The Iraqi government faced two major hurdles in August ?social unrest in Basra and an ongoing decline in the global oil market. However, new reports indicate that officials are starting to make headway resolving them. Political and economic stability should improve in Iraq if these problems are resolved by the end of the year.
Iraq News ? Baghdad Officials Push for Reforms in Basra
Iraqi Government Pursues Reforms in Basra
Problems in the province of Basra have created uncertainty for the rest of the country. Governor Majid al-Nasrawi faces the possibility of impeachment after a slew of corruption allegations were made against him. Nasrawi has responded to the accusations by insisting that the alleged improprieties are baseless and renewed his pledge to turn the province around.
The governor has stated that any problems impacting his province are due to years of mismanagement, which have been driven by outdated practices. He said that citizens of Basra will need to vote for new reforms if they hope to resolve these challenges. Nasrawi is also requesting additional assistance from the central government.
Part of the challenge that Basra faces is the burdensome regulations imposed by the central government. Baghdad recognizes their national policies don?t seem to be helping Basra, so they are considering easing some of them. The Independent High Electoral Commission recently announced that the citizens of Basra have collected 46,212 signatures for a petition to provide more autonomy to the region, which would mean that Basra officials could enact some of the policies needed to grow the economy and provide more relief to their citizens.
?The percentage required by law has been achieved,? wrote the HEC.
Nasrawi is likely to endorse any reforms that would give Basra more control over its future. He said that he has pursued long-term solutions over the immediate fixes brought by his predecessors, but will have more power to implement these changes if the central government backs down a little.
Abadi Proposes New Rules to Curtail Corruption
Corruption among government officials was a serious problem while former Prime Minister Maliki was in power. Abadi has introduced new reforms to mitigate corruption, but feels that additional measures are still needed. According to a review from Uticensis Risk Services, Abadi remains the only Shia leader to introduce a detailed plan to address the issue.
Abadi?s proposals have given the Shias more favorable attention in the media. His party will gain a stronger lead over the State of the Law party, which was formerly led by Maliki. While the proposals are helpful to his party, the country is the ultimate beneficiary of these changes. Reducing government corruption will unify Iraq and improve social sentiments, which are key to improving the long-term direction of the economy. The value of the Dinar will be affected if citizens are more confident in the role of their elected officials and government waste is reduced.
Oil and Energy ?Officials Wait for Oil Prices to Rebound
Falling oil prices have taken their toll on government revenues over the past year. The outlook for the coming year is still pessimistic, but officials are still confident that the long-term direction of the oil industry is positive. Higher oil production should offset declining prices for the foreseeable future.
Oil Prices May Start to Rebound in 2016
Oil is currently trading under $45 a gallon, which is less than half the value it was trading in 2010. Collapsing oil prices have reduced revenue for local oil producers and the central government as the decline has accelerated. Experts doubt they will make a solid recovery in the next year, but expect prices will at least start to rebound somewhat in 2016.
Oil Exports Should Rebound in September
According to the State Oil Marketing Organization, Iraqi oil exports dropped noticeably in August. A number of factors appear to have played a role, but one of the most profound was sabotage of a pipeline in Kurdistan.
Kurdish officials have stated that the setback has temporarily hampered the region?s ability to export oil to Turkey. They also announced that thieves on the other side of the Turkish border attempted to steal oil from the reservoirs. Nevertheless, KRG officials are confident that they will be able to improve security and will continue to directly export oil to their partners in Turkey.
A report from the KRG stated the region ?continued its direct oil sales in Ceyhan to compensate the Region for the budget shortfalls from the federal government in Baghdad and to continue to pay down debts accumulated in 2014 from pre-payments for direct oil sales.?
Exports also declined due to security challenges in Basra. However, Basra officials are also taking measures to address the problem, which should help elevate oil exports in the coming year.
The central government has been able to mitigate the effects of declining oil prices by boosting production over the past year. They appear confident that production will pick up again in the next couple of months, which will help lift government revenue.
Declining U.S. Output Likely a Boon for the Global Oil Industry
U.S. oil outputs are starting to fall. This is leading to speculation that the global oil supply is beginning to contract, which would create upward pressure on oil prices. This would be a boon for OPEC members, because they would probably be able to maintain output better than other nations.
Iraq in particular would benefit from lower oil exports from the United States, because they still have a strong supply of oil and are bound by more lenient restrictions from OPEC. Iraq is also discussing proposals to lift sanctions that limit its exports, which would allow the country to make up for reduced output from the U.S. and OPEC members.
Business and Foreign Investment ? Iraq Pursues New Trade Routes to Grow Local Trade
Improving trade with other regions remains one of the central government?s chief priorities. They have recently taken several initiatives to improve business activity throughout the country, including borrowing money from the Islamic Development Bank to finance some of their new endeavors.
New IDB Loan Will Increase Business Activity
The Iraqi Economy is seeking a $500 million loan from the Islamic Development Bank. An estimated $250 million of the loan will purportedly be used to build a new trade route with neighboring countries. Few details of the proposal have been released, but the new route is expected to boost business activity between Saudi Arabia, Iran and other neighboring countries. Improved trade relations with other Middle Eastern countries has boosted activity in Iraq as more countries launch startups or form partnerships with local businesses.
Baghdad hasn?t specified how it plans to spend the remaining half of the loan. Simon Kent of Iraq Business News speculates that the rest of the money will be used to fund the salaries of government employees and contractors that are currently working on ongoing infrastructural projects.
Foreign Direct Investment in Basra Improves
Both Baghdad and regional government officials have taken new measures to encourage foreign businesses to establish a presence in Iraq. A large number of businesses have signed contracts with the Kurdistan Regional Government over the past year. There are a number of reasons that this region has received the most interest:
- The KRG has reached a resolution with Baghdad over a dispute regarding taxation of local oil fields.
- Kurdistan has one of the fastest growing oil industries in the country, which is driving economic activity throughout the region.
- Kurdistan is gradually earning more freedom from the authority of the central government.
Kurdistan has led the way in foreign direct investment, but other provinces are starting to attract business as well. G4S Risk Management has recently signed a $187 million contract to provide security services for the Basra Bas Company. More businesses are likely to establish a presence in Basra in the coming year as some of the problems the province faces are addressed.
Economy ? Job Creation Efforts Extend to Remote Areas of Iraq
Job creation has remained one of the top priorities of the Abadi Administration. Since 2006, the joblessness had dropped sharply from its peak of 18%. However, the rate increased slightly to 16% last year. The higher unemployment rate is likely due largely to austerity measures the country had to implement over the past year. The central government is more committed to job growth as fears of economic stagnation start to abate.
While employment is fairly in Baghdad and other established regions, more remote areas of the country are facing more challenges. Citizens in Basra have staged protests over the past few years. They have previously stated that improving access to electricity was their chief priority, but have recently changed their emphasis to job creation. Improved employment in Basra and other could improve social sentiments throughout Iraq.
Baghdad has pledged to take necessary measures to stimulate job growth in the coming year. However, a large part of the job creation effort hinges on regional governments? efforts to improve economic activity. The problems in Basra stem largely from local shortcomings and would probably be best served through their own reforms rather than financing from the central government. Baghdad is likely to provide some resources, but may be more likely to help Basra and other remote provinces by responding to demands to remove corrupt or ineffectual government officials.
Dinar Value and Exchange Rate ? CBI Dismisses Rumors of Dinar Devaluation
Since recent economic and political reports have been mixed, experts have questioned the direction of the Buying Iraqi Dinar. However, the Central Bank of Iraq (CBI) has emphasized that it does not plan to devalue the currency in the months ahead. In fact, it is possible that the CBI will strengthen the currency, according to one official.
CBI Reluctant to Pursue Devaluation
The CBI has said that the risk of devaluation is minimal, in spite of the war with ISIS. CBI Governor Ali Mohsen Ismail said that the country has enough dinar reserves to maintain a decent pairing with the dollar. A small devaluation is possible if oil prices plunge further and the government struggles to raise the capital needed to finance the war against the Islamic State.
?There is no fear for the dinar,? said Ismail. ?If the pressure remains, we could marginally change the exchange rate to increase revenues of the finance ministry. This is just an option that needs to be carefully studied because we don?t want to give away what we have achieved in terms of the inflation rate, which is perfect now.?
Ismail?s comment indicates that the government wants to peg the value of the currency to the rate of inflation. There is a possibility that the dinar could be changed if aggregate demand causes inflation rates to rise in the future, but it is too early to be sure.
The governor?s announcement comes a month after Bloomberg analysts warned that declining dollar reserves could place added pressure on the dinar and force devaluation. The CBI report indicates that those fears may have been overblown.
Dinar May Rise With Other Developing Market Currency Pairs
While the CBI has dismissed rumors that it is going to devalue the national currency, other developing economies are likely to devalue their currency in the near future. The Chinese government has released a series of worrisome reports that foreshadow some serious economic concerns. The country?s central bank announced plans to devalue the yuan last month and have been under increased pressure to do so more rapidly as fears of economic stagnation rise.
Many experts suspect that the Saudi Arabian Monetary Agency (the central bank of Saudi Arabia), will start devaluing its currency in the near future amid reports that the economy is starting to slowdown. The SAMA has tentatively pledged to maintain currency prices for the foreseeable future, but their decision could also change if economic activity continues to atrophy.
If the CBI maintains currency prices while central banks of other developing nations start to devalue their currencies, then the value of the dinar may rise against them. However, it is still too early to gauge the direction of currency prices.
I have seen that you have written about the history of the Iraqi Dinar and Iraq?s Economy. I have been researching on the Iraqi Dinar and economic growth of the country. For the same reason of research, I have visited The World Bank website, to gather information. But now I found the data what I require already available here and is helpful to me. The information, here in this article, in combination with information available on The World Bank site, will help me in my research over the economic growth of the Iraq. I have gone through the different blogs of the website and found research based information, which I used to refer for the study of the changing pattern of the Iraq?s economy.
About Iraqi Dinar scam, banking.mt.govhad published this say, ?A Helena judge has issued a temporary restraining order against Richard Converse, a Great Falls tax practitioner, and his business, DC Tax Services, Inc., alleged to have operated a foreign currency scheme that involves 400 people – including 200 in Montana. Converse allegedly recruited people to invest in the Iraqi Dinar (Iraqi currency) and the Dong (Vietnamese currency) on the promise the foreign currency would soon soar in value. Victims were allegedly told they were buying the currency through a fictitious Bozeman bank (Victorious Financial Bank) with a situs in Belize and were asked to fill out paperwork imprinted with the name of Fidelity Investments.?
Investors paid him money allegedly with the belief they were buying the Vietnamese currency, called the Dong, and the currency of Iraq, called the Dinar. Both are worth very little. Investors buy into the currency program now with the promisethat both will soon be revalued and worth much more, making investors rich overnight.
Victims were allegedly told they were buying the currency through a bank and were asked to fill out detailed paperwork imprinted with the name of a reputable financial services firm, according to documents filed in the case. That paperwork asked for the victim?s name, date of birth, Social Security number and other personal information that could be used to steal the person?s identity. The form requested similar information for the victim?s beneficiary.
This really hurts that potential buyers of the currency and have a deep impact on the minds of the people that what they are doing they should look before they leap. Due to such type of scammy people, the investors not believing the reliable traders as well.
But What I think is we should think that all the people are not like this and always keep our eyes open so that we will not be forged.
Well what I think is something different about the Iraq?s economy and Iraqi Dinar value. I don?t know how the Basra reforms, Iraqi dinar value or ISIS are having any contribution in making the economy worse. What I feel is the oil that one must think of. Improper use of the reserve had laid the economic growth of the country. If you don?t believe that you can read the article on the Guardian. Her it is clearly mentioned by the author that the Iraq war was fought for the oil and not for anything else.
The Iraq War was only partly, however, about big profits for Anglo-American oil conglomerates – that would be a bonus (one which in the end has failed to materialize to the degree hoped for – not for want of trying though).
The real goal – as Greg Muttitt documented in his book Fuel on the Fire citing declassified Foreign Office files from 2003 onwards – was stabilizing global energy supplies as a whole by ensuring the free flow of Iraqi oil to world markets – benefits to US and UK companies constituted an important but secondary goal:
“The most important strategic interest lay in expanding global energy supplies, through foreign investment, in some of the world’s largest oil reserves ? in particular Iraq. This meshed neatly with the secondary aim of securing contracts for their companies. Note that the strategy documents released here tend to refer to ‘British and global energy supplies.’ British energy security is to be obtained by there being ample global supplies ? it is not about the specific flow.”
So this how it is clear that the war took place because of the oil and nothing else.
I was searching for the real reason why Iraq war had taken place, was it for the Iraqi currency (Iraqi dinar) or for the Iraqi oil reserves? While going through the proof mentioned on the debate.org, I came to know about the primary cause of the war was not Iraqi Dinar, but the oil of the country. In the proof it was written:
Bush decided to invade Iraq in April 2001, six months before September 11th, and the official reason was to improve Western access to Iraqi oil.
“President Bush’s Cabinet agreed in April 2001 that ‘Iraq remains
a destabilising influence to the flow of oil to international markets
from the Middle East’ and because this is an unacceptable risk to
the US ‘military intervention’ is necessary.”[1]
The decision for military action had nothing to do with 9/11, the war on terrorism, the UN weapons inspections, weapons of mass destruction, Iraqi human rights, or any of the factors that the US government would like you to believe are the true motives for war.
The only people who will benefit from the war on Iraq are the elite wealthy oil men who finance Bush’s election campaigns, and people like Bush who have huge personal investments in the oil industry. Oil company profits have already increased by fifty percent this year because of the war, and the invasion hasn’t even started yet!
“Profits in the fourth quarter soared 50% to $4.09bn (?2.5bn),
beating analyst expectations.”[2]
War-time propaganda tells you what you want to hear; that your politicians have noble motives for the war on Iraq.
So it was clear that the war was specifically for oil only.
Since 1990, there was a huge instability due to the occurrence of 21 destabilizing events in the middle east and that have affected the Iraqi Dinar with a decrease in the economic conditions. Even after such an instability the average oil price increased by 9.2%, which is a decent amount of increase, and as per my knowledge the Iraqi currency was revaluated. I have gone through the Forbes article based on the different conditions that have occurred and are occurring in Iraq. The article written by Mr. Bill Greiner tells a lot about how the Iraqi economy is getting down and what factors are responsible for it.
After reading the above article and the article from the Forbes, I came to one conclusion that all the destabilizing situations has created a situation of unrest in the people which ultimately leads to social and economic unrest in the Iraq?s factor for growth. The economy of the country rises when there are zero hurdles in the path of growth. I know there might be other issues as well but I think the primary cause of the instability is the people of the country, who are involved in the decision taking part of the country.
While I was searching for a suitable answer to my own questions I came across http://www.hks.harvard.edu/fs/jfrankel/What_to_do_with_Iraqs_Currency.pdf, where the initial few lines say:
Owing to instability in the region and the absence of credible institutions, the Iraqi dinar requires an anchor of substantial credibility. Some have proposed a rigid peg to the dollar, as via a currency board or outright dollarization. (E.g., Steve H. Hanke, ?An Iraq Currency Game Plan,? The International Economy, XVII, no. 3, Summer 2003, 81-83.) But this idea has major drawbacks. That it would mean giving up the ability to set monetary policy independently is not such a big cost, as few governments have been able to use such discretionary policy well anyway. But there are other big disadvantages.
There is no harm in buying Iraqi Dinar as I have read other articles on this website, I have seen it is safe to go for the Iraqi Currency. Even I have read about the different issues resolved while the transaction was carried out and is much faster as compare to other websites selling Foreign currency. I would appreciate the efforts of the blog writer who have shown the light of knowledge in the dark of myths.
Thank you.. and keep writing such wonder articles.