By John Lee.

The Iraqi parliament has reportedly authorised borrowing of up to $5 billion (Dh18bn) from abroad after the fall in oil prices caused a financial crunch.

According to The National, the vote came a few days rating agency Fitch forecast the economy to shrink 9 per cent this year and debt to skyrocket.

More here.

(Source: The National)

From Middle East Monitor, under a Creative Commons licence. Any opinions expressed here are those of the author and do not necessarily reflect the views of Iraq Business News.

Iraq asks IMF for debt deferment due to coronavirus crisis

The economic and finance adviser to Iraq’s Prime Minister has revealed that talks are taking place with the International Monetary Fund (IMF) for a deferment of the country’s foreign debt payments during the coronavirus crisis.

Mohammed Saleh told the IMF that the circumstances constitute a force majeure which is afflicting many countries around the world, the state-owned Al-Sabaah has reported.

“As one of the founders of the International Monetary Fund and the World Bank in the 1940s,” explained Saleh, “Iraq seeks to defer the payment of its debts. The IMF will help Iraq if it agrees to this, or a simplification of procedures, which is possible, but it all needs high-level diplomatic input.”

According to a spokesman for Iraq’s Council of Ministers, Alaa Al-Fahd, while the talks are ongoing and the proposal has been made, the IMF has given no response at the present time, as there are no claims for payment outstanding. He said that when the Iraqi government has a deficit it is approached on a yearly basis by the World Bank which offers it a loan to stabilise its economy.

“This year, however, there are many things that will be taken into consideration, as the United States has proposed stopping debt repayment at this stage, which is a good thing, especially since Iraq’s debts to be paid to the IMF this year are estimated at more than $10 billion,” said Al-Fahd. “In the event that there is an agreement, this will benefit Iraq given the current economic and political situation.”

The burden of paying its foreign debt, added the spokesman, is a strain on Iraq’s already-fragile economy, as most of the country’s wealth is produced by its oil industry due to a lack of economic diversity. “The economy of Iraq is unstable, because it depends 95 per cent on oil and the remaining five per cent cannot be collected now, due to the lack of taxes, fees, etc.” Iraq’s dependence on its oil industry has already been hit by the recent oil price war between Saudi Arabia and Russia.

The coronavirus pandemic and the economic slump it has caused is predicted to be particularly difficult for Middle East countries. In its World Economic Outlook report for 2020 which was released this month, the IMF has predicted that Iraq’s economy will decline by 4.7 per cent.

(Source: Middle East Monitor)

By John Lee.

Iraq is well positioned to service its debt obligations, according to an article in Australia’s Investor Daily.

Responding to the question “what’s your view on bonds issued by Iraq’s government?“, Mark Baker writes:

“Iraq is a net external creditor, meaning its external assets are greater than its external liabilities. That means the nation is well positioned to service its debt obligations.”

More here.

(Source: Investor Daily)

By John Lee.

Simon Hinrichsen, a PhD student at the London School of Economics (LSE), has published an analysis of Iraq’s sovereign debt over the years.

The full 51-page report can be downloaded here.

(Source: LSE)

Iraq has paid back more than $20 billion in foreign debt, the head of the parliamentary finance committee Haitham Al-Jubouri has said.

“Iraq’s foreign debt amounted to more than $50 billion. More than $20 billion was paid back over the last period,” Al-Jubouri told the Iraqi news agency.

According to the official, Iraq still owes $27 billion to foreign countries, in addition to $41 billion to Saudi Arabia given as a grant to the late Iraqi President Saddam Hussein.

(Source: Middle East Monitor)

The Iraqi Foreign Ministry has signed a Memorandum of Understanding with the General Secretariat of the League of Arab States, which includes exempting Iraq from 75% of its debts within the support funds provided to Arab countries, scheduling the remaining amount and paying for its contributions to the budget of the General Secretariat of the League of Arab States.

The issue of exempting Iraq from 75% of these debts was one of the items on the agenda of the Arab Summit in Tunisia voted by the Arab leaders, and as a result of the diplomatic efforts carried out by the Ministry, and the Iraqi Representation in the League of Arab States.

This memorandum was one of the topics of the talks held by Foreign Minister Mr. Mohamad A. Alhakim (pictured) in his meeting with the Secretary General of the League of Arab States, Mr. Ahmed Aboul Gheit, in Baghdad, which resulted in expediting its signature and bringing it into force.

The MoU was signed by Ambassador Mr. Ahmed Nayef Rashid Al-Dulaimi, Ambassador of the Republic of Iraq to Cairo, and Mr. Abdullah Sorour Al-Jarman, Head of Administrative and Financial Affairs Sector at the General Secretariat of the League of Arab States.

(Source: Iraqi Foreign Ministry)

By John Lee.

The Al-Bayan Center for Planning and Studies has just published a new report from our Expert Blogger Ahmed Tabaqchali.

Entitled “Understanding Iraq’s debt: An overview of its status, outlook and origins“, the report argues that much of that debate about Iraq’s debt is out of context, mixes loosely related facts and figures and mostly comes without an understanding of the concept of debt or debt servicing costs or debt sustainability.

The paper’s aim is to provide an understanding of Iraq’s debt, its origins, developments, status and implications for the future in dealing with the challenge of reconstruction.

Read Ahmed Tabaqchali’s full report here in English, and here in Arabic.

By John Lee.

Following Iraq’s successful return to the bond markets earlier this year, it is now reportedly planning a $2 billion sovereign bond issue in 2018.

The Governor of the Central Bank of Iraq (CBI), Dr. Ali Mohsen Ismail Al-Allaq [Alak] (pictured), told Reuters that the plan is currently awaiting parliamentary approval.

He added that Iraq’s foreign currency reserves have risen from $46.5 billion at the end of 2016 to $49 billion , helped by the increase in oil prices.

The country’s budget deficit is running at around $15.4 billion to $16.3 billion.

(Source: Reuters)

By John Lee.

Iraq opened the books yesterday on its first independent bond sale in a decade.

Investor demand was huge,” writese Marcus Ashworth at Bloomberg. “The deal was seven times oversubscribed.

The $1-billion, dollar-denominated bond, maturing in March 2023, was expected yield 7 percent, but demand enabled that to be cut to 6.75 percent.

In January, Iraq raised $1 billion of five-year bonds, guaranteed by the United States, at a coupon of 2.149 percent, but this latest bond is not guaranteed and depends on Iraq’s own creditworthiness. It is rated B- by both S&P and Fitch.

Iraq appointed Citi, Deutsche Bank and JP Morgan as joint bookrunners for the issue.

Meanwhile, the yield on the Iraqi 10-year bond (2028) has fallen from 9.3 percent in November to 6.7 percent.

(Sources: Bloomberg, Financial Times)

By John Lee.

The Financial Times reports that Iraq has appointed Citi, Deutsche Bank and JP Morgan as joint bookrunners for a new five-year government bond.

The issue is described as a dollar-denominated, long-dated, benchmark-scale bond; investor meetings scheduled over the coming days.

In January, Iraq raised $1 billion of five-year bonds, guaranteed by the US, at a coupon of 2.149 percent.

(Source: Financial Times)