Frank26 and KTFA Members Late Saturday Night. "IMF Says Iraq is Article 8"
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Frank26 and KTFA Members Late Saturday Night. "IMF Says Iraq is Article 8"
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KTFA:
Frank26: IMF SAYS IRAQ IS ARTICLE 8
Streamed live 10 hours ago
Dont forget they were taken off the stand by agreement! The IMF said they have their multiple currency practice, no longer under restrictions! This is important! Today the IMF told the world "by the way.."... contractors are going ballistic...
WS TOLD US THEY WERE DOING THIS FOR SOMETIME THAT THEY WERE ARTICLE 8 COMPLIANT, JUST HAVE NOT TOLD US/THE WORLD FORMALLY...
THE 3 ZEROS WERE LIFTED ELECTRONICALLY IN JAN... THE IMF TOLD US, NOW WE NEED IRAQ TO TELL US THEY ACCEPTED THESE AGREEMENTS, TO ADD VALUE..THERE IS NO WAITING PERIOD, JUST HAVE TO DO IT
So how long will we have to wait? There is no waiting periof-none…The moment they have the strength, will and desire to do it…..they will raise the value of their currency
....
https://youtu.be/P_dQgn24X9A?t=1
Iobey777: Seems to me that the IMF has "spilled the beans" about Iraq...it's time for them to step up and ACKNOWLEDGE what the world already knows!!!! IMO!
Don961: B. Recent Developments: Slow Post-War Recovery
6. Post-war reconstruction and economic recovery have been slow.
The large-scale reconstruction effort that was expected in liberated areas has not yet materialized, with capital spending in these areas totaling just ID 100 billion ($85 million) in 2018, or less than 0.5 percent of the estimated damage. Non-oil GDP rose by only 0.8 percent year-on-year in 2018 on account of weak execution of public investment (including reconstruction) and power outages, while overall GDP contracted by around 0.6 percent as oil production was cut to comply with the OPEC+ agreement. Inflation was flat over the year as a whole (Tables 1–2).
7. The fiscal and external positions improved significantly in 2018 due to the rebound in oil prices and underexecution of the capital budget (Tables 3–5).
• A large fiscal surplus—around 8 percent of GDP—was recorded in 2018 due to larger than expected oil revenues and a significant underexecution of the capital budget. However, the underlying fiscal position barely improved as non-oil revenue collection declined significantly (due to weak compliance) and current spending expanded by 5 percentage points of non-oil GDP.
• The government retired some domestic debt, including unwinding ID 1 trillion (about $0.9 billion) of indirect monetary financing, and accumulated fiscal buffers (about $17 billion). Public debt fell to 49 percent of GDP at end-2018 (Table 1).
• Higher oil prices and the modest improvement in the underlying fiscal position also led to a large current account surplus in 2018 (5¾ percent of GDP). Gross international reserves reached $65 billion by end-December, outstripping standard reserve adequacy metrics.
• The spread between official and market FX rates has narrowed to below 2 percent in recent months, from 6.25 percent at end-2017, as the comfortable reserve position has allowed the CBI to satisfy banks’ FX demand.
8. Iraq’s external position in 2018 was substantially stronger than suggested by desirable policies and fundamentals (see Annex III).
The sizable surplus realized in 2018 was 10 percent of GDP higher than staff’s current account norm of a 4½ percent of GDP deficit, developed from a model tailored to resource-rich countries such as Iraq with large investment needs.
The real effective exchange rate (REER) appreciated by 4.9 percent year on year in 2018, continuing a gradual trend since 2013 due mostly to movements in the nominal effective exchange rate (NEER).
9. Bank balance sheets remain weak, and private-sector credit is growing but from a very low base.
Two large public banks—Rafidain and Rasheed (R&R)—are burdened by legacy assets as well as loans to SOEs, while NPLs are high at a number of private banks. R&R’s capital is below statutory levels, while private banks are losing money due to the compression of spreads in the FX market, and could face capital constraints. The private-sector credit stock was only 9 percent of GDP at end-2018, up 9 percent year on year.
10. Parliament adopted a new General Financial Management Law (GFML) in May 2019 that strengthens the legal framework for public financial management.5
The law defines general government for the first time, establishes the need for a medium-term fiscal framework and enshrines fiscal transparency requirements. It also limits parliament’s capacity to amend the budget, as well as the scope for spending to be authorized outside budget processes. A number of gaps remain, including regarding guarantees and a treasury single account, that will need to be addressed by secondary legislation and/or decisions by the council of ministers. Newly introduced elements of fiscal federalism could erode non-oil revenue. link
Prepared ByMiddle East and Central Asia Department (In consultation with other departments)
FUND RELATIONS (As of May 31, 2019)
Membership Status: Joined December 27, 1945; Article XIV
General Resources Account
SDR Million ---------- Percent of Quota
__________________________
Quota 1,663.80 ---- 100.00%
Fund Holdings of Currency
3,425.13 ------------ 205.86%
Reserve Tranche Position
289.95 ---------------17.43
Latest Financial Arrangements
Type---------- Date of Arrangement---- Expiration Date---- Amount Approved (SDR Million)---- Amount Drawn (SDR Million)
Stand-By ----Jul 07, 2016--------------- Jul 06, 2019 -------3,831.00-------------------------------- 1,494.20
Implementation of HIPC Initiative: Not Applicable
Implementation of Multilateral Debt Relief Initiative (MDRI): Not Applicable
Implementation of Catastrophe Containment and Relief (CCR): Not Applicable
As of February 4, 2015, the Post-Catastrophe Debt Relief Trust has been transformed to the Catastrophe Containment and Relief (CCR) Trust.
Safeguards Assessments
The most recent safeguards assessment of the Central Bank of Iraq (CBI) was completed in April 2016. It concluded that the CBI continues to face capacity constraints in its operations, as well as a difficult security situation on the ground. In line with the IMF safeguards assessment's recommendations the Governing Council of the CBI approved a new charter for the Audit Committee prohibiting CBI executive representation on the committee. Also, the Parliament has approved amendments to the Law on the Central Bank of Iraq to strengthen CBI governance and the internal control framework. However, progress in strengthening the capacity of internal audit and financial reporting has been slow.
Exchange Arrangement
Iraq’s de jure and de facto exchange rate arrangements are classified as a conventional peg arrangement. The Central Bank Law gives the Board of the Central Bank of Iraq (CBI) the authority to formulate exchange rate policy. Effective January 2, 2017, the cash and transfer exchange rate was set at ID 1,184 plus ID 6 (fees) per U.S. dollar. Effective May 24, 2018, the official exchange rate was set at ID 1,190 per U.S. dollar including the Central Bank commission (ID 1,182 plus ID 8 (fees)) according to the closing prices of the daily bulletin of gold & main currencies published on the CBI website (www.cbi.iq).
The CBI provides foreign exchange at the official exchange rate for permissible transactions through its daily auctions (allocations), establishing a peg. However, because certain transactions are excluded from 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 one multiple currency practice (MCP) subject to Fund approval under Article VIII, Section 3.1 {1}
_____________________________________________
{1}The authorities have imposed a requirement that, to access the CBI foreign exchange window, a purchaser must have at least one bank account that has been opened for a minimum of six months. This requirement does not apply for access to foreign exchange from other sources, including purchases of foreign exchange from commercial banks’ own resources. Staff will monitor the implementation of this requirement to ascertain whether any undue burdens on access to foreign exchange for current international transactions emerge from its application in practice
___________________________________________
The MCP arises from the lack of a mechanism to ensure that the exchange rate at the CBI foreign exchange window and the market rates (retail exchange rates of commercial banks and exchange bureaus for the sale of foreign currency from sources other than the CBI foreign exchange window) do not deviate from each other by more than 2 percent.
A previously identified exchange restriction arising from an Iraqi balance owed to Jordan under an inoperative bilateral payment agreement has been eliminated.
Article IV Consultation
Upon the approval of the 36-month Stand-By Arrangement on July 7, 2016, Iraq was placed on the 24-month consultation cycle. The last Article IV consultation was concluded on August 1, 2017, along with the Second Review under the Three-Year Stand-by Arrangement. The staff report (IMF Country Report No. 17/251) was published on August 9, 2017, and is available on the internet.
Resident Representative
Mr. Kareem Ismail has been the resident representative for Iraq, based in Amman, since June 2018.
Technical Assistance, 2014–19
(a series of 3 charts follows ... showing various IMF departments offering Iraq assistance in various categories ....with headings of Department --- Date --- Purpose ....one entry stood out)
Department ----------- Date ------------ Purpose
LEG --------------------June 2015 ------Article VIII acceptance link
1. On behalf of the Iraqi authorities, we would like to thank staff for their constructive engagement, as well as the valuable capacity development provided to Iraq in support of its policy and reform efforts.
Recent Developments
2. Since the last Article IV discussion for Iraq, several elements contributed to improved political and economic conditions in the country: The formation of a new government, the recapture of territories previously held by ISIS, and a gradual recovery in oil prices. Millions of people displaced by the war against ISIS returned home, and negotiations around trade agreements with neighboring countries have progressed. Nonetheless, hundreds of thousands remain internally displaced and reconstruction efforts are delayed by many factors, including implementation capacity.
3. The economy is gradually recovering following the deep economic strains of the last four years. Growth is expected to be robust in 2019, reversing the contraction seen in the past two years, thanks to a notable improvement in security conditions and higher oil prices. The non-oil economy is projected to grow at more than 5 percent, due to better rainfall, a rebound in electricity production, and the fiscal stimulus. Inflation remained low in 2018 and the fiscal balance turned to a large surplus of about 8 percent. Higher oil prices have also supported a steady increase in international reserves to US$65 billion, helping to rebuild solid buffers to external shocks and retire domestic debt, including unwinding about US$1 billion of indirect monetary financing.
Growth and the positive fiscal balance contributed to reducing public debt-to-GDP by about ten percentage points in 2018 and the government has adopted a framework to control the issuance of guarantees, in cooperation with the Fund. Higher oil prices and the improvement in the underlying fiscal position also contributed to a marked improvement in the external position, as reflected in the large current account surplus (about 7 percent of GDP). At the same time, the spread between official and market foreign exchange rates has narrowed to below 2 percent in recent months.
4. The authorities are fully aware that Iraq is facing the challenge of maintaining economic stability, while ensuring durable peace and inclusive growth. This entails rebuilding much needed infrastructure, addressing the legacy of conflict, ensuring the provision of services and job opportunities for all Iraqis, particularly the youth, and modernizing the economy. To address these challenges, the newly formed Government of Iraq has launched an ambitious reform and reconstruction agenda, outlined in the Recovery, Reconstruction, and Development Program and National Development Plan. In February 2018,
in Kuwait, the international community committed to supporting Iraq’s reconstruction and development and pledged US$30 billion in the form of loans and guarantees at the International Conference for the Reconstruction of Iraq. A small portion of the needed reconstruction effort has, however, taken place to date, mainly due to limited absorptive and implementation capacity, as well as slow disbursement of pledged donor financing due to the heavy documentation requirements and project procedures.
Fiscal Policies and Reforms
5. The authorities are faced with pressures to increase employment in the public sector to address unemployment, achieve justice for some groups that were affected by past fiscal consolidation efforts including militia forces that helped defeat ISIS, and meet legal requirements to absorb graduates of certain specializations. Accordingly, tightening the fiscal stance in the short run is politically and socially difficult. Nonetheless, the authorities fully agree on the need for reforms over the medium term, particularly in the areas of non-oil revenues, subsidies, and civil service.
Parliament recently adopted a new civil service law as part of their effort to conduct a comprehensive review of the public sector functions and size. The reform of the electricity sector ranks high on the authorities’ agenda and priority has been given to increasing generation capacity to address power outages. Work in this area has resulted in increased electricity generation by about 25 percent in mid-May relative to the year before. Work to settle electricity-related cross-liabilities is ongoing. The authorities acknowledge that important challenges in the electricity sector remain, as outlined in paragraph 30 of the staff report.
6. The authorities also concur with staff on the need to adopt a risk- and rules-based approach to fiscal policy as part of broader fiscal reforms to manage oil revenue more effectively, and they appreciate staff’s analytical work on the subject.
In this connection, Parliament adopted a new General Financial Management Law in May 2019 that strengthens the legal framework for public financial management. The law defines general government for the first time, establishes the need for a medium-term fiscal framework and enshrines fiscal transparency requirements. It also limits parliament’s capacity to amend the budget, as well as the scope for spending to be authorized outside budget processes.
7. Public financial management (PFM) reforms continue to rank high on the authorities’ agenda. They have adopted tight procedures for the approval of government guarantees, kept arrears under control, and enacted a new PFM law in May 2019.
They are also designing and implementing a commitment control system for budget execution to avoid the emergence of new arrears. Moreover, budget transfers to the Kurdistan Regional Government were progressively restored during 2018 and have been included in the 2019 budget. The Ministry of Finance is planning to implement an Integrated Financial Management Information System with the support of the World Bank, for which the adoption of an updated budget classification and a chart of accounts is a prerequisite. Work in these areas is progressing, with the support of Fund technical assistance.
Monetary, Exchange Rate, and Financial Sector Policies and Reforms
8. The authorities remain committed to the peg to the U.S. dollar as it continues to provide a key nominal anchor to the economy.
9. The authorities are taking measures to enhance the stability of the banking sector. The two largest state-owned banks, Rasheed and Rafidain, are being restructured. The authorities have made progress in procuring suppliers for core banking systems and have segregated legacy assets and liabilities into “bridge branches.” The Bureau of Supreme Audit is working on finalizing their accounts for 2014 and subsequent years.
Once the core banking systems are fully operational, the authorities intend to have the two banks audited to international standards, which would allow their capital needs to be assessed accurately.
10. At the same time, the Central Bank of Iraq (CBI) is pursuing its efforts to strengthen the regulatory framework and improve prudential regulations in banking supervision to align them with Basel II Committee on Banking Supervision standards and guidelines.
In this connection, supervisory guidelines on bank internal audit and compliance functions were prepared in the fall, with Fund technical assistance. Work is progressing on early identification of bank risks and the way to deal with weak banks, including early intervention of supervisors, corrective actions and their enforcement, banking crisis management and the supervisor’s role, as well as techniques for liquidating unviable banks. The CBI also intends to develop a deposit insurance scheme, which would help level the playing field across the banking sector. To promote financial development and inclusion, the CBI is working on strengthening payment systems and encouraging deposits, including public salary payments directly into bank accounts.
11. In June 2018, the Financial Action Task Force (FATF) welcomed Iraq’s significant progress in improving its AML/CFT regime and noted that “Iraq has established the legal and regulatory framework to meet the commitments in its action plan regarding the strategic deficiencies that the FATF identified in October 2013.”
FATF thus considered that Iraq was no longer subject to the FATF’s monitoring process under its ongoing global AML/CFT compliance process. The authorities will continue to work to strengthen the AML/CFT framework. They consider that continued progress on AML/CFT will also help them address the transfer of illicit gains.
12. Good progress has been made in implementing the recommendations of the 2016 safeguards assessment of the CBI. Amendments to the Law on the Central Bank of Iraq to strengthen CBI governance have been enacted, and the revised audit committee charter now prohibits CBI executive representation on the committee. Work is ongoing on strengthening the capacity of internal audit and financial reporting.
Anti-Corruption Reforms
13. The government is prioritizing anti-corruption efforts, with a focus on strengthening public institutions. A new High Council on Combatting Corruption, chaired by the Prime Minister, was established in February 2019. A Commission on Integrity was established in 2011 with the tasks of corruption prevention and enforcement, and it has investigated several high-profile corruption cases. Legislation to criminalize illicit enrichment, trading in influence, embezzlement, and all forms of bribery has been drafted. Iraq has also developed a system of asset declarations, and a large number of public officials are currently required to disclose their assets. The authorities agree with staff that streamlining the anti-corruption framework would make it more effective and less onerous for economic activity.
Conclusion
14. Notwithstanding an improvement in security conditions and oil prices, Iraq faces the serious challenge of maintaining economic stability, while ensuring durable peace and inclusive growth.
The Iraqi authorities very much value the Fund’s policy advice in addressing its economic challenges, and they would welcome a Post-Program Monitoring engagement. Continued Fund capacity development would be essential in the period ahead. The authorities have been calling on the Fund to resume visits to Baghdad, similar to the practice of other international institutions. They welcome the recent lowering of the Fund’s security rating for Baghdad to a medium level of residual risk and look forward to welcoming Fund staff again.
link
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