Parliamentary Finance intends to reduce the sale of hard currency and open the auction file
1/17/2019



, a source in the parliamentary Finance Committee, on Thursday, the Commission ‘s intention to open an auction sale currency file, while noting that it would take several measures to reduce the sale of hard currency.


The source said in an interview for Alsumaria News, "The Finance Committee will work in the next few days to open the file auction currency in order to codify the waste in the sale of hard currency, which is the Central Bank,"


noting that "it is unfair that the bank sold more than 300 million Dollars per day without reflecting on the services and imports of customs and taxes to maintain the exchange rate. "


The source, who asked not to be named, said that "this caused great damage to the Iraqi economy and its inputs through which are compensated state budgets,"


noting that "the Finance Committee is taking urgent measures to reduce the sale of the Central Bank of hard currency amounting to about 100 million dollars Daily instead of $ 300 million a day through strict control to reduce waste of public money. "


It is noteworthy that the Central Bank is conducting daily meetings to buy and sell foreign currencies, except public holidays, which stops the bank from these auctions.

https://www.alsumaria.tv/news/258176…D8%B9%D8%A8/ar

The Iranian and Iraqi central banks are discussing the issue of opening official accounts based on rial and dinar, chairman of the Iran-Iraq Joint …

By Ahmed Tabaqchali, CIO of Asia Frontier Capital (AFC) Iraq Fund.

Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

December 2018 was probably the worst month in a decade for global equities, however the month’s sharp declines are eerily similar to those that drove the markets lower in December 2015 with the similarity extending to almost a replay of the start of 2019 to that of 2016.

The reasons, now and then, are fears of a slowing world economy with the world’s engine, China, showing signs of a meaningful slowdown. But the drivers of the slowdown this time are increasing evidence of the damage from the US-China trade war, echoing the Iraqi saying that “while reasons are many, death is the same”. However, now and then, the slowdowns were months in the making, but the markets ignored them until late in 2018.

The Iraq Stock Exchange (ISX), as measured by the Rabee Securities RSISUSD Index, on the other had quietly eked out a modest gain throughout the month to end up +1.9%. A gain which came despite sharp declines in the price of oil for the month that took Brent crude prices down about –40% from the October multi-year peak.

The ISX’s negative –15.0% return for 2018 marked the fifth year-over-year decline, on the back of declines of –11.8% in 2017, –17.3% in 2016, –22.7% in 2015, and –25.4% in 2014. The ISX further spent most of the last two years trying to break out; only to revisit the major May 2016 lows as each year came a close. This contrasts sharply with most global equities as the December sharp sell-offs took them down to about –20% off recent multi-year highs. This makes the risk-reward profile more attractive for the ISX vs. these markets as portfolio allocations are rebalanced in the light of the changed global environment.

Supporting the risk-reward profile for the ISX is the prospect of a recovery in corporate earnings. Iraqi equities should emerge from a multi-year severe economic contraction with the Telecoms being the first to emerge. Two of the major mobile operators out of three national operators reported Q3/2018 earnings that displayed the markers of recovery in earnings, margins and profits. Of the two, AsiaCell (TASC), listed since 2013, has a reported earnings span of 2012-2018 reflecting the operating environment before, during and after the ISIS conflict.

For TASC, the recovery started in late 2017 with the liberation of Mosul and the gradual return of customers lost since the 2014 ISIS invasion of a third of the country. As reported last month, TASC signalled its confidence in its future outlook with a distribution of a 12% dividend on the back of last year’s dividend yield of 14% –which in absolute terms is about a third higher than last year’s dividend. (See “Telecoms dial up Recovery” for further details on TASC).

The recovery for TASC extended to its stock price, which ended 2018 up +47%, following declines of –17% and –11% for the prior two years. TASC was joined by Baghdad Soft Drinks (IBSD), which was up +34% in 2018 on the back of 2017’s increase of +7%. IBSD is unique among the ISX’s listed companies as it continued to churn out healthy earnings growth through the downturn. Earnings for IBSD grew +13% in the first nine months of 2018, on the back of growth of +11% in 2017, +25% in 2016 and +37% in 2015 (pre-tax earnings).

TASC and IBSD’s performances stand in stark contrast to those of the banks which, as a group, had a dismal performance with the leading bank, the Bank of Baghdad (BBOB) down –52% in 2018 on the back of declines of –33% and –22% for the last two years. Other banks fared just as poorly with declines for a selected group ranging from –63% to –4% for the year. These negative returns don’t include income from dividends –which were quite high for some banks such as Mansour Bank (BMNS) or Commercial Bank Of Iraq (BCOI) that ended the year with dividend yields of 8% and 10% respectively. (See “Of Banks and Budget Surpluses” for more details on the banks).

Looking to 2019, the recovery of the banking sector would hinge on an economic recovery and a return of liquidity to economic activity, which for most of 2018 were held back by political uncertainties surrounding the May parliamentary elections.

Political uncertainty before the May 2018 elections was followed by indecisive election results, which in turn resulted in further uncertainties as the different political parties entered lengthy negotiations for the formation of a coalition government. Adding to these uncertainties was the eruption of massive demonstrations in the south demanding reform and investment into basic services. Things became clearer in early October with the promising appointments of a president and a prime minister in a fashion that broke the failed mould of the past. These were followed with the formation of a working government, which while still incomplete, can begin to act on the needed spending for a post-conflict recovery.

Paradoxically, while the political uncertainties paralyzed the government process, the government’s revenues soared with the recovery in oil prices, which has put the government on course for a two-year accumulated surplus of up to USD 24.5bn by the end of 2018. The oil markets decline from the un-sustainably high levels of the summer however are an un-welcome development but should not alter the country’s improving financial position as long as the government continues with the fiscal discipline brought on by the IMF’s 2016 Stand-By Arrangement (SBA). Moreover, Brent crude prices in a range of USD 50-60/bbl, would ensure that the government maintains this fiscal discipline and focus on reinvestments, a focus and discipline that are normally forgotten during periods of high oil revenues.

The healing effects of higher oil revenues over the last two years should begin the filter down into the broader economy over the next few months. The first evidence of this comes with the recent recovery in broad money, or M2 which acts as a proxy for economic activity, as can be seen in the chart below: –

(Source: Central Bank of Iraq, Iraq’s Ministry of Oil, Asia Frontier Capital)

(Note: M2 as of Sep. with AFC est.’s for Oct., Oil revenues as of Dec.)

While the October M2 figure is an estimate, it is based on actual M0 figures for the month and the recent M2/M0 multiplier figures. As can be seen M2 was moving sideways since oil revenues recovered in January 2016, but it began to accelerate in June 2018-Septemebr 2018 –and estimates for October suggest a continuation of this trend.

As such, this could mean that liquidity has finally begun to filter down into the economy – which should accelerate as the new government begins to act on its investment programme. Ultimately, this should filter down into the stock market, which should bring to an end the market’s divergence from its past close relationship with oil revenues – which currently is at the widest it has been for the last few years (see chart below).

(Source: Iraq’s Ministry of Oil, Rabee Securities, Asia Frontier Capital)

(Note: Oil revenues as of Dec.)

Recovery, in frontier markets, is a mirror image of Mark’s Twain’s phrase on going broke, in that recovery happens gradually and then suddenly. If similar experiences in other frontier markets (declining markets while fundamentals show gradual recovery following a long basing period) then the trend of the last few months could be followed by a sharp reversal.

However, for Iraq significant challenges remain with the huge demands for reconstruction, winning the peace, defeating a likely emerging ISIS insurgency, and controlling violence. In particular, the fragmented politics of the new parliament will continue to be a marker of risk for the government’s future stability, which would in turn pose a risk to economic recovery.

Please click here to download Ahmed Tabaqchali’s full report in pdf format.

Mr Tabaqchali (@AMTabaqchali) is the CIO of the AFC Iraq Fund, and is an experienced capital markets professional with over 25 years’ experience in US and MENA markets. He is a non-resident Fellow at the Institute of Regional and International Studies (IRIS) at the American University of Iraq-Sulaimani (AUIS), and an Adjunct Assistant Professor at AUIS. He is a board member of the Credit Bank of Iraq.

His comments, opinions and analyses are personal views and are intended to be for informational purposes and general interest only and should not be construed as individual investment advice or a recommendation or solicitation to buy, sell or hold any fund or security or to adopt any investment strategy. It does not constitute legal or tax or investment advice. The information provided in this material is compiled from sources that are believed to be reliable, but no guarantee is made of its correctness, is rendered as at publication date and may change without notice and it is not intended as a complete analysis of every material fact regarding Iraq, the region, market or investment.

Iranian tendency to delete 4 zeros from the national currency
1/6/2019

head of the "Alolaiaan" in the Islamic Shura Council , Hamid Reza Haji Babaei, Sunday that announced the cancellation of four zeros from the national currency is included on the agenda.

Hamid Reza Haji Babaei in a press statement briefed on the participation of the Governor of the Central Bank of Iran Abdul Nasser Hamati today in a meeting of "the House of Representatives of States" in the Islamic Shura Council, noting that my interest was presented during this meeting a report on the performance of the Central Bank in different fields.


The Iranian parliamentarian said that "Hamati stressed during this meeting that the government of Lador has a high exchange rate of foreign currencies."


"The governor of the Central Bank of Iran believes that the main problem in the country is not in foreign currency but in riyal, and has been standing in front of checks that are sold and bought in Dubai," Haji Babaii said.


"The road is open to China and Korea and the road to establishing relations with India is being opened," he said. "There have also been good talks with Turkey."


"The liquidity of 1,700,000 billion has lost 30 percent of its power as a result of inflation. We intend to delete four zeros from the national currency, which should be done quickly," Hamati was quoted as saying.

https://www.almaalomah.com/2019/01/06/380098/

How much was the fiscal deficit in Iraq’s budget for 2019?

1/2/2019

An increase in the rate of deficit and severe problems in the volume of revenues and transfers and allocations, as confirmed by the Finance Committee parliamentary balance of the two thousand and nineteen.


The member of the Committee Ahmed Al-Saffar that the balance of the year two thousand and nineteen has seen an increase in the fiscal deficit of twenty-six trillion dinars to twenty-seven trillion dinars,

noting that the government did not take all the proposals of the Commission in relation to the points supposed to be amended in the draft financial budget for the next year .


Al-Saffar also said that the draft budget law did not take into account the current situation of Iraq, problems in the liberated provinces, and the relationship between the governments of the center and the region, stressing that the parliamentary finance committee will have an opinion on the draft budget in its current form.

On the other hand, the member of the Finance Parliament Mohammed al-Darraji said that the budget law is very far from the approach of the government of Abdul-Mahdi, pointing out that the final accounts of previous governments did not reach Parliament until the moment and the new government to claim them.

Darraji added that the debts of Iraq exceeded 100 billion dollars in recent years and the central bank to support the budget through treasury bonds and raise the price of the dollar.

As for the problem related to the share of Kurdistan in the budget, a member of the Finance Committee on the mass of the Kurdistan Islamic Group, Ahmed Hama Rashid, the governments of Baghdad and Erbil to comply with all items of the federal budget regarding the share of the region of the budget and the payment of the obligations of the export of oil, Citizens or their living resources.


The Parliamentary Finance Committee hinted at the re-amendment of the federal budget allocations for the year two thousand and nineteen again to the government, because of the failure of the governmental committee to respond to most of its observations and suggestions of deputies.

https://www.alsumaria.tv/news/256800…D8%A7%D9%85/ar

This article was originally published by Niqash. Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

By Ibrahim Saleh.

How To Get A Loan In Baghdad – At 30% Interest, Repaid In 3 Months

It’s tough to get a loan from Iraq’s undeveloped banking sector unless you fulfil certain, very specific criteria. But growing consumer desire and outrageous interest rates are forcing a change.

To get a loan from a bank in Iraq is difficult for many, not least because in order to be approved for one, often the borrower must bring along somebody who is employed by the government to guarantee them. In Iraq, a government-paid position is seen as the most stable kind of job you can get. It means you will get paid regularly and that eventually you’re in line for a pension.

The guarantee given by a state employee is needed for a personal loan, no matter how big the sum. And most banks want the state employee’s salary to be twice the monthly repayments for the loan. Additionally a state employee can only guarantee one bank loan at a time.

All of this makes getting a loan from a local bank difficult for anyone who is not a state employee, particularly for low-income Iraqi families. This is why they will often turn to money lenders who work unofficially.

One of these kinds of lending offices advertises on the wall of a kindergarten in the Al Dawoodi neighbourhood in the Mansour area, in Baghdad. The advertising targets shop owners and says the office can provide loans of US$1,000 to US$5,000.

The terms are strict: The loans need to be paid back within around three and a half months, the borrower needs to make daily repayments and the arrangement would end with the lender getting a 33 percent return on the initial sum.

That is a high return for a relatively modest sum, like US$1,000, under especially tough conditions. Although the interest rates are high and conditions tough, many low-income Iraqis don’t have any other option.

“It’s an important service because then you can get a loan without having to bring a government employee to a bank,” says Ali al-Rubaie, a Baghdad local who has loaned money before in this manner. “If I had a guarantor, I would have borrowed far more money though – to buy a car or an apartment,” he adds.

Upon calling the lending office to enquire as to how their procedures were managed, the staff refused to give NIQASH any further information, or deny or confirm if the office was licensed in any way.

However a former borrower divulged conditions they had been able to get a loan under. The applicant must submit a letter asking for a loan and the office then tries to ascertain whether the applicant would be capable of repaying the cash, including looking into guarantors or assessing any property they owned and their business.

In the case of the store owners this lender targets, the office looked at the business which, one imagines, gives them some sort of guarantee to begin with. If the application for a loan was accepted, the borrower had to sign a promissory note to receive the funds.

In another nearby neighbourhood, locals talk about a resident called Haji, who lends money on similar terms. They say Haji has been known to loan as much as US$20,000. And Haji – nobody we spoke with knew his full name – apparently decides whether a loan can be guaranteed by making enquiries with the community leaders, or tribal elders, in the applicant’s neighbourhood. He also requires that those senior community members agree to repay him if the borrower defaults on the loan.

From a legal point of view, there is nothing stopping anybody loaning money to any other Iraqi, says legal expert, Ali al-Tamimi. There are no legal restrictions on individual lenders, as opposed to institutions, unless there is fraud committed or contractual violations. Only at this point, would the courts get involved, al-Tamimi explains. So it’s all perfectly legal, despite the injustice of the high interest and short repayment times.

Iraqi banks know that it is hard for Iraqis to borrow money. In fact a lot of Iraqis still don’t have bank accounts and in general, the banking sector remains undeveloped. This is starting to change though, as local banks begin giving personal loans rather than just working on trade deals and with larger institutions and the government.

Banks are beginning to think about how they could extend credit more easily to ordinary citizens, agrees Faisal al-Haimus, the chairman of the Trade Bank of Iraq, first set up by the US authorities after 2003 to facilitate trade. “The bank is currently considering extending loans to people other than government employees,” he told NIQASH.

Lack of credit makes it difficult to bankroll property development and vehicle sales and also deprives banks of potential interest earned.

“Our company has proposed to the Iraqi central bank and other Iraqi banks that they cancel this condition – where the borrower has to bring a state employee – because it is impacting negatively on Iraqis’ ability to buy our cars,” says  Sabah al-Janabi, the public relations manager for Land Rover and Jaguar cars in Iraq. “They were actually quite open to our suggestions and we expect things to change in the future.”