September 26, 2013
IQD Status Update
On June 27th 2013 Iraq was removed from all restrictions and provisions of Chapter 7 sanctions.
This news is still under embargo but I expect full coverage post rate change.
After removal from Chapter 7 sanctions Iraq AND Kuwait entered into a "Chapter 6" agreement together...note I said TOGETHER as Kuwait is equally under the Chapter 6 agreement with Iraq.
Chapter 6 agreements are available to all UN member nations as a way to negotiate under settlements to disputes between member nations with the UN as a third party moderator.
Iraq was NOT placed under Chapter 6 but agreed with Kuwait to enter a Chapter 6 agreement with Kuwait.
Kuwait is ALSO equally under this Chapter 6 and of course there are NO restrictions for Kuwait being in this agreement and like wise there are NO restrictions for Iraq.
This week on Tuesday we had the working group that was tasked to present the backing basket for the Iraqi Dinar that will be the official backing (based upon gold and other currencies)present their findings to the parliamentary finance committee. As you can find this info and the links posted at "Going Global" that announced this task group to set this backing basket. This was begun in June.
Yesterday we reported on the news of the CBI governor making a statement about this report...but the actual news of this report was not made public as of yet.
This report to the parliament was a necessary protocol that had to be accomplished before the public announcement of the backing basket.
Now the next step will be this weekends banking meeting which will allow the CBI to make all Iraqi banks aware of the pending changes to the value of the dinar and also the basis for this change.
After this disclosure to the banks the way will be clear for the CBI to make the public announcement which appears to be corresponding to the end of the quarter...start of the new month and the start of the new fiscal year in the United States...all of which fall on October 1st.
So we may indeed see the announcement of the new backing basket very soon.
On the rate...the current rate of .1166 is the defacto program rate and not a rate that would be within the standards of IMF Article VIII standards and therefore to begin a float from the program rate would be in violation of IMF standards.
If indeed they were going to float from .1166 they would have begun the day they were out of Chapter 7 sanctions or even before. Infact 3 years ago the CBI did allow the IQD to float at the auctions and every day for a few weeks the IQD gained in value and hit the current rate and stopped.
So if they were going to float from the defacto program rate they would have begun a while ago.
On the laws.
I have been sharing on the show my thoughts on the pending HCL and that I feel it cannot be passed until after the IQD is Article VIII compliant and this is why we see the big push by parliament for the first 3 days of October to meet to pass important laws. These laws may indeed require the IQD to first be Article VIII compliant and may be an indicator of the nearness of the announcement by the CBI
of the backing basket.
So all in all there are no changes from what we have been saying for weeks and that is we are waiting on the announcement from the CBI on the official backing basket of the IQD and the resulting rate that will bring the Iraqi Dinar into international standing by becoming IMF Article VIII compliant.
This will also open the door for Iraq to enter into full WTO membership.
Just 5 more days until October 1st.
Just maybe...to quote the Governor of the Central Bank of Iraq..."the friends of Iraq...will soon be surprised"