http://www.english.globalarabnetwork...ed-by-imf.html

Note: Understand in reading this, that this is someone’s opinion and that the document (Letter of Intent) is just that. It doesn’t mean that an loan was taken by the CBI form the IMF. If the Central Bank of Iraq had taken a loan from the IMF, that would be documented by the IMF on their website, and it would be posted throughout the media. This would then make the CBI obligated to not only pay back the loan, but would also allow the IMF to dictate or control the decision making process. But there still isn’t any documentation showing this.

The below news article is just showing the past, present and possible future goals and projections. It also shows what the CBI was planning to do as a back up plan if necessary. Read carefully.



Iraq completes three economic reform programs supported by IMF
MARCH 10, 2010 • POSTED IN

Since 2004, Iraq has successfully completed three economic reform programs supported by the International Monetary Fund (IMF): one under the Emergency Post Conflict Assistance (EPCA) facility and two (precautionary) Stand-By Arrangements (SBA). During this period, Iraq has made considerable progress under very difficult circumstances, including a very challenging security situation. Iraq has successfully reduced inflation, showed fiscal discipline, and started rebuilding our economic institutions. These achievements have helped us to obtain generous debt relief from Paris Club and other creditors that has substantially improved our external position.

Analysis: The following link (http://www.imf.org/external/np/dm/2004/101304.htm) is in reference to EPCA.
Please read the 7th paragraph before you continue! The paragraph starts as follows: “The IMF's Executive Board, on September 29, 2004, approved financial assistance to Iraq”. Doesn’t say that the government or CBI signed a loan agreement.



These hard-won gains of recent years could be undermined, however, by the large drop in oil prices from their peak levels of mid-2008. After reaching a high in July 2008, when Iraqi crude oil sold for $124 per barrel, prices fell to a low of $35 per barrel in January 2009, before slowly recovering to a level of around $68 per barrel in the second half of 2009. The average export price in 2009 was $57 per barrel, well below the average export price of $92 per barrel in 2008. In addition, due to dire infrastructural problems, the volume of oil exports in the early months of the year fell below 2008 levels (to 1.75 million barrels per day (mbpd) in the first five months). Iraq has been working to address these problems and oil exports reached 2 mbpd towards the end of 2009, bringing the average for the year to 1.88 mbpd.


As the proceeds from oil exports account for the bulk of our total export receipts, and for the majority of government revenues, the lower oil prices are posing considerable challenges to our internal and external economic stability. To maintain macroeconomic stability, and foster growth and employment, Iraq has adopted an economic adjustment program for 2010–11 for which it seek support from the IMF under a new 2-year SBA, as well as financial assistance from other international institutions and countries. This Memorandum of Economic and Financial Policies (MEFP) describes our economic objectives and policies, including the structural reforms, for this period.

IMF letter of Intent: http://www.imf.org/external/np/loi/2010/irq/020810.pdf from Mr. Baqir S. Jabr Al-Zubaydi (Minister of Finance of Iraq) & Dr. Sinan Al-Shabibi (Governor Central Bank of Iraq)
This pertains to the MEFP policy listed above.

Due to the temporary drop in oil production, real GDP growth is estimated to have slowed to 4 percent in 2009, from almost 10 percent in 2008. There are indications, however, that the improved security situation has supported economic activity in the non-oil sector. The Central Organization for Statistics and Information Technology (COSIT) estimates that real non-oil GDP grew by about 5½ percent in 2008 and that the pace of non-oil growth remained broadly unchanged in 2009.


The Central Bank of Iraq (CBI) has been successful in keeping inflation under control, by managing the exchange rate and by keeping the policy interest rate positive in real terms. When inflationary pressures emerged in 2008, the CBI stepped up the rate of appreciation of the dinar vis-à-vis the U.S. dollar (to about ½ percent per month until late 2008), which also helped counter dollarization. As a result, headline inflation fell to 6.8 percent by end-2008. Inflation remained well below the target of 6 percent in 2009, with prices falling by 4½ percent, mainly because of a further decline in fuel prices. Food price inflation has picked up more recently, however, and core inflation (excluding fuel and transportation) ended 2009 a 6 percent, down from 12 percent at end-2008.

With headline and core inflation low, the exchange rate has been stable since the beginning of 2009. The policy interest rate has been reduced gradually to 7 percent. Net international reserves increased to $50.2 billion at end-2008, but have fallen to $44 billion at end-2009, reflecting the drawdown of the government’s deposits with the CBI.


The government budget recorded a modest surplus in 2008 (almost 2 percent of GDP). Higher-than-expected oil revenues enabled us to increase spending. Particularly, and due also to our efforts to improve the execution of the investment budget, Iraq was able to substantially increase capital expenditures in 2008, compared to the previous year.


With the drop in oil prices, the external current account is estimated to have moved into a large deficit in 2009, of over 20 percent of GDP. And as oil revenues account for the bulk of government revenues, the government budget is also estimated to have shifted into a large deficit, of over 20 percent of GDP in 2009. The 2009 budget, which was adopted at a time when sharply lower oil revenues were expected, was designed to support as much as possible our investment program and the required security outlays, while containing current spending. The bombings of the Ministry of Finance in August and December of 2009, however, affected our capacity to fully execute our investment plans. Despite this, the 2009 budget deficit, based on preliminary financing data, is estimated to have recorded a deficit of over ID 17 trillion. This deficit was covered mainly by drawing down the balances the government had built up in the CBI and by mobilizing domestic resources through the issuance of Treasury bills.


The global financial and economic crisis has worsened Iraq’s external outlook significantly. The drop in oil export revenues, in particular, presents a major challenge in view of the country’s vast reconstruction and rehabilitation spending needs. Under these circumstances, Iraq is determined to strengthen fiscal discipline to better ensure that the reduced public resources are used more efficiently and that fiscal sustainability is preserved.