FIREFLY:Television is doing 11-page document, we've seen it before but they're reshowing it to us.
It's instructions to all the new money exchange centers that have been opened up on what they can accept and how much to give on damaged notes being returned by citizens. It's like they are telling exchangers a lot of the 3-zero notes are about to be returned.
FRANK: That's exactly what they're doing. Like I told you, these banks would be very essential...Collecting the 3-zero notes is going to be massive...
12% non-oil revenues in 2024: how can Iraq overcome the oil curse?
Shafaq News/ Iraq recorded a significant rise in non-oil revenues by the end of 2024, reaching 12% of total public revenues, compared to 7% in 2023. However, economic experts argue that this figure falls short of the government’s planned target.
In an interview with Shafaq News agency, economist Nabil Al-Marsoumi stated that "the total non-oil revenues achieved in Iraq as of October amounted to 14.438 trillion dinars (more than 39 billion USD), representing 12% of total public revenues, compared to 7% in 2023."
The government had aimed for 27 trillion dinars in non-oil revenues or 20% of total public revenues, but this goal has not yet been met, with only half of the target achieved so far.
Al-Marsoumi confirmed that "Prime Minister Al-Sudani planned to achieve 20% of public revenues from non-oil sources, but this has not been realized either, with only 12% achieved so far, just exceeding half the target."
The rise in non-oil revenues, which include taxes, fees, state-owned enterprise profits, and other financial sources, is vital for Iraq's economy. Experts emphasize that the main objective is to reduce the country’s dependence on volatile oil revenues due to fluctuating prices.
The biggest challenge Iraq faces in boosting non-oil revenues is the lack of economic diversification. Al-Marsoumi urged the government to "increase agricultural, industrial, and other economic activities within the GDP, by creating an internal economic cycle that secures job opportunities for citizens."
Oil contributes to about half of Iraq's GDP. Experts stress that Iraq still lacks a clear developmental plan supported by legal frameworks.
Al-Marsoumi noted, "When production diversifies, we need an efficient tax system capable of channeling tax revenues into the public treasury. In reality, we are far from this."
Doubling Non-Oil Revenues
Economic expert Mustafa Hantoush believed that one of the key factors behind the increase in non-oil revenues in Iraq during 2024 is the success of the United Nations’ SCOD program. This initiative has led to a significant shift, with many containers now coming through "regulated customs" rather than entering haphazardly, which has helped double customs and border revenues.
In his remarks to Shafaq News, Hantoush added, "Some self-financing companies have contributed to higher non-oil revenue rates. The state has also been able to withdraw part of these companies' revenues and return them as needed."
However, non-oil revenues suffer from two key challenges: the lack of legal frameworks that allow the state to claim revenues from various sectors, and the absence of electronic systems. For example, when the Central Bank transfers $65 billion for purchasing goods, customs and taxes worth $6 billion should be collected from these amounts. However, only about $1.5 billion has been collected to date.
Hantoush believed that "linking the Central Bank’s operations with remittances, credits, and customs processes, and collecting fees in advance, could significantly increase non-oil revenues." Examples of this include collecting insurance and tax fees on goods upfront, as well as automating tax and traffic revenue systems.
Experts agree that increasing non-oil revenues would allow the government to operate with a broader financial space. There are many potential sources of non-oil revenue, including fees from the Ministry of Oil, Electricity, Transport, and Communications, as well as the full utilization of these sectors' capabilities.
Hantoush also pointed to state-owned facilities with massive untapped wealth, such as the Baghdad Municipality and other municipalities with significant property holdings, urging the government to exploit these assets through specialized committees to help boost state revenues.
One of the things the central bank is stating they're going to do is...end that old electronic transfer system that exclusively works with the dollar and transition to a different type of banking system where the local Iraqi banks can start...
doing their own sending of foreign currencies and no longer just the dollar, multiple different foreign currencies abroad.
It's called Direct Banking...But to do that the US sanctions need to be lifted off of Iraq. That's why this whole time they've only been able to exclusively work with the US dollar.
Al-Sudani receives “special” message from Trump: Syria, Iran, and Armed Factions
Shafaq News/ Iraqi Prime Minister Mohammed Shia al-Sudani has received a “special” message from elected US President Donald Trump, a political source revealed on Saturday.
The source told Shafaq News that the message was delivered through a special envoy during an unannounced visit.
“Trump’s message emphasized the need for Iraq to curb the proliferation of weapons held by non-state actors, pressure Baghdad to limit the influence of Iranian-backed groups operating within Iraq, and advocate for Iraq’s non-intervention in Syrian affairs while supporting the formation of a new Syrian government post-Assad,” the source said.
Meanwhile, a government source disclosed that Iraq is actively working to ensure security and stability in the region. “Prime Minister Al-Sudani plans to present Iraq’s vision on this matter during an upcoming visit to Iran,” the source added.
Al-Sudani’s visit, scheduled for next week, is expected to include discussions with Iranian leaders on key regional developments, with a focus on the evolving situation in Syria.
The fall of the Bashar al-Assad regime on December 8 by opposition led by the Islamist group, Hayat Tahrir al-Sham (HTS), has triggered significant shifts in Middle Eastern dynamics. In response, Al-Sudani has intensified diplomatic efforts to stabilize the region.
He has made high-profile visits to Jordan and Saudi Arabia to discuss security cooperation and regional threats.
Iraq also participated in the Aqaba Conference held in Jordan, where representatives from the US and other nations convened to tackle shared security concerns.
Iranian President Masoud Pezeshkian visited Iraq on September 11, touring Baghdad, Erbil, Al-Sulaymaniyah, Najaf, Karbala, and Basra over a three-day period.
On May 22, Al-Sudani traveled to Tehran to attend the funeral of Iranian President Ebrahim Raisi, who tragically died in a helicopter crash.
Chapter Summary: Economic Developments in Iraq - A Weekly Review
Introduction
This chapter explores the latest economic developments in Iraq, focusing on the Central Bank of Iraq (CBI) and its recent reforms, financial strategies, and international relations. The significance of these developments lies in their potential to stabilize the Iraqi economy, improve governance, and attract foreign investment. Key concepts discussed include monetary policy, foreign currency transfers, oil prices, and sustainable economic partnerships. This summary provides a comprehensive overview of the changes in Iraq’s financial landscape, emphasizing the CBI’s strategic initiatives and their implications for the country’s future.
Central Bank’s Transition and New Trading Mechanism
The CBI has transitioned from an electronic platform for foreign currency transfers to direct operations involving Iraqi banks and international correspondent banks.
This move aims to align with global best practices and enhance the stability of the financial system.
The CBI’s highlights include modernization, currency diversification, and global integration.
Concerns have arisen among Iraqi citizens regarding the cancellation of the electronic platform for dollar trading, which was intended to regulate foreign transfers and manage exchange rate manipulation.
Key Points:
The transition is attributed to technical planning, government support, and contributions from banking staff and international partners.
The CBI aims to control the dollar exchange rate, prevent dollar smuggling, and strengthen the local economy.
Monetary Strengthening Mechanism
The CBI has adopted a monetary strengthening mechanism to fulfill national banks’ requests for foreign currency.
This mechanism includes maintaining a fixed exchange rate of 1,320 IQD per $100, enabling the CBI to manage local liquidity and ensure regulatory compliance.
Essential Information:
The cancellation of the electronic platform’s impact will depend on the effectiveness of alternative currency provisions for the commercial and service sectors.
Oil Market Dynamics
Iraqi oil prices have shown stability, with crude oil exceeding $73 per barrel in global markets.
The CBI reported strong growth in various banking sectors, including a 4.2% increase
in total bank deposits and a 15.1% rise in cash credit granted to the private sector.
Statistics:
The CBI’s gold reserves have increased by 57%, reflecting a robust monetary policy that has led to low annual inflation rates.
Economic Partnerships and Investments
Economic adviser Mouser Muhammad Chalet has stressed the importance of establishing sustainable economic partnerships with major countries, including India, Turkey, China, Korea, the United States, Japan, and Gulf nations like the UAE, Saudi Arabia, and Iran.
The Iraqi government is pushing for amendments to the 2025 budget lawregarding crude oil extraction costs in the Kurdistan region, indicating a proactive approach to optimizing resource management.
Supporting Evidence:
The emphasis on improving transport networks and establishing free industrial zones aligns with the need to combat corruption and build a balanced economy.
Recent Developments in the Banking Sector
The International Development Bank has expanded its operations by opening its 31st branch in Baghdad, indicative of its growth ambitions and commitment to supporting local economic development.
The CBI conducted currency auctions, selling $298 million worth of US dollars, primarily for external settlements and electronic transactions.
Noteworthy Facts:
The majority of dollar sales (90%) were directed towards balancing foreign accounts, signifying a focus on international financial stability.
Government Initiatives and Infrastructure Projects
The Iraqi government has approved the construction of a 2.25 million capacity oil pipeline to meet rising demand.
Funding has been allocated for rapid service projects, including schools and hospitals, as well as enhancements to financial management systems.
Real-World Examples:
The government has authorized the Ministry of Finance to sign loan agreements to support these infrastructure initiatives.
Conclusion
In summary, the recent economic developments in Iraq reflect a multifaceted approach to strengthening the financial system, enhancing governance, and fostering sustainable international partnerships. The CBI’s strategic initiatives, such as the transition to direct foreign currency operations and the adoption of a monetary strengthening mechanism, are crucial for maintaining financial stability. The emphasis on oil market dynamics, economic partnerships, and infrastructure projects further illustrates the government’s commitment to revitalizing the economy. As Iraq continues to navigate these changes, the implications for its economic future will depend on the successful implementation of these strategies and the ability to attract foreign investment while managing local economic challenges.
Main Takeaways:
Successful transition of foreign currency operations indicates a commitment to modernizing the financial system.
Fixed exchange rates and controlled liquidity aim to stabilize the economy.
Strategic partnerships and infrastructure investments are essential for sustainable growth.
Ongoing monitoring of the oil market and budgetary measures will be critical for economic resilience.
This chapter serves as a comprehensive overview of Iraq’s economic landscape, providing insights into the challenges and opportunities that lie ahead for the nation and its people.