Wednesday, January 23, 2008

Good News from Iraq: 23 Jan 2008

From Iraq Updates, Iraqi economic growth to hit 7 pct. (via LWJ)

Iraq’s economy is on track to reach GDP growth rates in 2008 of 7 per cent, driven by oil price movements, economic reforms and surging foreign exchange reserves, said the International Monetary Fund (IMF) last week.

The upbeat assessment is based on a meeting convened in Washington between the IMF and the Iraqi Minister of Finance Jabr Al-Zubaydi, Governor of the Central Bank of Iraq (CBI) Al-Shabibi, Minister of Oil Al-Shahristani and other senior officials from their banking community.

According to the IMF, “The fiscal stance [in Iraq] was successful in containing current spending, but fell short in the implementation of the ambitious investment program, which, combined with the difficult security situation, prevented the envisaged expansion of oil output.

“Rising oil prices, however, more than offset the production shortfall, thus helping to preserve fiscal sustainability. High inflation was sharply reduced by appreciating the exchange rate, tightening monetary policy, and controlling current government spending.”

An unexpected bonus was the rapid jump in net international reserves to A$23 billion, which are expected to climb even further during the year as Iraqi authorities make provision for massive inward investment flows in this year’s budget.

Offsetting the 7 per cent GDP growth is inflation which is in two-digits. But it’s now falling due to improved capacity. Meanwhile their currency is currently loosely pegged to the greenback on a “crawling” basis, meaning that even in Iraq you are not safe from sub-prime contagion.

On the governance front, the Iraqi authorities are aiming to strengthen public financial management and central bank accounting frameworks while also restructuring two of largest public banks. Meanwhile improving oil sector oversight arrangements are also on the agenda, especially with oil production expected to jump to 2.2 million barrels per day. These governance reforms include re-establishing the Iraq National Oil Company and reorganising the Ministry of Oil.

But in one of the IMF’s more bizarre statements, they complained that, “there are some delays in data provision and weaknesses that hamper economic analysis.”