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Iraqi economy in 2007

05 Jan 2008
Iraqi economy has experienced a relative advancement last year in several economic sectors, the most distinguished ones were those disclosed by the state budget through the financial allocations which amounted to about 41 billion dollars, 10 billion for investments and 27 billion for operating expenses and the remaining for governmental support. The Iraqi Central Bank had the main role in the economic scene when it adopted a strict monetary policy to fight inflation and reduce its levels; to achieve that raised the Iraqi dinar exchange rate for foreign currencies as well as interest rates in Iraqi banks. The results of this policy were the remarkable low rates of inflation and the retreat of the dollar exchange rate against the Iraqi dinar from 1448 dinars per dollar during 2006 to 1225 dinars at the end of this year. There was also the International Pledge Covenant signed at Sharm el-Sheikh resort, and it was a mutual commitment between Iraq and the international community to provide all sorts of economic and political support to Iraq. The Covenant included a set of economic axes to support the reconstruction and development of Iraq's economy. Observers looked positively to Iraqi negotiators' efforts during the same year to extinguish $140 billion of the debts accumulated on it. However, these efforts failed to persuade the Gulf States to reduce or extinguish part of the debts which amount to about $40 billion, and Kuwait refused reduce its cut which is %5 of Iraqi oil exports under the Security Council resolutions. As for the other productive sectors, opinions differed on the extent of successes to overcome the crises they suffered from; in oil sector, oil exports ranged between 1.5 and 1.7 million barrels a day at a time The Ministry of Petroleum sought to raise those figures to two million barrels per day, and this quest coincided with a significant rise in oil prices which are indications to the high oil revenues, while the Ministry of Finance did not disclose the investment increases in financial resources resulting from the high oil prices. The electricity sector has witnessed no progress because of many important factors like the security situation, the reluctance of foreign companies to invest in Iraq and the lack of control of the Ministry of Electricity over the available energy production. The activity of the agricultural and industrial sectors decreased and they achieved no positive results because of the lack of investment allocations for them. The banking sector has witnessed no development at the level of performance and continued its work without ambitions despite hints on the establishment of regional development banks to be supportive financial institutions of the provinces' projects. The private sector is still not active for reasons such as the non-activation of the Investment Law No. 13 of 2006, and the reluctance of Arab and foreign investments to enter the country. Other sectors especially transport, communications and housing have witnessed slow steps and their performance did not rise to the planned level.
Prepared & Translated By: Team Iraq Daily Business Updates
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