Yesterday, we heard of the victory of PM Maliki. Glad that’s over with. I don’t have to spend any more of my time debating over why I knew he would remain in office. A special thanks, to all my subscribers who continued to support me on my views and opinions. Its not always easy to go against the crowd but I vowed to be straightforward, upstanding and true to my subscribers when it comes to providing up to date accurate information.
On to other news!
Well, no surprise, another week has come and gone without the Iraqi Parliament passing the 2014 federal budget. It looks as though the Iraq budget will not be voted on before the newly elected politicians take their seats in a few weeks. There is talk of having the next parliament pass both the 2014 and the 2015 Iraq budgets. The Kurdish Regional Government (KRG) appears to be responsible for this delay. They are refusing to have the same auditing agency used by Baghdad and Erbil. The auditing agency would be used to identify and calculate Kurdish oil revenues on a monthly basis and transport the oil back to Baghdad. At the present time, the KRG government is unable to pay its employees. However, Prime Minister Maliki has ordered the Central Bank of Iraq (CBI) to allocate the funds to pay the KRG employee salaries. Just so you all know, this is the responsibility of the KRG and NOT the central Baghdad government.
The International Monetary Fund (IMF) has stated that the current budget does nothing for the total dependence on oil revenues. This becomes a risk when the price of oil drops below $106. The Iraq government is currently in a deficit scenario for the first time. In previous years, the government was always in a surplus. The government may consider using the cash reserves that are inside the CBI. In fact, they may have already done so. If the deficit were to continue on this would likely weaken the Iraqi dinar currency and increase inflation. The Iraq government is losing approximately 12 billion dollars a month with the budget delay. There are other issues with the 2014 federal budget. It reported that investments only account for 36% of the budget. This figure will not improve public services or economic infrastructure. There has been an increase in military spending. The Iraqi army has continued on with the assault on Fallujah and there doesnt seem to be an end in sight. The fighting is draining the resources of the Iraqi government.
There also appears to be some confusion with the Development Fund for Iraq (DFI). The DFI account is in the New York Federal Reserve. The Iraqi Government is in full control of this. There is nothing for the CBI to take back, they are already in control of the account. The funds will remain in the DFI in New York and the protection against liens and lawsuits will remain. I hope this clears up some of the questions that many of you have asked.
It is good to see that more banks are now willing to move into Iraq. Just recently, we saw the CBI approve French and Lebanese banks. Also, Citibank is another one. However, they are not operating as a full service banking intuition yet. In addition, keep your fingers crossed for Chase banks supposed move into the Baghdad area.
Oil sales in Iraq have been below the estimates of what the government predicted for 2013. As of right now, the oil exports are at 2.5 mb per day and it was predicted it should have been 4 mb a day. The current oil flow at 2.5 mb should be consistent if they have no more terror attacks on the oil pipeline.
The Iraq government has started an information campaign for badly needed Foreign Direct Investment (FDI). It will cost the Iraq government more then $400 billion to build the infrastructure inside the country. This is billions of dollars that Iraq does not have at the moment. The current Iraq budget does not allow sufficient funds to rebuild the infrastructure. The FDI from outside of Iraq is badly needed. According to 2012 statistics, the top five FDI countries have changed to South Korea, USA, U.K., Netherlands, and Turkey. Turkey has partially pulled back on investments in Iraq because the Iraq government supports the Syrian government and the Turkish government opposes Syria. However, when it comes to energy, Turkey would not back off from acquiring energy resources from the Kurdistan area.
The CBI has issued several articles about the printing of the new Iraq currency. They have stated that they have printed new enhancements to the Iraq banknotes. Those notes have yet to make it into circulation in Iraq. The exchange rate remains steady at 1166 according to the CBI web site.
It’s possible that the CBI could further delay announcements and start circulating the new currency all at once. I recently posted an article mentioning that the new currency would not be printed until January 2015. This may be the case however, it is quite possible that something could happen prior to January 2015.
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