Macroeconomic stability was maintained in 2010, despite a highly uncertain
domestic and external environment. Inflation has continued to be in the low single digits and the exchange rate has remained stable. The Central Bank of Iraq (CBI) kept its policy interest rate unchanged at 6 percent, after having lowered it from 7 percent in early 2010, and the volume of foreign exchange sold by the CBI in the foreign exchange auctions remained broadly stable at about $3 billion on average per month during the year. With some increase in export revenues, the CBI’s international reserves rose to just over $50 billion by end-2010, up from $44 billion at end-2009 and exceeding the target under the SBA.

Oil revenues have recovered … … although volumes have not increased as targeted. Underspending led to a smalller deficit in 2010 but financing needs shift to 2011. Inflation has remained in low single digits …
… the exchange rate has stabilized … … and overall reserves have increased slightly.
Sources: Iraqi Authorities, and Fund Staff estimates and projections.

Oil export revenues exceeded projections in 2010, with higher prices offsetting
lower export volumes. Exports averaged 1.85 million barrels per day (mbpd), well below the authorities’ target of 2.10 mbpd. The shortfall reflected periods of bad weather and attacks on pipelines, as well as the lack of an agreement with the Kurdish region to secure additional exports. Export prices were substantially higher, however, averaging just over $74 per barrel
during the year, compared to a budgeted price of $62.50 per barrel. Thus, oil export revenues reached $50 billion in 2010, compared to a budget forecast of $48 billion, and up from $39 billion in 2009, but still well below the peak level of $63 billion in 2008.

Although full-year data are not yet available, the 2010 government budget deficit is estimated to have remained well below the original forecast. Notwithstanding the somewhat higher oil revenues, this is believed to mainly reflect a large under-execution of the capital budget. Preliminary estimates suggest a 2010 deficit of about ID 10 trillion (equivalent to 10 percent of GDP), instead of the ID 18 trillion that had been projected in the 2010 budget
(19 percent of GDP). While some under-execution of the capital budget had been expected given the prevailing constraints in administrative capacity, the long delay in the formation of a new government appears to have contributed to a much larger degree of under-execution. In line with this, the balance in the Development Fund for Iraq (DFI) at end-2010 exceeded the (adjusted) target under the SBA by almost $4 billion …

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BAGHDAD / Aswat al-Iraq: The Central Bank of IraqCentral Bank of IraqCentral Bank of Iraq (CBICBICentral Bank of Iraq) dollar sales registered on Thursday, the last session in the week, $14.933 million at an exchange rate of 1170 Iraqi dinars per dollar, compared to the previous session’s $12.933 million.

“The demand hit $4.883 million in cash today, covered at an exchange rate of 1,183 Iraqi dinars per dollar, and $10.050 million in foreign transfers outside the country, covered at an exchange rate of 1,183 Iraqi dinars per dollar,” according to a CBICBICentral Bank of Iraq news bulletin received by Aswat al-Iraq news agency.

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