Weathering the storm

Sponsored statement by Hussein Al-Uzri, Chairman of the Trade Bank of Iraq

While violent acts in parts of Iraq continue to dominate the headlines there is another side of Iraq that is not often in the news. This is the Iraqi economy, which is successfully weathering the combined storm of political instability and transition from centralised control to a free market and is showing remarkable signs of good health.

Thanks in large measure to record international oil prices, Iraq has a fiscal surplus of $6bn while the Central Bank of Iraq (CBI) has built up its reserves to an unprecedented $15bn. The dinar has been remarkably stable against the US dollar and other major currencies and the signing of Iraq’s first ever Stand-By Agreement with the International Monetary Fund (IMF) at the end of 2005 paved the way for large-scale debt relief. The Paris Club agreed to an 80% reduction in Iraq’s Saddam-era debts and other creditors are expected to follow suit. Agreement was also reached with the vast majority of commercial creditors earlier this year leading to Iraq’s first ever bond issue. Iraqi bonds are trading well on international markets and Iraq has now formally re-entered the international capital markets and is rebuilding its creditworthiness and international business reputation.

Iraq’s growth rate in 2005 was a respectable 4% and is expected to be the same again in 2006, however, inflation remains a worry, with an annual rate close to 30%. The Government of Iraq has made restraining inflation one of its top economic priorities this year and we expect to see concerted action from the government and the CBI to tackle this problem.

The Government of Iraq is committed to a comprehensive programme of structural reform and market liberalisation. The recently adopted Foreign Investment Law removes barriers and assures international investors of equal treatment. A hydrocarbon law is expected by the end of 2006 that will open Iraq’s upstream and downstream sectors to development.

The IMF says the medium-term outlook for Iraq’s economy is good. At the Trade Bank of Iraq (TBI) we firmly agree with that assessment. TBI was initially established specifically to facilitate Iraq’s international trade and in that regard we have issued letters of credit in excess of $14bn in the past three years. We have fully paid up capital of $100m and a network of international correspondent banks, led by JPMorgan Chase, and we have built strong partnerships with the largest export credit agencies across the globe. In 2005 we were honoured to win a ‘Deal of the Year’ citation from Trade & Forfaiting Review for the Framework Agreement between TBI and US Ex-Im Bank, which enabled Iraq to secure credit for purchases of bulk commodities from the US (see TFR, February 2006, page 26).

TBI offers many innovative products and services beyond Trade Finance to include Project Finance, Credit Cards, Current Accounts, Salaries Accounts, Savings Accounts, and Fixed Deposits. TBI’s principal clients are the various government ministries, state-owned enterprises, Iraqi private banks and the private sector.

With branches in Baghdad, Suleimania, Erbil and Basra and several more about to open, state of the art technology, and more than 350 highly trained and efficient staff, TBI is available to serve all your banking needs in Iraq.