The global company (Baker Hughes), a giant specialized in the field of oil and gas, revealed on Sunday, September 8, 2024) that it is putting “the final touches” to sign a strategic agreement with the Iraqi Ministry of Oil.
The Media Office of the Prime Minister, received by Baghdad Today, said that Al-Sudani received today, “the Chairman of the Board of Directors of Baker Hughes, which specializes in oil and gas, and its CEO Lorenzo Simonelli and his accompanying delegation, and confirmed that the company is one of the four largest companies in the world specializing in energy and oil services.”
Al-Sudani pointed out that “the government is keen on the presence of the company in Iraq, which was invited to expand investment in it, through cooperation with the government or with the private sector in the field of oil and gas, noting that the Iraqi market has become a promising market, and that the government is planning major projects, especially integrated projects in the oil, gas and petrochemical sectors.”
He pointed to “the development road, which includes oil and gas transmission projects,” stressing “the importance of completing the projects in which the company operates in Iraq, especially the Nasiriyah oil field, in which the company invests to extract associated gas, with a capacity of 200 million standard cubic feet, which is hoped to be completed in 2026.”
For his part, the delegation of Baker Hughes confirmed their commitment to the government and their desire to invest in Iraq in the oil or gas sectors, and that they came to finalize the signing of a strategic framework agreement with the Ministry of Oil, as well as signing a memorandum of understanding in the field of gas, and investing in the gas platform to be established in the large port of FAO, expressing their desire to finance some projects in Iraq.
Iraq plans to delay redenomination of the dinar due to unfavorable economic conditions, focusing instead on stabilizing the economy.
Highlights
🏦 Executive meetings planned with the CBI for new currency updates next week.
💰 Iraq has over 3 trillion dinars in circulation, highlighting currency volume.
🚫 Redenomination paused to avoid confusion among the public regarding currency value.
📉 Economic conditions influenced the government’s decision against cutting zeros.
🔄 Public sentiment is crucial; instability can lead to lack of trust in the currency.
📈 Focus is now on economic stability, growth, and job creation instead of immediate currency changes.
🤔 Future redenomination could simplify transactions if economic conditions improve.
Key Insights
🏦 Importance of Executive Decisions: Upcoming meetings with bank executives could set the stage for future currency changes, emphasizing the significance of coordinated financial governance.
💰 Volume of Currency in Circulation: With over 3 trillion dinars in circulation, any change to currency value must consider the vast impact on daily transactions and public perception.
🚫 Public Confusion Risk: Redenomination can create confusion, particularly in a cash-dominated economy like Iraq’s, where citizens are deeply accustomed to current denominations.
📉 Economic Dynamics Matter: The decision to halt redenomination reflects a cautious approach, recognizing that economic fluctuations, particularly in oil prices, impact currency stability.
🔄 Public Trust is Key: Maintaining public confidence in the currency is essential; any changes must be made with careful consideration of how they will be perceived by citizens.
📈 Focus on Stabilization: By prioritizing economic stability and growth over immediate changes to currency, the government seeks to create a more controlled environment for potential future reforms.
🤔 Future Opportunities: If conditions stabilize, a future redenomination could enhance transaction efficiency, showing a commitment to reform and economic resilience.
Central Bank of Iraq Unveils Banking Reform Roadmap Post-US Negotiations
In a significant development, the Central Bank of Iraq (CBI) has announced an ambitious roadmap for comprehensive banking reform following a series of negotiations with the US Treasury and the US Federal Reserve.
Reform Initiatives: A New Era for Iraq's Financial Sector
Electronic Platform for Foreign Transfers
The initial phase of reform involves the enhancement of the electronic platform for foreign transfers. This platform, implemented as an initial measure, aims to reorganize financial transfers, ensuring proactive control over them instead of reactive monitoring.
Direct Relationships with Correspondent Banks
The CBI plans to shift towards building direct relationships between Iraqi banks and foreign correspondent banks. This shift, mediated by an international auditing company, will involve pre-audit of transfers before execution by correspondent banks, marking a significant step towards greater financial transparency and efficiency.
Strengthening Iraq's Financial System
The reform aims to strengthen the stability, transparency, and efficiency of Iraq's foreign trade financing, with expected positive impacts on the exchange rate and overall financial system stability.
Expanding Correspondent Banking Network
Discussions also centered on expanding Iraq's network of correspondent banks and preparing domestic banks to meet international standards for opening accounts with global financial institutions.
The Broader Context: Iraq's Banking Sector
Dependency on Oil and Macroeconomic Challenges
Iraq, one of the world's most oil-dependent countries, faces macroeconomic volatility due to its heavy reliance on oil revenues. The country's banking and financial sector reforms are part of efforts to diversify the economy and modernize its financial systems amid political and economic challenges.
Unemployment and Economic Recovery
Unemployment remains a significant issue in Iraq, exacerbated by the economic impacts of the COVID-19 pandemic. However, the economy is gradually recovering, with both oil and non-oil sectors showing signs of growth.
Financial Reforms and Private Sector Development
The CBI's reform strategy is framed within a broader context of promoting private sector growth by facilitating access to bank credit for small, medium, and large enterprises. The goal is to strengthen the role of these enterprises in the Iraqi economy and bridge the gap between private sector financing demand and supply.
Conclusion: A Path to Stability and Growth
The Central Bank of Iraq's banking reform roadmap, initiated post-US negotiations, represents a pivotal moment in the country's efforts to modernize its financial sector, promote economic stability, and foster a more robust private sector. These reforms are crucial for Iraq's economic recovery and its transition towards a more diversified and resilient economy.
Central Bank of Iraq announces comprehensive banking reform map
After the Central Bank delegation returned from the last round of negotiations with the US Treasury and the US Federal Reserve, it revealed the roadmap for radical and comprehensive banking reform, which begins with working to cancel...
The electronic platform for foreign transfers, which was implemented as a first stage to reorganize financial transfers in a way that ensures proactive control over them instead of subsequent control. This was a temporary exceptional measure and a gradual shift was planned towards building direct relationships between banks in Iraq and foreign correspondent and approved banks, mediated by an international auditing company to conduct pre-audit of transfers before they are executed by correspondent banks.
During the year 2024, up until now, 95% of the transfer process from the electronic platform to the correspondent banking mechanism directly between it and Iraqi banks has been achieved. This means that only about 5% of it remains within the platform, which will be transferred using the same mechanism before the end of this year, according to the plan.
Thus, some expectations about possible effects on the exchange rate and transfer operations are baseless, because the process will not be sudden or in one go at the end of this year, but rather it was originally achieved during the past period with effort and careful follow-up, except for the remaining small percentage that will be accomplished in the coming short period.
The Central Bank confirms that trade with the United Arab Emirates, Turkey, India and China represents about 70% of Iraq’s foreign trade as (imports), which prompted the Central Bank of Iraq to find channels for transfer in euros, Chinese yuan, Indian rupees and UAE dirhams, through approved correspondent banks in those countries. (13) Iraqi banks have actually begun to conduct transfer operations with a pre-audit mechanism that has been agreed upon and approved in addition to transfers in dollars.
Providing channels for personal transfers for legitimate purposes and external purchases through electronic payment channels, global money transfer companies, cash sales to travelers, and paying cash dollars for incoming transfers to the parties and purposes specified in the Central Bank’s published instructions.
The Central Bank stresses that it has placed foreign transfer operations and meeting dollar demands on sound tracks consistent with international practices and standards and the Anti-Money Laundering and Terrorist Financing Law.
He explains that providing the aforementioned channels for all purposes at the official dollar price makes this price the true indicator of economic practices, which is proven by the reality of price stability and control of inflation, and any other price traded outside those channels is an abnormal price that those with unorthodox or illegal practices resort to, who move away from official channels in their dealings, so they bear the additional costs alone by purchasing at a higher price than the official price to delude others with the difference between the official price and others.
The map and mechanisms announced by the Central Bank will certainly lead to lifting the confusion and instability in the monetary market, which is prevalent due to the continued imposition of American restrictions on our private banks and directing accusations, slander, rumors, analyses, interpretations and targeting of the Central Bank, and will create a state of optimism by lifting the restrictions imposed on some private banks.
This means that there are great efforts made by the Central Bank, in cooperation with the government, since the beginning of 2023 until now, in the field of implementing the financial and banking reform program and fruitful coordination with financial policy, which refutes the slander. And the accusations and spreading optimism and reassuring the market and citizens. This is what the Governor of the Central Bank had previously emphasized before the Central Bank delegation’s recent trip to America. And the new reform roadmap is a result of the efforts previously made and which the Central Bank has been working on for a year and eight months, and it is as follows:
- Reorganizing foreign trade financing to achieve several objectives at once, one of which is the transparency of foreign transfer operations that begin with the transfer process and the transferor to the final beneficiary and to the source through all data, documents and information that enhance and match reality.
All large and medium-sized companies are committed to achieving this goal. The problem now is the dealings of small traders outside the operations.
Foreign transfers are a pressure on the dollar money market and cause it to rise.
- The Central Bank opened channels for the Chinese, Turkish, Indian and Emirati currencies, which are currencies that represent a significant weight in foreign trade, as there was a halt for a period due to a new regulation aimed at providing sufficient control over these operations.
“A new audit mechanism has been put in place by an international company, and the process has been finalised and is now being restarted.”
The Central Bank has continuously urged the opening of relations with correspondent banks, because the Iraqi bank without having external correspondents is considered a local bank and cannot open up to the world.
The Central Bank, for its part, supports and assists this trend.”
- “In light of the new regulation of the foreign exchange process, the real price at which the Central Bank sells more than $250 million daily at the official price should be considered. This means that the bank covers foreign trade, and this explains why there is no inflation or price increases.
The parallel market is a market for those who do not want to go towards the regular methods of transfer and it is an illegal trade or trade that escapes the regular procedures or other illegal operations such as drug trafficking, human trafficking, corruption money, etc.
- Whether the dollar price rose or fell is not a correct indicator, as one must look at what and how much the Central Bank sells at the official price to liquidate various needs.
- That "the primary objective of the Central Bank is to maintain the general level of prices and limit inflation, and this is supposed to be the measure of the success of monetary policy, which has succeeded in controlling this aspect and the level of inflation compared to other countries and even in previous years is much lower, and within the target, and this means that foreign trade, on which Iraq depends primarily to meet the needs of citizens, is covered by the official price."
- “There is great praise in all meetings with international organizations, including the International Monetary Fund, the Federal Reserve, and the US Treasury, for the transformations, management, and organization of the external transfer process in the Central Bank of Iraq at the present time.”
And that "the Central Bank's plan until the end of the year will reach 100%, with foreign transfers between Iraqi banks and correspondent banks, without going through the US Federal Reserve.
The plan to reform and lift restrictions on banks includes two axes: the first relates to conducting an audit of previous operations that were suspected by an independent external audit office, some of which have been completed while we await the completion of the audit of others in order to determine the overall picture and classify the nature of these problems and how procedures will be carried out regarding them later.
And to reach a real, stable banking sector that is consistent with what is required at the level of the national economy, and to prevent some banks from remaining marginal and not representing a real addition to the Iraqi economy, and to gain external acceptance through agreement on their implementation of international policies, procedures and standards.
- The Central Bank has not set a quota for foreign transfers for banks, and they can submit whatever foreign transfer transactions they can attract. The Central Bank does not interfere in customers’ choices, and the banks that carry out this process rely on their capabilities to attract their customers. link
Melanie Hines shares insights on the Iraqi Dinar, updates on the Forex market, and news from her contact in Iraq, emphasizing the importance of electronic payments to curb corruption.
Highlights
📈 Forex Market: The market opened at 506, indicating current trading rates.
📡 Unique Intel: Melanie’s contact confirms limited discussions on reforms, emphasizing official news only.
💳 Electronic Payments: Iraq is adopting digital systems to reduce corruption, a significant step for the economy.
🏢 Central Bank Update: A new skyscraper for the Central Bank symbolizes stability and progress in Iraq.
📅 Future Expectations: Discussions about potential revaluation timelines hint at significant economic changes ahead.
🔍 Market Readiness: The production of lower denomination notes is underway, preparing for a transition
.
Key Insights
📊 Forex Rates Matter: Understanding the opening Forex rates is crucial for traders and investors, as they influence market sentiments and expectations.
🕵️♂️ Information Control: The military’s restriction on speculation highlights the importance of verified news over rumors in the investment community.
🌐 Digital Economy: Iraq’s shift to electronic payments is not just about modernization; it’s a strategic move to combat systemic corruption, paving the way for economic stability.
🏛️ Architectural Symbolism: The new Central Bank building represents Iraq’s commitment to economic growth and modernization, enhancing investor confidence.
⏳ Anticipated Changes: Insights on potential revaluation timelines suggest that investors should stay informed and be ready for shifts in the market.
📉 Denomination Adjustments: The transition to lower denomination notes indicates a planned adjustment in currency value, vital for those invested in the dinar.
