Prime Minister Haider al-Abadi has made enacting new reforms the cornerstone of his platform since assuming office. He has recently tried to enact a series of new policies via executive orders, but Parliament blocked his efforts, stating that he will need their approval to proceed.
Despite the setback, Abadi is intent on advancing his reforms, which should ease concerns in the region. He is expected to work closely with Parliament to introduce new solutions to curb corruption, modernize infrastructure and stimulate the economy. Iraq is also making significant progress on multiple other fronts, which should affect the value of the Dinar in 2016.
Iraq News ? Russia Expected to Extend Support in Campaign Against ISIS
A number of new changes are impacting the social and economic direction of Iraq. The economy is expected to rise as the government unveils new initiatives, global oil prices continue to rebound and progress is made in the campaign against ISIS.
Vladmir Putin Announces Plans to Attack ISIS
Russian President Vladmir Putin had previously pledged to offer aid to Iraq in its fight to quash militant resistance of the Islamic State of Iraq and Syria. He was been hesitant to follow through on these promises, but recently renewed his commitment after a Russian plane was allegedly taken out by ISIS terrorists. Russia has responded by sending 4,000 troops and missile systems to Syria in retaliation.
“We have calculated all possible threats. We have sent not only fighter jets, bombers and helicopters, but also missile systems,” stated Colonel General Viktor Bondarev, head of the Russian air force.
Russian support is expected to reduce the costs the Iraqi government has faced fighting the insurgents. It will also weaken resistance, thereby enabling the government to reclaim captured territories.
Abadi Targets Corruption
Corruption was a major cause for concern while Abadi?s predecessor was in office. A couple members of the former Maliki Administration have been indicted on corruption charges. The most recent was former environment minister Sargon Lazar Slewa, who was sentenced to two years in prison by a Baghdad court on Thursday. The details of the case have yet to be released, but the conviction illustrates the central government?s dedication towards ending official corruption.
Oil and Energy ? Central Government Intends to Retain Hold of KRG Oil
The oil industry faced a number of woes over the past year, which took their toll on the central budget. Those problems have been largely resolved, which is encouraging for the economy and the Dinar.
Norwegian Firm Boosts Production in Tawke
DNO ASA, a leading oil and gas producer from Norway, established a presence in Tawke. The company has played an important role in boosting oil production in the region. According to the company?s third quarter report, they produced an average of 152,507 barrels a day. The report indicates that production has risen by 30% over the past year.
Bijan Mossavar-Rahmani, the Chairman of DNO, said that production is projected to rise further in the coming months. He was far more pessimistic earlier in the year, but feels that most of the problems are being resolved.
?With the worst of the oil price crisis behind us, we have sharpened our focus on monetizing our share of Tawke production, including exploring new marketing arrangements,? Mossavar-Rahmani announced. ??Regular export payments and a timetable for recovery of around USD 1 billion in Kurdistan receivables are key to resuming Tawke investment necessary to reverse natural field decline and sustain production.?
Resolution With KRG Will Improve Outlook for Oil Producers
Maintaining the support of Kurdistan has been one of the biggest challenges the central government has faced over the past year. The Kurdistan Regional Government (KRG) has been trying to secede from Iraq, which would remove a large share of the Iraqi oil industry.
However, Baghdad doubts that the KRG will follow through on its plans to leave Iraq. They are trying to negotiate a new arrangement that would convince the region to remain a part of the union.
Iraqi speaker of Parliament Salim Al Jabouri and former KRG prime minister Barham Salih recently held a meeting to discuss some new proposals that would address any of the lingering concerns that the KRG has raised. Jabouri is confident that they can strike a resolution, which is increasing the likelihood that Kurdistan will reconsider its efforts to secede. Progress in these discussions is easing concerns that Iraq would lose a viable source of oil revenue, which is improving the outlook for the economy and the Dinar.
Suppression of Organized Crime Becomes Focus for Oil Industry
The oil industry has faced some challenges in recent months. The biggest obstacle has been dealing with declining oil prices, which forced oil producers to scale output to meet revenue targets. Oil prices have started to rebound over the past couple of weeks, but other concerns have come to light that oil producers and government officials will need to contend with.
Organized crime influence over the oil industry is among the growing problems that need to be addressed. The Minister of Oil was recently captured by a militant group with an unknown affiliation. He was rescued by the Ministry of Security, but the concerns still persist. Some of the groups involved in kidnappings are powerful Shiites that play an important role in deterring ISIS.
Abadi has acknowledged the ongoing problems that the criminal elements have created. He has stated that the central government will be taking new steps to limit influence from militants, regardless of their affiliation.
Business and Foreign Investment ? Vehicle Manufacturers Expand Presence in Iraq
Iraq has attracted a number of Western companies over the past two years. The country is also becoming a prime destination for other Middle Eastern firms. The regional economy will expand as Iran and other countries increase their foreign direct investment.
Iran Khodro Increases Production in Iraq
Khodro is an Iranian automobile manufacturer that recently established a presence in Iraq. The company has found that the investment has been very worthwhile and is trying to increase its share of the Iraqi automobile market. Saeed Tafazzoli, CEO for Export, said that its partners in Iraq have elected to use Khodro for most of their production needs.
?IKCO?s rivals have failed to grab the attentions of Iraqi people over the past years and that?s why Iraq?s Iskandariya site has decided to lower their production levels and allocate most of its production lines to IKCO?s vehicles,? Tafazzoli stated.
IKCO?s decision to expand in Iraq proves that the market is becoming increasingly competitive. They anticipate that profitability will continue to rise as the demand for vehicles rises.
Asian Oilfield Services Collaborates With KRG
Kurdistan is one of the fastest growing economies in Iraq and intends to build momentum by modernizing their infrastructure. They are going to increase efficiency by leveraging global industry experts.
The KRG has been collaborating with foreign consulting companies to improve production in various businesses. They recently commissioned Asian Oilfield Services Ltd to conduct a 3D seismic survey for Gazprom, the region?s largest natural gas extraction company. The Dubai based company surveyed fields covering 100 square kilometers and presented their findings to KRG officials.
The KRG is likely to retain Asian Oilfield Services for future services as well. They are confident that the research will prove invaluable as they strive to locate new oil and gas reserves throughout the region.
Economy ? Iraq Rises in Global Prosperity Index
Iraq is quickly putting its lackluster year behind it. Oil prices are beginning to recover, which bodes well for the central government. There are other indicators that the economy is improving, which will inevitably affect the value of the Dinar.
Iraq Rises in Global Prosperity Index
Legatum Institute conducts an annual analysis of 142 different countries and ranks them by their levels of prosperity. According to their recent global prosperity index, Iraq rose among other countries. They are currently ranking 123rd, which is a five spot increase from the previous year.
The report breaks up the index into several factors. Iraq actually ranks near the median of other polled countries in terms of economic performance. The Legatum Institute report shows the country is ranking 81st on the Economy sub-index.
The reason that Iraq didn?t rise higher in the prosperity index is that it still faces serious security challenges with the ongoing fight against ISIS. The country is only ranking 135th on the Safety and Security sub-index, but this rating could improve in the 2016 report as the central government makes strides in the war against the militants.
Dinar Value and Exchange Rate ? Trading Remains Stable
A couple of weeks ago, the outlook for the Iraqi Dinar had been relatively neutral. However, recent trends appear to have stabilized the value of the currency, which is encouraging for Dinar traders.
Value Rises Sharply
The value of the Dinar had plummeted in September, but has since made a sharp recovery. Data from Xe.com shows that the Dinar is currently trading at its highest value in over a year.
There could be a number of factors driving the change. Rising oil prices may be one of the primary reasons the currency is gaining value. Prices recently reached $50 a barrel, which is much higher than the prices they were trading at in the summer. Some experts believe that oil prices will never return to $100 a barrel, but they are still confident that the market will continue the rebound.
Gradual progress in the war against ISIS could also be driving demand for the Dinar. Currency traders are probably becoming more optimistic that the economy will rebound as Iraq regains territories and can boost oil production without fearing attacks from militants. Foreign direct investment is probably also on the rise as more firms feel that the threat of ISIS is starting to subside.
Currency Stabilizing After New Reforms
During the first half of the year, the Dinar traded erratically after new changes were put into place. According to Mark DeWeaver of Iraq Business News, the currency value declined 11.9% between January and June after new rules were put into place to limit money laundering. Attempts to improve the collection of custom taxes also caused the currency to decline earlier in the year.
DeWeaver and other currency experts originally feared that the currency value would free fall by the end of the year. However, the Dinar appears to have stabilized after the recent rise in prices. This appears to show that the monetary system has adapted to the new policies and the currency value will remain stable or continue to rise steadily in the coming months.
Currency Auction Reports Indicate Healthy Demand
Recent reports from the Central Bank of Iraq (CBI) show that the number of Dinars sold at currency auctions has remained steady in recent weeks. According to their November 5th report, 23 banks and 16 remittance companies participated in the most recent currency auction. These financial institutions purchased $178,835,000 worth of Dinars at a value of 1166 Iraqi Dinars (IQD) per dollar.
The transaction volume was slightly lower than a couple of the past few weeks, but still significantly higher than the reports from July. Transactions increased in August and have remained fixed since. ?The demand for dollar was ranging on today auction around the level of / 38 / million / 680 / thousand dollars which sold in cash,? the CBI stated in one of its August bulletins.
These reports indicate that banking activity remains steady, which is keeping the demand for the Dinar elevated. Rising Dinar values may be a precursor to higher levels of currency exchanges in the coming months.
Dinar May Benefit as CBI Issues New VISA Cards
The CBI has been taking steps to bring the Iraqi banking system into the 21st century. This will improve convenience for citizens that no longer need to hold large cash reserves. It could also have a significant impact on the value of the Dinar.
By enabling citizens to make purchases with electronic cards, the CBI is likely to increase consumer spending, which will stimulate local businesses. It could also increase money circulation, which would lift the value of the currency.
The CBI began issuing the VISA cards in August, but it may take a little while for consumers to become accustomed to using them. Therefore, it may take a few months for any benefits to become evident.
Even if the new cards don?t have a profound impact on the value of the Dinar, they indicate that the CBI is committed to improving the efficiency of the financial system for Iraqi citizens and businesses. Future developments are probably on the horizon, which will improve the value even further.
Knowledge is a powerful key to success. If you?d like to learn more about Iraq?s oil industry and what it means for the Dinar, just click below.
[title size="2" content_align="left" style_type="default"]Leave A Comment[/title]