Iraq: Letter of Intent to the UN

[RonSkilbeck]

* Iraq: Letter of Intent (LOI) sent to the IMF by the Authorities of Iraq

April 12th, 2011 11:10 am · Posted in NEWS (Iraq & World Currency)

Letter of Intent sent to the IMF by the authorities of Iraq*

Memorandum of Economic and Financial Policies by the authorities of Iraq*

Technical Memorandum of Understanding*

*Also included in Staff Report

http://www.imf.org/external/pubs/ft/scr/2011/cr1175.pdf

A 71 page read - I'm working through it now.

I didn't see this posted - brought it from another site

[jlldrs]

* Iraq: Letter of Intent (LOI) sent to the IMF by the Authorities of Iraq

April 12th, 2011 11:10 am · Posted in NEWS (Iraq & World Currency)

Letter of Intent sent to the IMF by the authorities of Iraq*

Memorandum of Economic and Financial Policies by the authorities of Iraq*

Technical Memorandum of Understanding*

*Also included in Staff Report

http://www.imf.org/external/pubs/ft/scr/2011/cr1175.pdf

A 71 page read - I'm working through it now.

I didn't see this posted - brought it from another site

Letter of Intent was on pages 28 to 30 for quick reference.

It was dated March 3, 2011. Some of the "gurus" said that it was only good for 1 month or until April 3, 2011 or it was no longer valid. That is one of the reasons there was so much chatter around this document in the month of March.

[dmama]

i tried reading it but my computer would not allow it can you please inform me on what it says

[RonSkilbeck]

Letter of Intent was on pages 28 to 30 for quick reference.

It was dated March 3, 2011. Some of the "gurus" said that it was only good for 1 month or until April 3, 2011 or it was no longer valid. That is one of the reasons there was so much chatter around this document in the month of March.

I remembered the one from last month before I brought this over here. Still working my way through it - and maybe I'm wrong, but I got the impression that this is the 2nd one submitted. That's why I'm reading through the entire document this time. This wan't to confirm or deny any of the information from a month ago - but to add more another piece to the puzzle.

[jlldrs]

I remembered the one from last month before I brought this over here. Still working my way through it - and maybe I'm wrong, but I got the impression that this is the 2nd one submitted. That's why I'm reading through the entire document this time. This wan't to confirm or deny any of the information from a month ago - but to add more another piece to the puzzle.

It very well could be, I know Frank was a big advocate of this letter throughout last month.

And by the way God Bless you for going through the entire document, that sounds like no fun to me!

[Pskspray]

The following I dragged over from the document.

It seems to me that there is no pressure to change the exchange rate policy. They want to keep it stable.

They are making progress. I believe in this investment and I will continue to invest more as I can afford it.

Page 10

15. The CBI will continue to aim at keeping inflation low, predominantly by

maintaining a stable exchange rate. The low level and the relative stability of inflation do

not suggest any significant over- or undervaluation of the Iraqi dinar. Also, a stable exchange

rate continues to provide a solid anchor for the public’s expectations in an otherwise highly

uncertain environment and in an economy with a very low level of financial intermediation.

Meanwhile, the CBI will continue to keep its policy interest rate positive in real terms. To

enhance mobilization of domestic financing, limitations on state-owned banks’ use of

government deposits for investing in Treasury bills have been reduced, while the pension fund

has also been allowed to invest in Treasury bills and to participate in auctions directly.

Page 14

24. Staff supports the CBI’s policy of managing the exchange rate of the Iraqi dinar

to keep inflation low. A stable exchange rate continues to provide a solid anchor for the

public’s expectations in an otherwise highly uncertain environment. Over time, rising oil

revenues could put upward pressure on the real exchange rate, which would warrant allowing

greater exchange rate flexibility. Staff also welcomes the authorities’ continued commitment

to safeguard the independence of the CBI, which is critical for maintaining confidence in the

Iraqi dinar.

Page 31

8. The CBI will continue to be independent in the pursuit of its policy objectives. The

CBI’s monetary and exchange rate policies will continue to be aimed at keeping inflation in

the low single digits and safeguarding international reserves. We believe that the policy of

maintaining a stable exchange rate continues to be appropriate, as it provides a solid anchor

for the public’s expectations in an otherwise uncertain environment and in an economy with a

still very low level of financial intermediation.

Page 43

3. For purposes of monitoring under the program, a program exchange rate will be

used. This program exchange rate will be set at ID 1,170 per U.S. dollar. The program

exchange rate will be used to convert into Iraqi dinars the U.S. dollar value of all CBI foreign

assets and liabilities denominated in U.S. dollars, as required. For CBI assets and liabilities

denominated in SDRs and in foreign currencies other than the U.S. dollar, they will be

converted in U.S. dollars at their respective SDR-exchange rates prevailing as of

December 31, 2010, as published on the IMF’s website.

IMF Section

IX. Exchange rate arrangement:

The Central Bank of Iraq has been conducting foreign exchange auction on a daily basis

since October 4, 2003. The central bank followed a policy of exchange rate stability which

has translated in a de facto peg of the exchange rate since early 2004. However, from

November 2006 until end 2008, the CBI allowed the exchange rate to gradually appreciate.

As a result, the exchange rate arrangement of Iraq was reclassified to the category of

crawling peg effective November 1, 2006. Since the start of 2009, the CBI returned to its

earlier policy of maintaining a stable dinar. Consequently, the exchange rate arrangement of

Iraq was reclassified effective January 1 2009 as a stabilized arrangement.

Statement by Mr. Shaalan on Iraq

Executive Board Meeting

March 18, 2011

5. Monetary policy. The Central Bank of Iraq (CBI) intends to maintain its present

monetary policy, which aims at keeping inflation in the single digits. The exchange rate

remains the CBI’s main policy instrument, given the very low level of financial

intermediation. The authorities remain committed to ensuring the independence of the CBI,

which they view as critical for maintaining confidence in the Iraqi dinar.

Final Page

Following the Executive Board’s discussion on Iraq, Mr. Naoyuki Shinohara, Deputy

Managing Director and Acting Chair, stated:

“Iraq has maintained macroeconomic stability under difficult external and internal

circumstances, while making efforts to rebuild key economic institutions. Inflation has

remained subdued, and the exchange rate has remained stable. The 2011 budget aims to

accelerate investment in public services and infrastructure, and accommodates higher social

safety net provisions to support those in need. Iraq’s rehabilitation needs remain large and the

higher investment spending is essential to help create a vibrant private sector that provides

employment opportunities for Iraq’s large labor force, thus helping to reduce poverty. At the

same time, a strong emphasis on ensuring the quality of public spending will be important.

“Decisive efforts to rebuild key economic institutions and improve governance will be

critical for private sector development. The formation of the new government and the

expected increase in oil production in the coming years offer an opportunity to do so while

maintaining macroeconomic stability. Further strengthening public financial management

encompasses the introduction of an automated financial management and information system

and improvements in cash management which would eventually culminate in the

establishment of a single treasury account. Establishing a framework for oil revenues to

succeed the Development Fund for Iraq should help ensure continued accountability and

transparency. In the financial sector, moving ahead with the financial and operational

restructuring of the two largest state-owned banks and enhancing the central bank’s

supervision capacity will contribute to creating a financial sector that can provide essential

services to the private sector.

“Iraq continues to make progress to conclude debt agreements and resolve outstanding claims

under terms comparable to the 2004 Paris Club Agreement.”