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What is the IMF's problem with Iraq ?

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Haidar Mortada

Finance International Monetary Fund Iraq

First, it is important to know that the problem of the IMF is not with Iraq, but with the policies of state institutions in Iraq, which are considered inefficient in managing the economy of the country, which forced the country to borrow time after time.

What is the IMF in Iraq ?!

Again, it is important to know that the IMF is not a profitable institution, but an advisory institution that pays contributions to countries to join this global institution, in exchange for these countries to receive advice and financial support in critical times.

What do we mean by critical times ?!

A third time, when you hear the news of a state resorting to the IMF, it is important to understand implicitly that this country has a bad history of wrong policies and that it has been so heavily entrenched that countries and international banks no longer wish to lend to this country because of its mismanagement of the economy.

In the sense that the IMF does not go to the states to advise them whatever their policies are wrong and destructive! It is the countries that go to the International Monetary Fund to ask for its advice and support, when it is about to sink into the quagmire of bankruptcy!

Examples of wrong policies include:

The CBI's "currency auction" policy is one of the most important files criticized by the International Monetary Fund (IMF), which it considers an illogical policy in managing the country's economy.

From the point of view of CBI, the fixed exchange rate is a policy to maintain price stability and market support, all in order to help the poor class of the people. This is undoubtedly Sami's goal.

From the point of view of IMF experts, the CBI can be linked as a charity to help the poor, then go to the market and spread money to passers-by!

The poor will get the money they need, but the money will be shared by the privileged, wealthy and traders in the market.

Therefore, the IMF believes that this economic policy and other policies, which are wasting the wealth of Iraq in vain without being reflected on the lives of its citizens ..

What is the IMF proposing ?!

What the IMF proposes is the same as the logic of reason and the sound economic sense that support must be directed to support the basic needs of the poor and low-income strata. It is unreasonable that all the people, including the affluent, the rich and the wealthy, are supported. This support.

For its part, countries are not bound by these mechanisms. They can formulate mechanisms and propose structural reforms, which, if committed to their implementation, will succeed in eliminating the fiscal deficit in their budget, eliminate corruption and pay not only the IMF's receivables but also the entitlements of States

and international institutions.

* The opinions expressed in this article may not necessarily reflect the opinion of the informational network.


https://annabaa.org/arabic/economicarticles/19108
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Come on Iraq stop the auctions !!!!  :woot: :woot:

 :twothumbs:  Pokerplayer  

 

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GM PP AND DV. SAY IT LOUDER! :D:twothumbs::bravo::bump:

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50 minutes ago, ladyGrace'sDaddy said:

Sounds like the IMF is tired of waiting for somebody to push the button.:o

They aren't the only ones that are tired waiting for them to push that big red button. :rocking-chair:

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I have a feeling that the auctions will not stop till people start to go to prison for a long time or lined up with a firing squad for the corruption. 

Uhhh, maliki, stand in the fromt of the line please.

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I think it will all happen at the same time . Suddenly and all together . In a soon type of flash .....? I think of the article from a few days ago of President Salehs private meeting to make  significant changes and re arrange positions. and a few other things.

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It takes a Special kind of Jack Azz to torque the shorts of the IMF. Well done Iraq. The corrupt GOI has done a stellar job.

.....perhaps the sign outside the Parliament bldg. should read - “ We Excel to Mediocrity “

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8 minutes ago, Laid Back said:

Second review Article IV Consultation.

 

The authorities are appropriately maintaining the peg of the Iraqi dinar to the U.S. dollar, which provides a key anchor to the economy.

 

 

Implementation of Key Recommendations from Article IV Consultation.

 

Recommendation;

Maintain the exchange rate peg and step up the liberalization of foreign exchange market

 

Status;

Mostly done. The authorities have removed most liberalization of the foreign exchange market exchange rate restrictions subject to Article VIII,
Section 2 (a).

 

Go end of daily auctions 

Go liberalization of exchange rate restrictions 

Go RV

Go $1:1

 

 

Thanks LB for all your posts!  Article 8 has to be right around the corner. :backflip:

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4 hours ago, WheresmyRV? said:

Thanks LB for all your posts!  Article 8 has to be right around the corner. :backflip:

 

“ in the coming period “ as Mahdi is fond of saying :wave:

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6 hours ago, WheresmyRV? said:

Thanks LB for all your posts!  Article 8 has to be right around the corner. :backflip:

You’re welcome WheresmyRV?

I think from the third quarter of 2019 to the first quarter of 2020 is a good window of opportunity. 

 

Go Art8

Go RV

Go $1:1

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Yep..there is a problem they have not privatised state instructions and pushe the government money into the private banking sector, they have also made the sizeable fiscal adjustment to createfiscal space as per imf reports and recommendations...

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10 hours ago, blueskyline said:

I think it will all happen at the same time . Suddenly and all together . In a soon type of flash .....? I think of the article from a few days ago of President Salehs private meeting to make  significant changes and re arrange positions. and a few other things.

My thoughts exactly..

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11 hours ago, ladyGrace'sDaddy said:

Sounds like the IMF is tired of waiting for somebody to push the button.:o

Exactly

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10 hours ago, Laid Back said:

You’re welcome WheresmyRV?

I think from the third quarter of 2019 to the first quarter of 2020 is a good window of opportunity. 

 

Go Art8

Go RV

Go $1:1

Only if the government of Iraq is fully seated. Otherwise, the moon will rot before the cows come home.

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This article tends to forget the reason behind the 2016 SBA, the origination of the loan for a large amount of money to be spread out over three installments. The other problem the IMF has is that they do business with only fully formed governments. Since Iraq still has not fully formed since last year's election, it cannot proceed. Therefore the last installment and the third review cannot take place until Iraq's government gets it's act together. The first and second reviews while were successful have had benchmarks missed and those benchmarks subsequently waived. So Iraq is the problem in its own agreement with the IMF. Remember, it was not until after this agreement that Iraq stated it would not take on more loans. 

 

Here are some excerpts from the Second Review

 

What Iraq has been working on since completion of Second Review

  • The [Iraqi] government remains committed to...achieve debt sustainability while maintaining the exchange rate peg, strengthening public financial management and banking supervision, and fighting money laundering, the financing of terrorism, and corruption. (see below)

  • As part of the completion of the second review, the Board also approved Iraq’s request for waivers of non-observance and applicability of performance criteria, and modification of performance criteria. (two waivers were requested, 10 of 12 benchmarks were met)
  • The economic policies implemented by the Iraqi authorities to deal with the shocks facing Iraq—the armed conflict with ISIS and the ensuing humanitarian crisis and the collapse in oil prices—are appropriate. Resolute implementation of the authorities’ program, together with strong international financial support, will be key. (ISIS has not been completely eradicated from Iraq,)
  • Further fiscal consolidation measures are needed in 2017-18 to keep the program on track...The composition of the fiscal adjustment should be improved over time by increasing non-oil revenue and reducing current expenditure...reforming the electricity sector and state-owned enterprises will make room for larger and more effective investment expenditure that supports growth and job creation.
  • Significantly improving public financial management will be important. Arrears need to be assessed and paid following verification, and expenditure commitment and cash management should be strengthened to prevent the accumulation of new arrears.[I have talked about this, in regards to the SBA, in the past. Notice the articles? Iraq asked for a postponement of paying arrears to who again? ]
  • Measures to bolster financial sector stability include strengthening the legal framework of the Central Bank of Iraq, restructuring state-owned banks, and eliminating an exchange restriction and a multi-currency practice. Measures to prevent money-laundering, counter the financing of terrorism, and strengthen the anti-corruption legislation also need to be implemented. (Take a look at past articles from the date of the second review and notice a trend?)
  • Implementation of the budget-sharing agreement with the Kurdistan Regional Government would put both the federal government and the Kurdistan Regional Government in a better position to address the shocks to the Iraqi economy 
  • CBI Board undertook a realignment of the peg from 1166 to 1182 dinar per USD on December 1, 2015 (see below)
  • CBI stands ready to provide foreign exchange at the official exchange rate plus commissions for permissible transactions through its daily allocations, establishing a peg...because certain transactions are excluded from access to the CBI auctions, many transactions take place at parallel market exchange rates (see below)
  • Iraq continues.. [to] maintain one exchange restriction and one multiple currency practice (MCP) subject to Fund approval under Article VIII, Sections 2(a) and 3 (see below)
  • CBI stands ready to provide foreign exchange at the official exchange rate plus commissions for permissible transactions through its daily 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 average spread between the official and market rates was around 6 percent in June 2017.

  • In view of the difficulty to reduce to zero the obligations outstanding for more than three months to international oil companies (because of the lumpy size of oil shipments), the government proposes to raise the floor on these obligations to $500 million, starting in September 2017. (see below)

Dates of the Review

Third review of the Stand-By Arrangement  September 2017 March 2018 

Fourth review of the Stand-By Arrangement December 2017 June 2018

(These two reviews did not happen due to the election and the last statement put out by the IMF on this was dated Nov 17, 2017)

 

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                                  910.00

Stand-By               Feb 24, 2010                         Feb 23, 2013                              2,376.80                               1,069.56

Stand-By               Dec 19, 2007                        Mar 18, 2009                                  475.36                                      0.00

(Every time a disbursement happened there were outcries of a new loan to which I countered was part of the SBA)

 

Exchange Arrangement

Iraq’s de jure and de facto exchange rate arrangements are classified as a conventional peg arrangement. The Central Bank Law provides the Board of the CBI with power to formulate exchange rate policy. The CBI Board undertook a realignment of the peg from 1166 to 1182 dinar per USD on December 1, 2015, unifying the effective rates applicable to cash sales and transfers at 1190 including the central bank commission. The CBI stands ready to provide foreign exchange at the official exchange rate plus commissions for permissible transactions through its daily 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. Until March 2016, the CBI published 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 exchange restriction and one multiple currency practice (MCP) subject to Fund approval under Article VIII, Sections 2(a) and 3.

 

The exchange restriction arises from an Iraqi balance owed to Jordan under an inoperative bilateral payments agreement.

 

The MCP arises from the official action to limit the purchase of foreign exchange, with no mechanism to ensure that exchange rates in the official and parallel markets do not deviate from IRAQ 4 INTERNATIONAL MONETARY FUND each other by more than 2 percent. The average spread between the official and market rates was around 6 percent in June 2017.

 

In addition, to the extent the authorities maintain exchange restrictions imposed for security reasons, these should be notified to the IMF under the framework of Decision 144-(52/51). 


Issues with Monetary and Financial Statistics

 

The CBI reports monetary statistics for the central bank and other depository corporations (ODCs) for publication in the IMF’s International Financial Statistics (IFS), using the standardized report forms (SRFs). However, the quality and timeliness of the data continue to be hampered by the lack of staff capacity, particularly at the commercial bank level and source data quality. There are major inconsistencies between financial soundness indicators for deposit takers (state-owned and private banks combined) and SRF 2SR for ODCs, which are an indication of data quality problems. Per the CBI officials, all foreign-owned companies operating in Iraq are classified as nonresidents—a deviation from international standards regarding the application of the residence concept. In addition, monetary statistics do not cover the northern region (Kurdistan) due to problems with data collection. The publication of SRF data in IFS has been delayed, while the reporting of Fund accounts in the relevant statistics is still pending the authorities’ confirmation. A monetary and financial statistics mission is planned for FY17 to improve the compilation practice with focus on the account classification and the reporting of Fund accounts.

 

Excerpts of Statement by Mr. Hazem Beblawi, Executive Director for Iraq and Ms. Maya Choueiri, Senior Advisor to the Executive Director August 1, 2017

 

1. Since mid-2014, Iraq has been facing a double shock resulting from the so-called Islamic State of Iraq and Syria (ISIS) conflict and the sharp drop in global oil prices.

2. Against this background, in order to restore fiscal and external sustainability, the authorities have taken bold steps to put their public finances on a sustainable footing, while maintaining their commitment to the exchange rate peg, which continues to provide a key nominal anchor in an uncertain environment.

3. Despite these persistent efforts and encouraging developments, the Iraqi economy continues to face daunting challenges and risks, notably a further decline in oil prices, political and security instability, and considerable constraints in administrative capacity.

4. Real GDP growth remained strong in 2016, increasing by 11 percent, due to the increase in oil production resulting from past oil investment. Nonetheless, oil production is expected to contract in 2017 in line with the OPEC-agreed production cut.

5. In response to the fall in oil revenue, the authorities have implemented a large fiscal effort consolidation in 2014, with the aim to achieve debt sustainability.

6. The authorities will pursue their fiscal consolidation effort to bring spending in line with available resources.

7. Earlier this week, parliament approved a supplementary 2017 budget reducing total spending by 2 percent and introducing a credit allocation for repaying arrears incurred during previous years. In the 2018 budget, the government will prepare measures (to be finalized during the third review) to reduce the non-oil primary deficit on an accrual basis by ID 2.3 trillion (4.4 percent of non-oil GDP) compared to the draft supplementary budget for 2017. The authorities intend to strengthen revenue by (i) auditing the Development Fund for Iraq and Successor Account 300/600 at the CBI to check that all oil revenue reaches the treasury; (ii) preparing and sending to parliament a sales and excise tax law in line with Fund technical assistance (TA) recommendations (proposed SB for the third SBA review); and (iii) introducing changes in the Customs Code in line with Fund TA recommendations (also proposed SB for the third SBA review). The government will also continue ongoing work on reforming state-owned non-financial enterprises and the electricity sector, notably by increasing collection and reducing production costs and capturing flared gas to use it for electricity production.

8. Public financial management reforms continue to rank high on the authorities’ agenda. They have adopted tight procedures for the approval of state guarantees (prior action). They will improve Government Finance Statistics reporting in line with Fund TA recommendations. They will also carry out quarterly surveys of arrears and prepare plans for 3 their orderly payment, following an independent audit of domestic arrears by the Board of Supreme Audit. The government will also design and implement a commitment control system for budget execution, in line with IMF TA recommendations to avoid the emergence of new arrears. Future reforms will include gradually moving to a Treasury Single Account, designing and implementing an Integrated Financial Management Information System, implementing Public Investment Management reform, and strengthening Debt Management with TA support from the Japanese International Cooperation Agency.

 

Monetary, Exchange Rate and Financial Sector Policies and Reforms

 

9. The authorities remain committed to maintaining the peg to the U.S. dollar as the stability of the exchange rate continues to provide a key nominal anchor to the economy in an uncertain environment. They are working actively on removing remaining exchange restrictions and a multiple currency practice, in close cooperation with Fund staff.

 

10. The authorities are taking measures to enhance the stability of the banking sector. The audit of the financial statements of the two largest state-owned banks Rasheed and Rafidain will be completed by end-August 2017. (This was done.)Based on these audits, the Ministry of Finance will prepare a plan to restructure the two banks (This was done.), in cooperation with the World Bank. At the same time, the government is strengthening the legal framework of the CBI to provide for independent oversight, building on the December 2015 IMF safeguards assessment. The authorities will continue to implement reforms to strengthen the Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) framework. Following the adoption of an AML/CFT compliance mechanism in October 2016, the CBI and Iraqi Insurance Diwan will issue AML/CFT instructions for exchange and insurance companies, followed by guidance to all reporting entities covered by the AML/CFT Law regarding the implementation of preventive measures.

 

Performance Under the SBA

 

11. The government remains fully committed to the objectives of the program, notably gradually bringing expenditure down to a level consistent with the lower level of oil revenues to achieve debt sustainability while maintaining the exchange rate peg, strengthening public financial management and banking supervision, and fighting money laundering, the financing of terrorism, and corruption. The government will also ensure that social spending is protected.

 

12. As noted above, the PCs at end-December 2016 and one continuous PC under the SBA were missed because of the spending pressure flowing from the war against ISIS and the ensuing humanitarian crisis. These factors resulted in larger spending and lower external arrears payments than programmed for 2016. Considering the temporary nature of these arrears, and the steps to put the program back on track and improve cash management, the authorities request waivers for the non-observance of the continuous PC and one PC at end- 4 June 2017. They also request waivers of applicability for the four PCs at end-June 2017 for which complete information is not available yet. Notwithstanding a difficult environment and severe constraints, the authorities were able to preserve social spending above program floors by a significant margin.

 

13. Considerable progress was also made in meeting the structural benchmarks for the second review of the SBA, with ten out of twelve SBs met, while the remaining two are in progress. In particular, the authorities have completed essential SBs aimed at improving fiscal transparency, strengthening governance, enhancing debt management, improving cash management and fiscal transparency, strengthening safeguards assessments and the governance of the CBI, and improving the business environment, as detailed in the Memorandum of Economic and Financial Policies. In view of the difficulty to reduce to zero the obligations outstanding for more than three months to international oil companies (because of the lumpy size of oil shipments), the government proposes to raise the floor on these obligations to $500 million, starting in September 2017. 

 

 

Conclusion

 

15. Iraq continues to face particularly difficult times, and its economy remains under severe stress. In light of the performance under the SBA and the policies laid out in the MEFP, the authorities request the completion of the second review under the SBA and the purchase of the third tranche. The SBA continues to provide them with needed financial support and a valuable anchor during a period of considerable uncertainty. They are fully committed to implementing the SBA, although stable security conditions remain a prerequisite for the success of their policies. 

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Makes me wonder if these morons are not forming a complete government on purpose.  This way they can continue the auctions and steal more money.

 

If they form the full government, they might have to stop the auctions, stop the corruption, and RV the currency.

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7 minutes ago, Floridian said:

Makes me wonder if these morons are not forming a complete government on purpose.  This way they can continue the auctions and steal more money.

 

If they form the full government, they might have to stop the auctions, stop the corruption, and RV the currency.

You could be right Floridian, holding up all progress to fill their greedy pockets with money.  

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