Thread: Iraq/Dinar News. 09/05 to 01/14/07

Yes, the forgiveness of foreign debt is great news for Iraq.

I'm just not so sure anymore if it's necessarily means good news is on the way for those of us holding dinars.

I have just finished reading a very long and detailed thread at IFF which has really deflated my excitement. In this thread someone obviously very knowledgable about finance, etc.,(and who was previously "gung-ho" about the dinar) offers his analysis as to why there won't be any kind of significant reval that will make us all rich and happy. His explanation centered around the lack of reserves (oil in the ground doesn't count) to back up the amount of currency that's in circulation...beyond the current value.

No one was able to refute his analysis... so far. Maybe someone will come along and do so, but there are some pretty intelligent people in there already.

Adster, I know you know what I'm talking about, because I saw that you posted a couple of times in that thread.

I hope this post doesn't make anyone angry...but since this thread is primarily so positve about our future, even our immediate future, I think everyone here needs to be aware that other strong opinions exist which are in the opposite direction.

Caroline

Originally Posted by Caroline

Yes, the forgiveness of foreign debt is great news for Iraq.

I'm just not so sure anymore if it's necessarily means good news is on the way for those of us holding dinars.

I have just finished reading a very long and detailed thread at IFF which has really deflated my excitement. In this thread someone obviously very knowledgable about finance, etc.,(and who was previously "gung-ho" about the dinar) offers his analysis as to why there won't be any kind of significant reval that will make us all rich and happy. His explanation centered around the lack of reserves (oil in the ground doesn't count) to back up the amount of currency that's in circulation...beyond the current value.

No one was able to refute his analysis... so far. Maybe someone will come along and do so, but there are some pretty intelligent people in there already.

Adster, I know you know what I'm talking about, because I saw that you posted a couple of times in that thread.

I hope this post doesn't make anyone angry...but since this thread is primarily so positve about our future, even our immediate future, I think everyone here needs to be aware that other strong opinions exist which are in the opposite direction.

Caroline

Was the thread from psychojerm? Very aptly named. He's been a naysayer from the start. Makes you wonder why he hasn't offloaded his stash.

This was always going to be a highly speculative investment. But to me, with all the research done it can only go one way. I don't believe for a minute Bush, Blair, the Paris Club members and other countries would have forgiven billions of debt if they knew they weren't going to get it back in time. Would the bank offer you a loan if they knew you had nothing but the shirt on your back? NO. Debt has been forgiven because of repayments via oil.....

With Iraq's supply of oil and natural gas, a lot of which has been undiscovered and still in the ground they can become one of the wealthiest countries in the world, no doubt about it.

As for backing the currency, noone truly knows how much in reserves they have at the CBI. Noone also knows how much would be cashed in when it does peg. You have to realise that if it pegged at say .32, you might cash in, but how many high flyers out there would buy up the dinar at that rate knowing further down the line it would go to a rate of 1 to 1, or higher? What you cash in will be bought up by the billions by bigger institutes. If they wanted to they could backstop speculators cashing in with their oil reserves but I don't see them doing this.

There is no way with the world watching over Iraq it can or will fail. Too many people involved and too much at stake. Yes, there are a lot of bright folk over on IIF that would also say it will revalue, and at a high rate.

Iraq NEEDS foreign money or they'll stay as they are and go nowhere. They need to import and export goods for the economy. How will they do this if their money has no value at all? Their whole country could be bought up by China or Iran if they do not revalue at a reasonable rate. Their own people can't afford to buy food for their family currently. A reval would stop that and kick start the economy by giving Iraqi's employment and allow them to start their own businesses. Even insurgencies would stop once money is put into pockets. Terrorists could be bought off instead of blowing themselves and others up.

Checkout the rates above, and that was only 3 years ago. It will happen again, and soon IMO. Too many good things happening, meetings etc for it to remain as it is. Iraq needs the world and the world needs Iraq.

Yes, I was talking about the posts from psychoderm. I don't like his name, either, but I did find his very detailed posts to be convincing. Your arguments are also convincing.

I pray you are the one who is right.

Caroline

Originally Posted by Caroline

Yes, I was talking about the posts from psychoderm. I don't like his name, either, but I did find his very detailed posts to be convincing. Your arguments are also convincing.

I pray you are the one who is right.

Caroline

So do we all! He's one of a minority over there. They all take the mickey out of him, lol. Time will tell I guess. Happier knowing I've got them tucked away, would hate to look back if/when it hits thinking, 'why didn't I buy the ruddy things'!

I'm feeling good about it for sure.

Iraqi PM names defense, interior ministers
http://www.kurdmedia.com/news.asp?id=12398
5/18/2006 Xinhua

Iraqi PM, Nouri Al-maliki
The Iraqi state-run television reported today that prime minister-designate Nuri al-Maliki has named two men for the crucial ministries of defense and interior in the new government.

"The prime minister named Major General Baraa al-Rubaie (Sunni) for the defense minister and Nassir al-Amery (Shiite) for the interior minister," the Iraqiya TV reported.

The report said that Sunni Arab Salam al-Zowbaie from the Iraqi Consensus Front and Barham Salih from the Kurdish bloc were named as deputy prime ministers.

On Wednesday, a Sunni legislator said that al-Maliki will submit his new cabinet list to the parliament for approval on Saturday.

"The prime minister called on the parliament to convene Saturday to approve his government lineup and its political program," Hussein al-Falluji from the Iraqi Consensus Front told Xinhua.

The Sunni Arab bloc threatened to withdraw from the political process if it failed to get the defense portfolio.

"We have informed the incoming prime minister that if we don't get the defense minister, we will withdraw from the political process," Falluji said.

Maliki, from the dominant Shiite United Iraqi Alliance, was nominated as premier last month.
Under the constitution, he has to form the cabinet before May 21.

But disputes over key posts delayed the formation of Iraq's first full-term government since the US-led invasion toppled Saddam Hussein in 2003.

Coming back to what Caroline said above, been having a good old think about it.

I think too many are looking at Iraq from the wrong perspective. Think of Iraqs currency as being in a probational value phase. The money they have in circulation will remain in circulation and is the official currency, however, the value is not what it should be. The EPCA literally holds the exchange rate at 1460(ish) with the USD. That will continue until the IMF releases Iraq from that obligation which should occur once a permanent recognized government is in place...does this weekend sound good for you . Iraqs currency although bound by the EPCA is being managed but unlike Kuwait, Suadi Arabia, et.al., the NID is not valued against its main natural resource...oil. All petroleum sales including oil must go into the DFI. Once this is released to the new government they can once again properly assess the exchange rate using oil to back the currency. I think we are mis-interpreting the word revalue, when in actuality the dinar, once the IMF programs are released, would not revalue but rather return to its true value or dejure value as it were (which in effect is a revalue). What you see happening financially has never been done on this scale so all previous scenarios all not applicable.

Interesting, Adster.

Please keep your thoughts coming. I'm really trying to be open-minded and realistic about this whole thing.

I would be very interested in hearing your views and/or Mike's on what psychojerm said in IFF in posts # 257 and #264 in the thread "Don't Waste Your Money on the Dinar."

Thanks.

Caroline

Originally Posted by Caroline

Interesting, Adster.

Please keep your thoughts coming. I'm really trying to be open-minded and realistic about this whole thing.

I would be very interested in hearing your views and/or Mike's on what psychojerm said in IFF in posts # 257 and #264 in the thread "Don't Waste Your Money on the Dinar."

Thanks.

Caroline

Interesting,

As Adam so stated, psycho is just what his name applies, way out there beyond reason, and having read his opinions, he sounds knowledgable on subject of currency, he does'nt know anymore than the rest of the people posting over there, and yes, as Adam pointed out, there are some sharp people on forum.

What it all comes down to is simple economics. Take away the terrorists and you have a country pumping out 5M a day in oil. Sadly, this is not the case at the moment, but will be in time, and that is just scratching the surface of potential oil revenues in time.

Many try to say oil is the only thing backing Iraq, but not so, and the forgiven debt is like money in the bank, as this adds to the value of technical reserves needed to back currency. It is not a dollar to dollar formula, but oil is only one small aspect of a countries total net worth. Agriculture will be a huge asset for country and will be more imortant than oil for Iraq as it will be one of Iraq's largest export markets, and eveyone has to eat. There are so many things that go into a countries economics that most overlook them seeing only oil, and reserves are part of the equation, not just what is pumped now.

As we have all learned with PIPS, there will always be naysayers on every subject, and every forum has them, as we well know. I value the opinion of all, but psycho is not looking at the whole picture, just a small part, oil. The economy is booming in Iraq even with terrorist bombings, so imagine when they fade away as Iraq starts to spread the wealth around among its people. Wealth can take the anger out of any society when spread around fairly. These suicide bombers are blowing themselves up because their families are getting paid off. Do you really think these killers are doing it for religious reasons? Martarism, that is a crock of crap. It is all about money, always has been, always will be, so don't worry, peg will happen soon, in fact, I heard it already is set. LOL

Good luck to all, Mike

Thanks, Mike, for your comments, but in the posts I referenced above by psychojerm, he's talking about the difference between forex trading platforms and interbank trading.

Caroline

How bout this? This is the best bit......

With the advent of a permanent Iraqi government, the Bank sees opportunities for increased stability, more fruitful cooperation, and enhanced program effectiveness that warrant a further incremental strengthening of the Bank’s presence in Iraq.




World Bank To Strengthen Existing Presence In Iraq
News Release No:2006/412/MNA

Contacts:
In Washington: Amy Stilwell (202) 458-4906

[email protected]



WASHINGTON, May 16, 2006 – At an informal meeting of the Executive Directors today, Joseph Saba, Country Director of the Middle East Department, briefed the Board on the status of the Bank's work program in Iraq and explained the intention of the World Bank’s Middle East Region to strengthen its existing presence in Iraq, timed with the advent of a new Iraqi full-term government. The following is his full statement:



Informal Briefing on Iraq

Joseph Saba, Country Director

Middle East Department

Middle East and North Africa Region

May 16, 2006



Mr. Chairman and Members of the Board,

During the last eight months, the World Bank has made progress in implementing its Second Interim Strategy Note for Iraq, which was discussed by Executive Directors on September 15, 2005. Iraq has also witnessed historic political developments, namely the approval through public referendum of a constitution and national elections under the constitution for a full-term government. Iraq’s Prime Minister-designate is now in the process of selecting a cabinet. At this important time in the political process, I would like to provide an update on the status of our program in Iraq and our plans to strengthen our support for the new government and donors.

Update on World Bank Work Program

As you recall, the Second Interim Strategy Note’s overarching objective is to help Iraq develop institutional frameworks, policies, and systems for more effective, accountable, and transparent use of Iraq’s resources. To achieve this, it provides a framework for expanded analytical and advisory activities, additional Iraq Trust Fund resources, and up to US$500 million in IDA lending. I will provide an update on our progress in all three areas.

The Bank’s analytical and advisory activities—capacity building, policy advice, and economic and sector work—are a key vehicle for supporting the government’s transition to more efficient and accountable systems of governance and resource allocation. Despite the interim nature of the current government, the Bank has deepened its policy dialogue. Drawing on the accumulated knowledge of the last three years and in daily consultation with Iraqi officials, the Bank is finalizing a briefing book for the incoming government on core reforms, giving priority to strengthening governance and institutions, modernizing social safety nets, and accelerating economic reforms.

Projects financed by the World Bank Iraq Trust Fund (ITF) within the International Reconstruction Fund Facility for Iraq (IRFFI) continue to advance, financing improvements to education, health services, irrigation and drainage, and water supply and sanitation. An Emergency Disabilities Project (US$19.5 million) was approved in late 2005. In total, the ITF has now financed ten emergency projects amounting to about US$385 million, of which eight projects, amounting to US$375 million (97% of the total), are implemented directly by Iraqi governmental authorities. Disbursements stand at about US$55 million, which is nearly double the level of September 2005 although still disappointingly low. Importantly, the pace of contracting has accelerated over the past eight months as Iraqi capacity to meet Bank standards for subproject design, tendering, and contracting has strengthened. About 46% of ITF grant monies, valued at more than US$172 million, have been tendered or contracted. Over US$90 million of contracts have been awarded or completed. Next week, on May 24, the Bank and UN will brief IRFFI donors in Amman, Jordan, on the status of the IRFFI program. The Bank and UN will also propose to extend the IRFFI termination date from the end of 2007 to the end of 2010 to accommodate new projects and new government priorities.

The Bank has worked closely with government counterparts to prepare projects to be financed from the International Development Association (IDA). Executive Directors approved the first IDA-financed project—the Third Emergency Education Project (US$100 million)—in November 2005. An Emergency Road Rehabilitation Project (US$135 million) was negotiated in February 2006 and will be submitted to Executive Directors as soon as we receive reconfirmation from the new government. Projects are also under preparation to support rehabilitation of electricity and water supply and sanitation.

The International Finance Corporation (IFC) has also advanced its work. In March 2006, IFC invested US$98 million in a cement plant in northern Iraq. IFC is also supervising investments made in 2005 to two Iraq Banks, and is looking into a third banking investment, all focusing on expanding financing to SMEs. Technical assistance through the donor-funded Iraq Small Business Financing Fund Facility and PEP-MENA is building financial sector capacity. Also, PEP-MENA is collaborating with the Bank on a Housing Construction Sector Study.

Looking Forward

With the advent of a permanent Iraqi government, the Bank sees opportunities for increased stability, more fruitful cooperation, and enhanced program effectiveness that warrant a further incremental strengthening of the Bank’s presence in Iraq. As you know, the Bank’s operational work in Iraq has relied until now on a growing cadre of professional Iraqi staff based in Iraq, regular meetings with Iraqis outside of Iraq, use of the Bank’s videoconferencing facilities in Baghdad, and close support from the Interim Office for Iraq in Amman. An international consultant contracted through DFID has helped represent the Bank in the International Zone and has been working out of space provided by the Ministry of Planning. It is this space we plan to upgrade and use.

For maximum program flexibility and responsiveness in a complex and changing environment, and based on the results of two security missions to Iraq, the Region will recruit a volunteer to serve as Iraq Country Director based in the International Zone in Baghdad. If our assessment changes, the Country Director could be based in a neighboring country, rotating frequently into Iraq. Given the transition in Iraq and the growing World Bank role, a field-based Country Director would better manage and strengthen the Bank’s overall country relationship and take the lead in developing flexible and innovative ways of working in Iraq at different levels of government and more broadly with civil society. The Country Director would also take a leading role in donor coordination and harmonization. Strengthening the Bank’s physical presence in Iraq at this juncture is also consistent with the actions of the Bank’s development partners.

The Country Director would be supported in the International Zone by at least one and, depending on need, cost, and availability, up to three internationally-recruited staff or consultants and additional Iraqi staff to be identified. All international staff to be based inside Iraq will do so only on a voluntary basis. Bank staff in the International Zone would operate out of secure premises first identified during a security mission in August 2005. The Iraqi Ministry of Planning and the Ministry of Finance have offices in the same building. Mission travel to Iraq would be in accordance with strict limits set by Bank security. All security within Iraq, including for occasional controlled visits outside the International Zone, would be provided by a dedicated security support team from a security contractor.

Given the security situation outside of the International Zone, the Bank would continue to rely mainly on Iraqi staff and consultants, who operate in a low-profile manner out of their homes and government ministries, for supporting project implementation and undertaking project supervision. We anticipate adding Iraqi professional and support staff in other locations in Iraq to enhance work at the local level. Overall, the strengthened country presence would enable the Bank to substantially deepen its policy dialogue with the new government, allowing the Bank to play a more central role in improving donor coordination and enabling a stronger focus on public sector governance and other core reform areas outlined in the Bank’s briefing book for the new government.