STATUS OF THE RV
Do you believe that its almost mid-June already? So, the hot news this period is GOLD. Is Iraq going to back their dinar with gold? I have many people asking me this question. So, I decided to ask my CBI contact on my Wednesday call to Iraq and I was told that YES, the dinar will be backed by gold. Or more like they told me it is being NOW being backed by gold. It is a process to get there. They are moving quickly in this process.Choo-Choo!!!
😊 What more GOLD?
Then because of a negative article this period on this subject of gold, of citizens purchasing gold and keeping this money out of the banking system, I asked if this was harmful and could it negatively impact their effort to revive the banking sector. I was told it was not an major issue as they are tracking the notes and dollars as they are used to buy gold. To buy large sums of gold they must go to special dealer that is registered to sell. Petty jewelry sales will not impact. They are watching large buyers. Also I was told that they may place a limit on personal gold possessions. This also by itself confirms that the dinar is going to be backed by gold soon.
What else is of importance in the news?
😊 Stock exchange and Securities
Today, Wednesday, the Iraqi Securities Commission announced the signing of an agreement with the International Finance Corporation (IFC), affiliated with the World Bank. Al-Youm Al-Akhbariya said and I quote- “We continue our efforts aimed at incorporating good international practices in developing the performance and effectiveness of the Iraq Stock Exchange and other activities related to securities.” Wow! Just read the Pillars of Financial Reform. Here we go again more of it. They are attacking all these sectors.
😊 Diversification of Revenues
Specialists in economic affairs called for the necessity of working to enhance non-oil revenues and reduce dependence on oil in a manner consistent with economic reforms. The specialist in economic affairs, Dr. Ahmed Al-Rawi, explained oil because of its international and strategic importance, oil is considered a causal commodity.” For economic activity or even influencing political decisions it has become necessary to take practical measures regarding reconsidering revenues away from rentier expectations of oil alone and raising all forms of unnecessary revenues for public expenditures.
Activating non-oil revenue systems, such as the system of taxes and public fees, and revitalizing economic sectors so that the economy becomes capable of providing revenues for the budget as job opportunities for the young workforce and diversifying incomes, as well as developing nonoil production.
We already knew this is the path that Iraq is taking and so this news should not be a shock to anyone reading my newsletter. Over the course of months we read article after article telling us of this diversification strategy.
😊 Sovereign Wealth Fund (SWF) an unusual idea?
Then also in the news the economic and financial advisor to the Prime Minister, Mazhar Muhammad Saleh, proposed an “unusual” idea to establish a sovereign wealth fund. Unusual idea? Really? Whoever wrote this article is not telling the entire story. Just months ago, we read an article telling us this was the plan. So, the plan to establish the fund is not new and is already in the making. So, today let’s us instead learn about what they propose to do and why. Why will this fund be so important to Iraq?
Saleh said {to Al-Furat News} that: “The SWF sovereign wealth funds, which Kuwait started with the Generations Fund since the 1950s, were followed by surplus countries exporting raw materials in general and oil in particular, on the basis of diversifying the investment of those financial surpluses in financial and real investment opportunities in major economies.” Outside their countries through a fund called the Sovereign Wealth Fund (SWF) whose function is to manage the investment of surpluses in financial and real assets outside their countries, and the reason is due to an issue called “weak absorption capacity.”
He explained, “that is, the weakness of the ability to convert those surplus savings from revenues from exporting natural resources into investments within the state itself due to many internal structural factors. Those revenues from exports are immediately invested in operations within the economy, noting that those surpluses are capital assets that can be reinvested and generate value-added chains that multiply the national income of their countries many times over.
So, in other words what Saleh proposed in establishing the SWF is to invest the surplus revenues and not just piss them away on projects. Instead, if you invest this revenue you can multiply the money many times over and then just draw from the fund to meet deficits when needed. The principle in the fund always exists and is there also in times of dire emergencies. Unlike the CBI reserves that are mandated by the IMF to cover the government expenses in time of emergencies, the SWF is more flexible and gives an additional pad of money for stability and security. This fund will also cut down the reliance on oil revenue and help them move more quickly out of the rentier economy WOW!
😊 Is the parallel market now under control?
In recent news I showed you articles on the departure of the UNAMI mission from Iraq. They told us it would not fully conclude until the end of 2025. But already just the news of it gave a feeling of relief and renewal that Baghdad will emerge from international guardianship, and this strengthened the confidence in the Iraqi dinar. It’s called “perception”. Get it? Investors invest on perception and research for their speculative investments. In addition to the policies of the Central Bank having an impact too on the dinar, but the dollar will remain within a safe range from the dinar. There will be some difficult changes that that Iraq must go through in the coming months but the groundwork has been laid.
It was pointed out in the article, and I quote from it – “that Iraq is currently led by a services government and it seeks, according to economic paths, to build paths that contribute to financial stability in the private sector,” noting that “parallel market prices are not worrying, and their variables will remain within a slight range.” To me this sounds like they have the parallel market under control and that is what matters. Yes, we still see fluctuations but what is the average that matters. Is it now stable for the most part? The CBI tells us it is.
Yes, “the writing is on the wall” now as this is the BEST news of this period of my Newsletter as observers and specialists in political affairs expressed their optimism about Iraq’s exit from the list of “high-risk countries” that was officially announced by the International Task Force (FATF) last week. I quote from the article – “noting that the international declaration represents an important step in the correct path that the Sudanese government is taking in achieving reforms. Financial and economic along with political stability.” Iraq’s exit from the list of high-risk countries could not get any better. They are slowly clearing the way to the reinstatement, one obstacle at a time. This is yet another stop on our choo choo train that needed to be released. They were not about to release the currency back to FOREX with this in place. Get it? So this is all WOW! WOW! WOW! news for us today.
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