Questions have arisen regarding Iraq’s Article VIII status in the IMF. At this Iraq is under Article XIV, which is a transitional arrangement. I have posted the Article in the IMF thread.
I. Membership Status: Joined: December 27, 1945; Article XIV (IMF website, Iraq's position in the fund)
Between 1983 and 2003 there was no activity between Iraq and the IMF. Iraq was in arrears in its payments to the IMF and had not accepted the new quota revisions completed in 1998. In addition, when the UN implemented the Chapter VII sanctions in 1990, the IMF ceased any activity on financial activity involving Iraq.
When the Coalitional Provisional Authority (CPA) took over in May, 2003, the authorities began restructuring the government to include the CBI. The IMF provided technical assistance to the CPA. In October of 2003 the CPA began the distribution and exchange program with the new dinar. During the next few months there was a fluctuation in the exchange rate which stabilized around January, 2004 to approximately 1460 dinars to one USD.
In September 2004, the IMF and World Bank transitioned from providing technical assistance to supervision of the CBI and the financial infrastructure of Iraq. This occurred because the IMF approved a (US)$436.3 billion Emergency Post-Conflict Assistance loan to Iraq. The approval for the loan was only possible because in September, 2004 Iraq settled an outstanding debt to the IMF by paying its arrears which totaled about (US)$81 million and consented to the 1998 increase of its quota. Iraq was now current on it financial obligations to the IMF and was under a contractual agreement with the IMF.
The supervision of the CBI included the management of the rate exchange program. The dinar was placed under a controlled program rate by the IMF. It was based on the current exchange rate of approximately 1460 dinars which had remained “largely unchanged since the end of the banknote exchange in Mid-January 2004.”
On September 21, 2004, the IMF officially established control of the dinar. The Iraq SDR rate changed from 2.53758 to .000466938. The rate as of April 30, 2009 is .000570626 which is approximately 1800 dinars. The SDR exchange rate is higher than the exchange rate for USD.
Iraq was placed under Article XIV. To quote from the Request for the Emergency Post-Conflict Assistance document “Iraq has not yet accepted the obligations of Article VIII, Sections 2, 3 and 4 of the IMF’s Articles of Agreement. Iraq has been granted observer status in the World Bank”.
This was the status of Article VIII in the 2007 consultation.
Iraq: 2007 Article IV Consultation, Fifth Review Under the Stand-By Arrangement,
“Iraq continues to avail itself of the transitional arrangements under Article XIV.
The Fund is conducting a review of Iraq’s foreign exchange regulations. The de facto
exchange rate regime is a crawling peg to the U.S. dollar.”
This was the status of Article VIII in the 2008 review.
2008 International Monetary Fund December 2008
Iraq: Second Review Under the Stand-By Arrangement and Financing Assurances
Iraq is making progress to accept the obligations of Article VIII, Sections 2(a), 3, and 4, of the Fund’s Articles of Agreement (SMEFP-2, #17). The staff’s review of exchange laws and regulations has almost been completed, and the authorities intend to implement staff’s recommendations in this area to complete the process.
This is the attached reference #17 outlining Iraq’s position.
Attachment II. Iraq—Second Supplementary Memorandum of Economic and Financial
November 29, 2008
17. We have made progress in moving towards accepting the obligations of Article VIII,
Sections 2(a), 3, and 4, of the Fund’s Articles of Agreement. The review of exchange laws and regulations is nearing completion. We will work with Fund staff to complete the review as soon as possible and are ready to implement the Fund staff’s recommendations once we receive them. In the meantime, we are committed to not impose any restrictions on the making of payments and transfers for current international transactions nor to introduce any multiple currency practices.
At this time, there is no information that has been posted on the IMF website concerning this loan. The only information appears to be coming from Iraq sources.
The $64,000 dollar question is “what is the status of Article VIII under the new loan that Iraq has evidently signed with the IMF.”
I. Membership Status: Joined: December 27, 1945; Article XIV (IMF website, Iraq's position in the fund)
Between 1983 and 2003 there was no activity between Iraq and the IMF. Iraq was in arrears in its payments to the IMF and had not accepted the new quota revisions completed in 1998. In addition, when the UN implemented the Chapter VII sanctions in 1990, the IMF ceased any activity on financial activity involving Iraq.
When the Coalitional Provisional Authority (CPA) took over in May, 2003, the authorities began restructuring the government to include the CBI. The IMF provided technical assistance to the CPA. In October of 2003 the CPA began the distribution and exchange program with the new dinar. During the next few months there was a fluctuation in the exchange rate which stabilized around January, 2004 to approximately 1460 dinars to one USD.
In September 2004, the IMF and World Bank transitioned from providing technical assistance to supervision of the CBI and the financial infrastructure of Iraq. This occurred because the IMF approved a (US)$436.3 billion Emergency Post-Conflict Assistance loan to Iraq. The approval for the loan was only possible because in September, 2004 Iraq settled an outstanding debt to the IMF by paying its arrears which totaled about (US)$81 million and consented to the 1998 increase of its quota. Iraq was now current on it financial obligations to the IMF and was under a contractual agreement with the IMF.
The supervision of the CBI included the management of the rate exchange program. The dinar was placed under a controlled program rate by the IMF. It was based on the current exchange rate of approximately 1460 dinars which had remained “largely unchanged since the end of the banknote exchange in Mid-January 2004.”
On September 21, 2004, the IMF officially established control of the dinar. The Iraq SDR rate changed from 2.53758 to .000466938. The rate as of April 30, 2009 is .000570626 which is approximately 1800 dinars. The SDR exchange rate is higher than the exchange rate for USD.
Iraq was placed under Article XIV. To quote from the Request for the Emergency Post-Conflict Assistance document “Iraq has not yet accepted the obligations of Article VIII, Sections 2, 3 and 4 of the IMF’s Articles of Agreement. Iraq has been granted observer status in the World Bank”.
This was the status of Article VIII in the 2007 consultation.
Iraq: 2007 Article IV Consultation, Fifth Review Under the Stand-By Arrangement,
“Iraq continues to avail itself of the transitional arrangements under Article XIV.
The Fund is conducting a review of Iraq’s foreign exchange regulations. The de facto
exchange rate regime is a crawling peg to the U.S. dollar.”
This was the status of Article VIII in the 2008 review.
2008 International Monetary Fund December 2008
Iraq: Second Review Under the Stand-By Arrangement and Financing Assurances
Iraq is making progress to accept the obligations of Article VIII, Sections 2(a), 3, and 4, of the Fund’s Articles of Agreement (SMEFP-2, #17). The staff’s review of exchange laws and regulations has almost been completed, and the authorities intend to implement staff’s recommendations in this area to complete the process.
This is the attached reference #17 outlining Iraq’s position.
Attachment II. Iraq—Second Supplementary Memorandum of Economic and Financial
November 29, 2008
17. We have made progress in moving towards accepting the obligations of Article VIII,
Sections 2(a), 3, and 4, of the Fund’s Articles of Agreement. The review of exchange laws and regulations is nearing completion. We will work with Fund staff to complete the review as soon as possible and are ready to implement the Fund staff’s recommendations once we receive them. In the meantime, we are committed to not impose any restrictions on the making of payments and transfers for current international transactions nor to introduce any multiple currency practices.
At this time, there is no information that has been posted on the IMF website concerning this loan. The only information appears to be coming from Iraq sources.
The $64,000 dollar question is “what is the status of Article VIII under the new loan that Iraq has evidently signed with the IMF.”