DFI - EXPIRED - IMF REPORT

by RELIX Thu May 23, 2013 4:32 pm

It appears the IMF is working to get the banks in shape and to
revitalize the economy. This cannot be done with an extinct currency.
This is from the IMF website and not some GOOROO non-sense.

http://www.imf.org/external/np/sec/pr/2013/pr1387.htm

IMF Mission Concludes Article IV Discussions with Iraq

Press Release No. 13/87
March 21, 2013
An International Monetary Fund (IMF) mission, led by Mr. Carlo
Sdralevich, met with an official Iraqi delegation headed by the Acting
Minister of Finance, Dr. Ali Al Shukri, in Amman, Jordan, during March
2-12, 2013 to conduct the Article IV Consultation discussion. The IMF
mission met with the Acting Minister of Finance, the Acting Governor of
the Central Bank of Iraq (CBI), head of the Board of Supreme Audit,
AbdulBasit Al Turki Said, and other Iraqi officials from the ministries
of finance, planning, and oil, and representatives from the Central Bank
and the Board of Supreme Audit. The team also met with representatives
from the Iraqi banking and business community.

At the conclusion of the mission, Mr. Sdralevich made the following statement:

“Following the recent expiration of the Stand-By Arrangement with
Iraq approved in 2010, the IMF is committed to continue close
collaboration with Iraq to support its development and help the
government improve the social conditions and employment opportunities of
Iraqi citizens.

“Despite a difficult security and political environment, Iraq managed
to maintain macroeconomic stability over the past two years. On the
back of rising oil production and robust non-oil activity, economic
growth has remained strong at about 8 percent in 2012. We expect
activity to accelerate further to 9 percent in 2013, as oil production
increases from just under 3 million barrels per day (mbpd) in 2012 to
3.3 mbpd in 2013. In 2012, inflation was contained at 6 percent, and we
project it to decline slightly next year. On account of strong oil
proceeds, CBI reserves reached US$70 billion at the end of 2012, while
the Development Fund for Iraq (DFI) rose to US$18 billion.

“While we welcome the achievement of a budget surplus of about 4
percent of GDP in 2012, largely due higher-than expected oil revenues,
the execution of the 2013 budget should be aligned with available
financing and provide for the accumulation of adequate fiscal buffers in
the DFI, which suggests to target a budget surplus in 2013. Public
financial management should be strengthened, notably by phasing out
off-budgetary spending practices and reliance on state-owned bank
financing to support public enterprises. Approval of additional spending
commitments during the fiscal year should also be avoided.

“Financial sector policies are improving, but more remains to be
done. The CBI’s ongoing efforts to refine monetary policy instruments,
strengthen banking supervision, and accelerate the restructuring of the
banking system are crucial. In this respect, the recent steps to clean
up the balance sheets of Rasheed and Rafidain in preparation for their
restructuring and recapitalization are key. The CBI should also take
measures to gradually liberalize the provision of foreign exchange
through its auctions, with the objective of avoiding in future the
turbulence experienced by the market in the past year.

“Iraq will need to address serious medium-term challenges in order to
be able to create the conditions for high and sustainable growth that
is necessary to improve the living standards of its people. The economy
continues to suffer from severe structural weaknesses such as a small
nonoil sector, high unemployment, public sector dominance, and a weak
business environment. In this context, we discussed the role of economic
policies in leveraging Iraq’s potential and creating an enabling
environment.

“With regard to the fiscal sector, the budget must be managed
carefully to maintain macroeconomic stability, meet Iraq’s large social
and investment needs while continuing to accumulate buffers to address
oil market volatility, and ensure medium-term fiscal sustainability. At
the same time, Iraq needs to strengthen fiscal institutions and public
financial management to make sure that the large oil revenues are used
effectively and transparently.

“Developing a stronger financial sector development will require
moving away from the current model in which weak state-owned banks
dominate the financial sector and enjoy favorable treatment vis-a-vis
private banks. A solid banking system that can support growth and
employment will require the full financial and operational restructuring
of state-owned banks and creating a level playing field for both
private and public banks.

“Finally, while oil-growth is projected to remain high over the
coming years, boosting non-oil private sector growth will need a
long-term government strategy centered on improving the business
environment and opening up opportunities for the private sector.”