Central Bank: report of the international monetary support of our foreign exchange market liberalization

[Frangipani]

2013/30/07

 

Central Bank: report of the international monetary support of our foreign exchange market liberalization

 

Baghdad/Obelisk: banking sources said that the report on the work of the Executive Board of the International Monetary Fund last month endorsed to the Iraqi Central Bank to release foreign currency market.

 

The sources said in a statement to "the Obelisk", "recently taken steps to streamline the organizational rules of the market born satisfaction of the Executive Board of progress made recently in the context of Central Bank strengthen bank supervision and its efforts in restructuring the Bank and Mesopotamia.

 

The report was issued by the International Monetary Fund, Iraq has recommended that the pace of structural reform to boost growth and job creation in the private sector, and the need to continue the rational management of the foreign reserves of the Central Bank of Iraq and the Development Fund for Iraq.

 

 

 

http://www.almasalah.com/ar/news/15043/%D8%A7%D9%84%D8%A8%D9%86%D9%83-%D8%A7%D9%84%D9%85%D8%B1%D9%83%D8%B2%D9%8A-%D8%AA%D9%82%D8%B1%D9%8A%D8%B1-%D8%A7%D9%84%D9%86%D9%82%D8%AF-%D8%A7%D9%84%D8%AF%D9%88%D9%84%D9%8A-%D9%8A%D8%A4

 

 

[DinarDana]

I am very surprised I am the first poster on this article.

 

Executive Board of the International Monetary Fund last month endorsed to the Iraqi Central Bank to release foreign currency market.

 

Good news for Iraq and the closer we are getting to seeing a positive change in the IQD.

[jg1]

I am very surprised I am the first poster on this article.

 

Executive Board of the International Monetary Fund last month endorsed to the Iraqi Central Bank to release foreign currency market.

 

Good news for Iraq and the closer we are getting to seeing a positive change in the IQD.

Yes, nice. Wait and see. Thank you. 

[Chartman17]

It looks like we are moving toward the end game.

[supergirl]

good one.  thanks.

[JMULS31]

Everything seems like we're at the end. But nothing happens

[jg1]

I went to the IMF site and copy and pasted this, its pretty jumbled so best to go to the link. 

 

http://www.imf.org 

International Monetary Fund 

Washington, D.C. 

July 2013 IRAQ 

STAFF REPORT FOR THE 2013 ARTICLE IV CONSULTATION 

KEY ISSUES 

Context: Since 2003, close engagement with the Fund has helped Iraq maintain 

macroeconomic stability, despite a difficult political and security environment, external 

economic shocks, and a weak economic structure. In this context, the 2013 Article IV 

discussions focused on strengthening policies to realize Iraq’s economic potential and 

make growth more inclusive. 

Outlook: The positive trend in oil production and exports contrasts with the weakening 

economic governance deriving from an increasingly difficult political process and 

worsening security. The authorities will be able to fend off the danger of the natural 

resource curse if they can improve political and security conditions, strengthen economic 

institutions, and implement sound policies. Fiscal policies should aim at financing the 

needed social and investment spending while building up adequate fiscal buffers to 

insulate the economy from oil market shocks. On the back of large oil exports, strong 

current account performance is expected to result in the accumulation of international 

reserves. 

Main policy recommendations: The authorities need to be proactive in addressing 

medium-term challenges and risks by: (a) ensuring fiscal sustainability and building fiscal 

buffers to address volatility in oil revenues; ( stepping up the liberalization of the 

foreign exchange market; © continuing the prudent management of reserves held by 

the Central Bank of Iraq and the Development Fund for Iraq; (d) deepening the reform of 

the financial sector, including the creation of a level playing-field for private banks; and 

(e) accelerating structural reform to promote private sector growth and employment 

creation. 

April 30, 2013 IRAQ

2 INTERNATIONAL MONETARY FUND

Approved By 

Alfred Kammer and 

Taline Koranchelian 

Discussions were held in Amman, Jordan during March 2–12, 2013. 

The staff team comprised Messrs. Sdralevich (head), Parodi, 

Alkhunaizi, Shbaikat, and Said (all MCD), Ms. Kirabaeva (MCM), and 

Mr. Nielsen (SPR). The team met with Acting Finance Minister 

Al-Shukri, Deputy Finance Minister Othman, Board of Supreme Audit 

Head and Acting Governor of the Central Bank of Iraq Al-Turki Said, 

other senior government officials, and representatives of the Iraqi 

private sector. Ms. Choueiri (OED) participated in the policy meetings

 

http://www.imf.org/external/pubs/ft/scr/2013/cr13217.pdf

 

 

 

REVIEW OF THE FUND’S INCOME POSITION FOR FY 2013 

AND FY 2014 

EXECUTIVE SUMMARY 

FY 2013 net income is now projected at SDR 2.0 billion, including surcharges, broadly in 

line with the midyear estimate of SDR 2.1 billion. The income will help build the Fund’s 

precautionary balances, which are expected to reach SDR 11.5 billion at the end of 

FY 2013, consistent with the earlier estimates.

The paper includes decisions relating to the disposition of FY 2013 income, which are in 

line with the practice in recent years. A decision is proposed to resume the 

reimbursement of the General Resources Account for the expenses of conducting the 

business of the PRG Trust in line with the Executive Board’s approval of a long-term 

financing strategy for the PRGT in September 2012.

In April 2012, the Executive Board applied for the first time the new rule for setting the 

margin for the basic rate of charge and established a margin of 100 basis points for the 

two financial years FY 2013–14. As required under this new rule, staff has completed a 

full analysis of the underlying factors relevant for setting the margin and has 

determined that there have not been fundamental changes that would warrant a 

change in the margin for FY 2014.

The updated projections for FY 2014 point to a net income position of 

SDR 1.6-1.8 billion, compared with the April 2012 estimate of SDR 2.1 billion. The 

updated projections reflect lower lending income, primarily due to the expiration of 

arrangements with undrawn balances and lower non-lending income as a result of the 

low global interest rates and the agreement to phase in investments under the new 

gold-sales funded endowment. The projections are subject to considerable uncertainty 

and are sensitive to a number of assumptions. 

April 30, 2013 REVIEW OF THE FUND’S INCOME POSITION FOR FY 2013 AND FY 2014 

2 INTERNATIONAL MONETARY FUND

Approved By 

Andrew Tweedie 

Prepared by the Finance Department in consultation with the Legal 

Department and the Office of Budget and Planning 

CONTENTS 

INTRODUCTION __________________________________________________________________________________ 3

REVIEW OF THE FY 2013 INCOME POSITION ___________________________________________________ 3

DISPOSITION DECISIONS ________________________________________________________________________ 7

FY 2014 INCOME OUTLOOK _____________________________________________________________________ 9

REVIEW OF SPECIAL CHARGES _________________________________________________________________ 15

BOXES 

1. The Rule for Setting the Margin for the Basic Rate of Charge ___________________________________ 4

2. Reimbursement to the GRA from the PRG Trust _________________________________________________ 5

FIGURES 

1. Summary of Disposition Decisions ______________________________________________________________ 9

2. Projected Reserve Accumulation ______________________________________________________________ 11

3. EMBIG Spreads: Total Composite and Bottom Quartile _______________________________________ 12

4. Current Levels of SDR-Weighted Yields and Market-Implied Forward Rates __________________ 25

TABLES 

1. Projected Income and Expenditures—FY 2013 __________________________________________________ 6

2. Projected Income Sources and Uses—FY 2014 ________________________________________________ 13

3. Sensitivity Analysis-Effect of Changes in Selected Assumptions in FY 2014 ___________________ 14

4. Recent Burden Sharing Adjustment Rates and FY 2014 Quarterly Rates ______________________ 15

5. Income from the Margin and Reserve Accumulation __________________________________________ 22

6. Long-term Credit Market and Comparator Spreads ___________________________________________ 24

7. Investment Account Performance Scenarios __________________________________________________ 27

ANNEXES 

I. Decisions in Effect Related to the FY 2013 Income Position ____________________________________ 20

II. Framework on the Margin for the Rate of Charge _____________________________________________ 21

III. Investment Account (IA) Performance Scenarios ______________________________________________ 25

IV. Assumptions Underlying the Income Projections _____________________________________________ 28

V. Projected Income and Expenses—FY 2013–14 ________________________________________________ 29

VI. Cumulative Burden Sharing Adjustments at end–January 2013 ______________________________ 30REVIEW OF THE FUND’S INCOME POSITION FOR FY 2013 AND FY 2014 

INTERNATIONAL MONETARY FUND 3

INTRODUCTION 

1. This paper reviews the Fund’s income position for FY 2013 and FY 2014.

1

 The paper 

updates projections provided at the FY 2013 midyear review and proposes decisions for the current 

and next financial year. The paper includes a comprehensive review of the Fund’s income position as 

required under the new Rule I-6(4) adopted in December 2011 (see Box 1). Based on this review, no 

change in the margin for the rate of charge is proposed. 

2. The paper is structured as follows: The first section reviews the FY 2013 income position 

and the main changes from the midyear projections; the second section makes proposals on the 

disposition of FY 2013 net income, and placement to reserves; the third section discusses the margin 

on the rate of charge for FY 2014, updates the income projections, and reviews the projected 

burden sharing adjustments; and the last section reviews special charges.

REVIEW OF THE FY 2013 INCOME POSITION 

3. FY 2013 net income is now projected at SDR 2.0 billion, compared with SDR 2.1 billion at 

the midyear update (see Table 1).2

 Key factors affecting the latest projections are as follows:

 Lending income: Operational lending income (margin, service charges, and commitment fees) 

is estimated at about SDR 1.5 billion, consistent with the earlier estimate. The slightly higher 

income of SDR 5 million reflects higher commitment fees earned on the cancellation of some 

arrangements, partially offset by reduced margin income and service charges following the 

rephasing of scheduled disbursements under existing arrangements. Surcharge income is 

estimated at SDR 1.2 billion, in line with earlier estimates. 

 Investment income: Investment income for FY 2013 is estimated at SDR 58 million for the 

fixed-income subaccount (reserves portfolio), SDR 6 million for the endowment subaccount 

(gold profits portfolio) and SDR 0.036 million for the temporary windfall profits subaccount. 

Total IA income of SDR 64 million is expected to be about SDR 9 million lower than the midyear 

estimate due to lower-than-projected returns on government bonds. 

 Reimbursements to the General Resources Account (GRA): The GRA is reimbursed annually 

for the expenses of conducting the business of the SDR Department, of administering the PRGT 

Trust, and of administering SDA resources in the MDRI-I and the PCDR Trusts.3

 The GRA will be 

reimbursed for the expenses of conducting the business of the SDR Department in FY 2013 

1

 A companion paper provides an update on The Consolidated Medium-Term Income and Expenditure Framework 

(04/30/13). 

2

 The Fund’s Income Position for FY 2013—Midyear Update (12/21/12). 

3

 Reimbursement to the GRA from the MDRI-I and the PCDR Trusts is for expenses not already attributable to other 

accounts or trusts administered by the Fund, or to the GRA. REVIEW OF THE FUND’S INCOME POSITION FOR FY 2013 AND FY 2014 

4 INTERNATIONAL MONETARY FUND

 Box 1. The Rule for Setting the Margin for the Basic Rate of Charge 

Effective May 1, 2012, Rule I-6(4) reads as follows: 

"(4) The rate of charge on holdings (i) acquired as a result of a purchase under a policy that has been the 

subject of an exclusion under Article XXX©, or (ii) that exceed the amount of the member's quota after 

excluding any balances referred to in (i), shall be determined in accordance with (a) and ( below. 

(a) The rate of charge shall be determined as the SDR interest rate under Rule T-1 plus a margin 

expressed in basis points. The margin shall be set at a level that is adequate (i) to cover the estimated 

intermediation expense of the Fund for the period under ( below, taking into account income from 

service charges, and (ii) to generate an amount of net income for placement to reserves. The appropriate 

amount for reserve contribution shall be assessed taking into account, in particular, the current level of 

precautionary balances, any floor or target for precautionary balances, and the expected contribution 

from surcharges and commitment fees to precautionary balances; provided, however, that the margin 

shall not be set at a level at which the basic rate of charge would result in the cost of Fund credit 

becoming too high or too low in relation to long-term credit market conditions as measured by 

appropriate benchmarks. Notwithstanding the above, in exceptional circumstances, the margin may be 

set at a level other than that which is adequate to cover estimated intermediation expenses of the Fund 

and to generate an amount of net income for placement to reserves. 

( The margin shall be set for a period of two financial years. A comprehensive review of the Fund's 

income position shall be held before the end of the first year of each such two-year period and the 

margin may be adjusted in the context of such a review, but only if this is warranted in view of 

fundamental changes in the underlying factors relevant for the establishment of the margin at the start of 

the two-year period." 

through an assessment on participants in the SDR Department (proposed Decision 1).4

 These 

expenses are estimated at SDR 1.149 million. Expenses of conducting the business of the MDRI-I 

and PCDR Trusts are estimated at SDR 0.019 million and SDR 0.039 million, respectively 

(proposed Decisions 2 and 3). Starting in FY 2013, the practice of reimbursing the GRA for the 

expenses of conducting the business of the PRG Trust will be resumed (see Box 2). The 

reimbursement is an important element of the Fund’s income model endorsed in 2008 and the 

resumption of the reimbursement was part of the financing strategy approved in September 

2012 for the PRGT aimed at placing concessional lending on a self-sustaining basis over the 

longer term. Reimbursement had been included in the earlier projections. The estimated PRGT 

expenses for FY 2013 to be reimbursed to the GRA are SDR 52.21 million (proposed Decision 4). 

 Expenses: Net expenses are expected to be lower than projected by about SDR 22 million. The 

decrease reflects lower-than-projected expenses on capital projects (IT and facilities) of about 

SDR 4 million. The FY 2013 net administrative expenditures are also projected to be about 

4

 Consistent with paragraph 5( of Schedule M, the SDRs taken into account for purposes of calculating the 

assessment do not include SDR 87 million that, due to the overdue financial obligations of certain members, are 

being held in an escrow account pursuant to paragraph 5(a) of Schedule M. REVIEW OF THE FUND’S INCOME POSITION FOR FY 2013 AND FY 2014 

INTERNATIONAL MONETARY FUND 5

SDR 31 million lower than budgeted. The lower expenses are partially offset by movements in 

the U.S. dollar/SDR exchange rate of about SDR 13 million.5

 IAS 19 timing difference: The Fund’s pension and employee benefit expense is determined by 

the provisions of IAS 19, under International Financial Reporting Standards (IFRS). A timing 

difference results between the actuarially determined IAS 19 expense related to benefits earned by 

employees during the financial year and the amount actually funded from the budget. The IAS 19 

expense for FY 2013 of SDR 249 million is higher than funding projected at SDR 102 million, which 

gives rise to a timing difference of SDR 147 million that decreases net income. 

Box 2. Reimbursement to the GRA from the PRG Trust 

In 1987, the Executive Board adopted a decision providing for the annual reimbursement of the GRA for the 

expenses of conducting the business of the then-ESAF Trust (now PRGT). While this reimbursement was 

frequently suspended by the Executive Board (see paragraph 2 below), a key element of the new income 

model endorsed by the Fund in 2008 was the resumption of the reimbursement of the GRA for PRGT 

administrative expenses. However, an exception was provided pursuant to which the Fund should 

temporarily suspend annual reimbursements of the GRA in respect of the expenses of conducting the 

business of the PRGT if a determination is made that the resources of the Trust are likely to be insufficient to 

support anticipated demand for PRGT assistance and the Fund has been unable to obtain additional subsidy 

resources. 

Since the inception of the Trust Fund in 1976, all administrative expenses associated with the cost of 

administering the Fund’s concessional lending have been accounted for, and normally the costs have been 

reimbursed to the GRA. Exceptions to the general rule have been agreed by the Executive Board in the 

context of funding initiatives since 1998 to increase concessional lending capacity or provide debt relief. 

During fiscal years 1998-2004, the Board agreed to suspend reimbursement and redirect SDR 366.2 million 

of such payments from the GRA to the PRGF-HIPC Trust, to help finance both subsidy needs and debt relief. 

Similarly, during fiscal years 2005-2009 SDR 237.3 million was redirected to benefit the PRGF-ESF Trust. 

As part of the 2009 LIC financing package, the Executive Board decided that for a period of three years 

(FY 2010–12), an amount equivalent to the expenses of operating the PRGT would be transferred from the 

PRGT Reserve Account to the General Subsidy Account of the PRGT instead of to the GRA. Suspending PRGT 

reimbursement to the GRA during these three years generated additional PRGT subsidy resources of 

SDR 147.9 million. 

In September 2012, the Executive Board approved a financing strategy for the PRGT aimed at 

placing concessional lending on a self-sustaining basis over the longer term. This strategy involves 

establishing a base lending envelope of SDR 1¼ billion annually by using already available 

resources and contributions from members linked to the remaining windfall profits from recent 

gold sales and also assumes the reimbursement of the GRA for PRGT administrative expenses to 

resume in FY 2013. If, however, demand for PRGT borrowing exceeds the base envelope by a 

substantial margin for an extended period, the strategy for the self sustained PRGT allows for the 

possibility that a further temporary suspension of reimbursement could be considered by the 

Executive Board (see Proposal to Distribute Remaining Windfall Gold Sales Profits and

Strategy to Make the Poverty Reduction and Growth Trust Sustainable, 9/17/2012). 

5

 The projected outturn is approximately US$47 million lower than budgeted (FY2014-FY2016 Medium Term Budget, 

3/29/13) and the updated US$/SDR exchange rate is about 1.52 compared with the earlier projection of 1.55. REVIEW OF THE FUND’S INCOME POSITION FOR FY 2013 AND FY 2014 

6 INTERNATIONAL MONETARY FUND

Table 1. Projected Income and Expenditures—FY 2013 

(in millions of SDRs) 

Source: Finance Department and Office of Budget and Planning 

1/ Review of the Fund’s Income Position for FY 2012 and FY 2013-14 (4/12/12). 

2/ The Fund’s Income Position for FY 2013—Midyear Update (12/21/12). 

3/ Consistent with the recently endorsed rules and regulations for the IA, the earnings from the endowment subaccount will be 

retained in the IA and therefore they are excluded from operational income. 

4/ Interest free resources reduce the Fund’s costs and therefore provide implicit returns. Since the Fund invests its reserves in the IA 

to earn a higher return, the interest free resources retained in the GRA are mainly attributable to the SCA-1, unremunerated reserve 

tranche positions not represented by gold holdings, and GRA income for the year not transferred to the IA. These resources 

reduce members’ reserve tranche positions and the Fund’s remuneration expense resulting in implicit income for the Fund. 

5/ IAS 19 is the accounting standard that prescribes the accounting treatment of pensions and employee benefit expenses, and 

involves actuarial valuations. The IAS 19 expense was determined in the actuarial valuation completed in June 2012. 

6/ Net income on the basis presented in the Fund’s IFRS annual financial statements. 

Initial 

Projections 1/

Midyear 

Projections 2/

Current 

Projections

A. Operational income 1,789 1,597 1,573

Lending income 1,577 1,452 1,457

 Margin for the rate of charge 1,006 933 919

 Service charges 106 71 57

 Commitment fees 465 448 481

Investment income 130 73 58

 Reserves 65 67 58

 Gold profits portfolio 65 6 - 3/

Interest free resources 4/ 15 5 5

Reimbursements 67 67 53

 MDRI-I, PCDR Trusts, and SDR Department 3 3 1

 PRG Trust 64 64 52

B. Expenses 683 683 661

Net administrative expenditures 643 643 625

Capital budget items expensed 7 7 6

Depreciation 33 33 30

C. Net operational income position (A- 1,106 914 912

Surcharges 1,216 1,155 1,242

IAS 19 timing adjustment 5/ -147

Retained gold endowment income 6 3/

Net income position 6/ 2,322 2,069 2,013

Fund credit (average stock, SDR billions) 100.6 93.3 91.9

SDR interest rate (average, in percent) 0.3 0.1 0.1

US$/SDR exchange rate (average) 1.55 1.55 1.52

Precautionary balances (end of period, SDR billions) 11.8 11.6 11.5

Memorandum Items:

FY 2013REVIEW OF THE FUND’S INCOME POSITION FOR FY 2013 AND FY 2014 

INTERNATIONAL MONETARY FUND 7

DISPOSITION DECISIONS 

4. Projected net income includes net operational income of about SDR 912 million and 

surcharge income of SDR 1.2 billion (Table 1). The Executive Board needs to consider the 

disposition of net income and the use of IA investment income, which may impact the 

determination of GRA net operational income. Each of these elements is discussed below, and 

presented in Figure 1, beginning with the disposition of IA investment income.

5. The IA has three subaccounts.

6

 Under the recent Board-approved Rules and Regulations 

for the IA, the IA has three separate subaccounts holding three portfolios of assets: (i) a fixedincome subaccount funded by transfers of currencies from the GRA in amounts equivalent to the 

Fund’s total reserves in June 2006, plus subsequent transfers of GRA net income not associated with 

gold profits; (ii) the endowment subaccount funded with gold profits (other than windfall profits) as 

part of the new income model aimed at diversifying the Fund’s sources of income; and (iii) the 

temporary windfall profits subaccount funded GRA currency transfers attributed to windfall gold 

profits, which is to be used to fund a partial distribution of the general reserve to the membership 

for the benefit of the Poverty Reduction and Growth Trust.7

6. The use of IA income is guided by the Fund’s Articles. Under the Articles, investment 

income from the IA may be invested, held in the IA, or used for meeting the expenses of conducting 

the business of the Fund.8

 Further, Article XII, Section 6(f)(ii), permits the transfer of GRA currencies 

to the IA when the Fund’s reserves are above the cumulative amount of previous transfers of 

currencies from the GRA to the IA. Accordingly, in prior years a two-step approach has been taken 

with respect to the fixed-income subaccount; first, a transfer of IA income from this subaccount to 

the GRA is made to meet administrative expenses, which increases net income, and in turn increases 

available resources for placement to the GRA reserves. Second, the increase in reserves provides 

scope for further transfers of GRA currencies to the IA, thereby expanding the corpus of the IA which 

has generally provided higher returns.

7. Staff proposes that income in the subaccounts of the IA be used as follows: 

 Fixed-Income Subaccount (reserves portfolio): Consistent with past practice, staff proposes that 

the estimated FY 2013 income of SDR 58 million be transferred to the GRA to be used towards 

meeting the expenses of the Fund (proposed Decision 5). By so doing the IA income will 

contribute to the GRA net operational income, which will be placed in the Fund’s reserves. 

6

 See Press Release No. 13/37 on the new rules and regulations of the Investment Account. 

7

 In September 2012, the Board approved the partial distribution of the general reserve in an amount equivalent to 

the remainder of the windfall gold profits of SDR 1.75 billion and that the distribution be funded through a reduction 

in IA assets attributed to these profits, subject to the receipt of satisfactory assurances that members will provide 

new PRGT subsidy contributions equivalent to at least 90 percent of the amount to be distributed. 

8

 Article XII, Section 6 (f)(iv). The Board could also, by a 70 percent majority of the total voting power, decide to 

reduce the principal invested in the IA (Article XII, Section 6 (f)(vi)). 

 

http://www.imf.org/external/np/pp/eng/2013/043013a.pdf

[Boozer]

RV already

[DinarDana]

Everything seems like we're at the end. But nothing happens

 

You know what I was taught, "A watched pot never boils".

[JMULS31]

Can someone please + dinardana for me. I'm using my phone and I accidentally hit the red. Sorry dinardana. I did like your quote

Edited July 31, 2013 by JMULS31

[sandfly]

THANKS RV

[aliciadogz]

Can someone please + dinardana for me. I'm using my phone and I accidentally hit the red. Sorry dinardana. I did like your quote

I Plus her for ya but I agree too.

[DinarDana]

Can someone please + dinardana for me. I'm using my phone and I accidentally hit the red. Sorry dinardana. I did like your quote

 

Awe thanks and a special thank you for being kind. Those tiny buttons are tough on our fingers.

 

I Plus her for ya but I agree too.

Thanks for covering for JMULS, community minded and kind! -

 

Now we need a watched pot as an emoticon!

[supergirl]

 

Now we need a watched pot as an emoticon!

 

yes, we really do. 

[TQueezy]

Can we please get a forum platform that has More and Less functions for posts longer than 100 words or 10 lines?!