THE NEW IRAQI DINAR

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FROG AND CHIPS : ON IRAQ & THE NEW IRAQI DINAR

02/03/2008 

 

Iraq's economy is dominated by the oil sector, which has traditionally provided about 95% of foreign exchange earnings.

 Although looting, insurgent attacks, and sabotage have undermined economy rebuilding efforts, economic activity is beginning to pick up in areas recently secured by the US military surge.

 Oil exports are around levels seen before Operation Iraqi Freedom, and total government revenues have benefited from high oil prices.

 Despite political uncertainty, Iraq is making some progress in building the institutions needed to implement economic policy and has negotiated a debt reduction agreement with the Paris Club and a new Stand-By Arrangement with the IMF.

 The International Compact with Iraq was established in May 2007 to integrate Iraq into the regional and global economy, and the Iraqi government is seeking to pass laws to strengthen its economy.

 This legislation includes a hydrocarbon law to establish a modern legal framework to allow Iraq to develop its resources and a revenue sharing law to equitably divide oil revenues within the nation, although both are still bogged down in discussions.

 The Central Bank has been successful in controlling inflation through appreciation of the dinar against the US dollar. Reducing corruption and implementing structural reforms, such as bank restructuring and developing the private sector, will be key to Iraq's economic success.

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