Iraq cbank bars project funding via treasury
Sep 27, 2009 at 09:06
Iraq's central bank has opposed calls from the Iraqi government to issue new treasury bills to finance infrastructure projects.
Such a policy would drain the Iraqi banks of their assets and would eventually dip into the country's $40 billion of foreign exchange reserves, the bank said in a statement Sunday.
A massive budget deficit, estimated at nearly $19 billion this year, is adding to pressure on the government to try to find new sources of financing for its projects. The proposed issue would be to finance transportation projects as well as projects of the Baghdad municipality.
The pressure exerted by the government on "the Central Bank of Iraq to issue new treasury bills would weaken the bank's monetary policies such as curbing inflation", said the statement emailed to news agency Dow Jones Newswires.
The Central Bank said it cannot issue new treasury bills at a time when the bank's assets would be important to check the country's soaring inflation rate, which was 10.8 percent up from around 7 percent in the previous month. For the last 10 months, Iraq's foreign exchange reserves remained unchanged without any increase, it added.
The bank had agreed earlier this year to issue $3 billion worth of yearlong treasury bonds at an interest rate of 2 percent to finance much-needed power and water projects. The move came after the finance ministry requested the government to issue these bonds to help finance two power deals signed last year with General Electric Co and Siemens AG.
Sep 27, 2009 at 09:06
Iraq's central bank has opposed calls from the Iraqi government to issue new treasury bills to finance infrastructure projects.
Such a policy would drain the Iraqi banks of their assets and would eventually dip into the country's $40 billion of foreign exchange reserves, the bank said in a statement Sunday.
A massive budget deficit, estimated at nearly $19 billion this year, is adding to pressure on the government to try to find new sources of financing for its projects. The proposed issue would be to finance transportation projects as well as projects of the Baghdad municipality.
The pressure exerted by the government on "the Central Bank of Iraq to issue new treasury bills would weaken the bank's monetary policies such as curbing inflation", said the statement emailed to news agency Dow Jones Newswires.
The Central Bank said it cannot issue new treasury bills at a time when the bank's assets would be important to check the country's soaring inflation rate, which was 10.8 percent up from around 7 percent in the previous month. For the last 10 months, Iraq's foreign exchange reserves remained unchanged without any increase, it added.
The bank had agreed earlier this year to issue $3 billion worth of yearlong treasury bonds at an interest rate of 2 percent to finance much-needed power and water projects. The move came after the finance ministry requested the government to issue these bonds to help finance two power deals signed last year with General Electric Co and Siemens AG.