a lot of business face-to-face, so if you’re going to be successful there they have got to know who they are dealing with. On that basis I think British companies have the potential to do much better than the Chinese ones for example.

“They would rather do business with a British company because of the historical links between the two. They know we made a mistake invading, but they also already know our weaknesses and failings, unlike China, which is the frightening unknown.”

Ord-Smith of UKTI agrees: “It is a very exciting time to be in this job in this market. Iraqis tell us they have great respect for British companies, the quality of their goods and services, and would like to see more enter the market. So would I.”

But Iraq is not a place where businesses can expect to reap instant rewards. Experts question how long it might take for the country to return to pre-invasion growth levels – some suggest it could take as long as a generation – but Ord-Smith believes it’s a matter of when, not if, the Iraqi market takes off.

And with the level of growth in Iraq one of the highest in the world – the International Monetary Fund estimates the country will grow at a rate of 12.5pc this year – he may well be right. Largely driven by high energy prices, nominal gross domestic product is expected by the IMF to reach $108bn, a new record, with inflation remaining in relative check at a steady 5pc.

All spoken to agree that the most important thing a business can do at this stage in Iraq is to lay down the foundations sooner rather than later, as it will be those “early adopters” who establish a reputation in the country during the tough times that will be seen as friends of Iraq when the going gets good, leading to rich dividends further down the line.

 

Baghdad, June 22 (Rn) – The Central Bank of Iraq, Wednesday, that he decided to restructure the local currency in order to develop the payment system in the country.

Sums of money The appearance of Mohammed Saleh told the Kurdish news agency (Rn) that “the central Bank of Iraq has decided to start the execution of the strategic and long-term specialized restructuring of the local currency to the development of the payments system in Iraq.”

He added that “the central bank will raise the level of local currency and the currencies of developing new approaches to reach U.S. $ 100, which would address the economic gap in the financial payments system in the country.”

He continued that “the project of restructuring the local currency, which started gradually need to support the government and parliament that he will organize the purchasing power compared Palmdjulat economy.”

He expressed the IMF in August / August, his support of the Iraqi economy in the event of having a number of economic measures including the privatization of banks and raise three zeroes from the local currency and to meet debt and compensation is the responsibility of Iraq.

The Iraqi government has denied any change in the local currency this year to reduce inflation. The local Iraqi currency has gone through several changes in its history, most recently in 2004 when the former Governing Council replaced the previous currency, which was the symbol of the former regime.

The main tasks of the Iraqi Central Bank to maintain price stability and the implementation of monetary policy, including exchange rate policies, and management of reserves of foreign currency, and the issuance of currency management, as well as to regulate the banking sector.