I know this has been out for awhile, but I saw another few postings on other sites about the IMF and Iraq with regards to July of this year...any thoughts??
Shabibi addresses monetary issues up to July 24, 2012.
IRAQ: LETTER OF INTENT
March 3, 2011
Mr. Dominique Strauss-Kahn
Managing Director
International Monetary Fund
700 19th Street, N.W.
Washington, D.C. 20431
Dear Mr. Strauss-Kahn:
The Stand-By Arrangement (SBA) for Iraq that was approved in February 2010 by the Executive Board of the International Monetary Fund (IMF) has continued to provide us with a valuable anchor for our economic policies during a period of political transition and considerable uncertainty with regard to the global economic outlook. The key objectives of the SBA remain the preservation of macroeconomic stability, and the adoption of policies and measures to ensure sustainable growth and poverty reduction. In this regard, the program offers a framework for our structural reform agenda, as we still face many challenges in the rebuilding of key economic institutions. Our reform efforts are particularly geared towards improving public financial management, including the management of our hydrocarbon resources, and developing a financial sector that can support private sector activity. Last but not least, the SBA provides us access to financial assistance to support the economic stability and reconstruction of Iraq in challenging times.
We remain committed to implementing the policies described in our Letter of Intent dated February 8, 2010 and the Memorandum of Economic and Financial Policies attached to that letter, as well as to the policies described in our supplementary Letter of Intent of September 18, 2010. The attached Memorandum of Economic and Financial Policies provides information on our recent efforts and achievements, and outlines our economic program for 2011, the second year of the SBA. The policies and measures described in the attached Memorandum will continue to aim at maintaining macroeconomic stability, in particular by ensuring fiscal sustainability, and moving ahead with the implementation of our structural reform agenda.
While we believe our fiscal and monetary policies were on track in 2010, fiscal end-year data are not yet available. We therefore request waivers of applicability for the end-December 2010 performance criteria for the central government fiscal deficit and the central government current spending bill, for which data are not yet available and for which there is no evidence that these were not observed. All other end-2010 performance criteria were met. As we reported at the time of the first review under the SBA, we met all the performance criteria for end-June 2010, with the exception of the floor under the Central Bank of Iraq’s (CBI) net international reserves. We also met the end-June 2010 performance criterion related to the central government current spending bill for which data had not yet been available at the time of the completion of the first review.
Furthermore, we request an extension of the SBA by five months, through July 24, 2012. This would allow time for an additional review based on end-December 2011 performance criteria, which underscores our commitment to the fiscal and monetary policies outlined in the attached MEFP, and also allow for more time for the implementation of the structural reform measures under the program. Linked to this, and as our financing needs have shifted to 2011, we request a rephasing of the remaining disbursements under the SBA, with two equal disbursements of SDR 297.10 million, equivalent to 25 percent of quota each, following the completion of the second and third reviews, a disbursement of SDR 891.30 million, equivalent to 75 percent of quota, following the fourth review, and a final disbursement of SDR 118.84 million, equivalent to 10 percent of quota, following the new fifth review in 2012. We understand that the SBA will continue to be subject to semi-annual reviews, semiannual performance criteria, and structural benchmarks, as set out in the attached Tables 1 and 2, and described in more detail in the attached Technical Memorandum of Understanding (TMU). In this regard, we understand that the completion of the third review under the SBA—expected to take place on or after May 31, 2011—will require observance of the quantitative performance criteria for end-December 2010 specified in Table 1, that completion of the fourth review—expected to take place on or after October 30, 2011—will require observance of the quantitative performance criteria for end-June 2011, and that the completion of the fifth review—expected to take place on or after May 31, 2012—will require observance of the quantitative performance criteria for end-December 2011.
We remain firmly committed to maintaining the independence of the CBI, as well as to ensuring that all of Iraq’s oil exports are in accordance with international agreements and that all oil export revenues accrue to the central government. Given the large uncertainties and the high volatility of international oil prices, we continue to base our projections and the government’s budget for 2011 on conservative assumptions for oil export volumes (2.2 million barrel per day on average) and oil prices (an average price of $76.50 per barrel for Iraqi oil). As we also remain firmly committed to containing current government spending, in the event that by end-June 2011 our oil export revenues turn out to be higher than our projection of $30.5 billion, we plan to save half of the additional revenues to rebuild our financial buffers, while using the other half (up to a limit of $5 billion) to finance additional investment to improve the delivery of basic public services. Moreover, if by the time of the fourth program review we see that our oil export revenues in the first three quarters of 2011 have exceeded our projection of $46 billion for that period by more than $3 billion, we intend to treat the SBA as precautionary. Vice versa, should oil export receipts fall below our assumptions, we will reduce spending by half of the revenue shortfall and cover the remaining gap by further using our financial buffers and seeking additional external support, including from the IMF. If the revenue shortfall turns out to be sizable, or if the reserve position of the CBI weakens below program targets in between test dates, we will consult on the policy response with IMF staff. Similarly, we also intend to treat the SBA as precautionary if by the time of consideration of the fourth review it is expected that the rate of execution of the government’s capital budget in 2011 will be less than 90 percent.
Overall, our economic program continues to be on track and we believe that the policies set forth in the attached Memorandum of Economic and Financial Policies are adequate to achieve our objectives. In support of our policies, we request the Executive Board of the IMF to complete the second review and approve the third disbursement under the SBA of SDR 297.10 million. We remain fully aware of the many challenges ahead and we are prepared to take additional measures if necessary. We will consult with the IMF on the adoption of these measures and in advance of any revision to the policies contained in our economic program, in accordance with IMF policies on such consultation. The Iraqi government and the CBI will continue to provide the IMF with the necessary information for assessing progress in implementing our program, as specified in the attached TMU, and will maintain a close policy dialogue with IMF staff. We authorize the IMF to publish this Letter of Intent and its attachments, as well as the related staff report, on the IMF’s website following consideration of our request by the IMF’s Executive Board.
Sincerely yours,
/s/ /s/
Dr. Rafe Al-Essawi / Dr. Sinan Al-Shabibi
Minister of Finance of Iraq / Governor of the Central Bank of Iraq
Shabibi addresses monetary issues up to July 24, 2012.
IRAQ: LETTER OF INTENT
March 3, 2011
Mr. Dominique Strauss-Kahn
Managing Director
International Monetary Fund
700 19th Street, N.W.
Washington, D.C. 20431
Dear Mr. Strauss-Kahn:
The Stand-By Arrangement (SBA) for Iraq that was approved in February 2010 by the Executive Board of the International Monetary Fund (IMF) has continued to provide us with a valuable anchor for our economic policies during a period of political transition and considerable uncertainty with regard to the global economic outlook. The key objectives of the SBA remain the preservation of macroeconomic stability, and the adoption of policies and measures to ensure sustainable growth and poverty reduction. In this regard, the program offers a framework for our structural reform agenda, as we still face many challenges in the rebuilding of key economic institutions. Our reform efforts are particularly geared towards improving public financial management, including the management of our hydrocarbon resources, and developing a financial sector that can support private sector activity. Last but not least, the SBA provides us access to financial assistance to support the economic stability and reconstruction of Iraq in challenging times.
We remain committed to implementing the policies described in our Letter of Intent dated February 8, 2010 and the Memorandum of Economic and Financial Policies attached to that letter, as well as to the policies described in our supplementary Letter of Intent of September 18, 2010. The attached Memorandum of Economic and Financial Policies provides information on our recent efforts and achievements, and outlines our economic program for 2011, the second year of the SBA. The policies and measures described in the attached Memorandum will continue to aim at maintaining macroeconomic stability, in particular by ensuring fiscal sustainability, and moving ahead with the implementation of our structural reform agenda.
While we believe our fiscal and monetary policies were on track in 2010, fiscal end-year data are not yet available. We therefore request waivers of applicability for the end-December 2010 performance criteria for the central government fiscal deficit and the central government current spending bill, for which data are not yet available and for which there is no evidence that these were not observed. All other end-2010 performance criteria were met. As we reported at the time of the first review under the SBA, we met all the performance criteria for end-June 2010, with the exception of the floor under the Central Bank of Iraq’s (CBI) net international reserves. We also met the end-June 2010 performance criterion related to the central government current spending bill for which data had not yet been available at the time of the completion of the first review.
Furthermore, we request an extension of the SBA by five months, through July 24, 2012. This would allow time for an additional review based on end-December 2011 performance criteria, which underscores our commitment to the fiscal and monetary policies outlined in the attached MEFP, and also allow for more time for the implementation of the structural reform measures under the program. Linked to this, and as our financing needs have shifted to 2011, we request a rephasing of the remaining disbursements under the SBA, with two equal disbursements of SDR 297.10 million, equivalent to 25 percent of quota each, following the completion of the second and third reviews, a disbursement of SDR 891.30 million, equivalent to 75 percent of quota, following the fourth review, and a final disbursement of SDR 118.84 million, equivalent to 10 percent of quota, following the new fifth review in 2012. We understand that the SBA will continue to be subject to semi-annual reviews, semiannual performance criteria, and structural benchmarks, as set out in the attached Tables 1 and 2, and described in more detail in the attached Technical Memorandum of Understanding (TMU). In this regard, we understand that the completion of the third review under the SBA—expected to take place on or after May 31, 2011—will require observance of the quantitative performance criteria for end-December 2010 specified in Table 1, that completion of the fourth review—expected to take place on or after October 30, 2011—will require observance of the quantitative performance criteria for end-June 2011, and that the completion of the fifth review—expected to take place on or after May 31, 2012—will require observance of the quantitative performance criteria for end-December 2011.
We remain firmly committed to maintaining the independence of the CBI, as well as to ensuring that all of Iraq’s oil exports are in accordance with international agreements and that all oil export revenues accrue to the central government. Given the large uncertainties and the high volatility of international oil prices, we continue to base our projections and the government’s budget for 2011 on conservative assumptions for oil export volumes (2.2 million barrel per day on average) and oil prices (an average price of $76.50 per barrel for Iraqi oil). As we also remain firmly committed to containing current government spending, in the event that by end-June 2011 our oil export revenues turn out to be higher than our projection of $30.5 billion, we plan to save half of the additional revenues to rebuild our financial buffers, while using the other half (up to a limit of $5 billion) to finance additional investment to improve the delivery of basic public services. Moreover, if by the time of the fourth program review we see that our oil export revenues in the first three quarters of 2011 have exceeded our projection of $46 billion for that period by more than $3 billion, we intend to treat the SBA as precautionary. Vice versa, should oil export receipts fall below our assumptions, we will reduce spending by half of the revenue shortfall and cover the remaining gap by further using our financial buffers and seeking additional external support, including from the IMF. If the revenue shortfall turns out to be sizable, or if the reserve position of the CBI weakens below program targets in between test dates, we will consult on the policy response with IMF staff. Similarly, we also intend to treat the SBA as precautionary if by the time of consideration of the fourth review it is expected that the rate of execution of the government’s capital budget in 2011 will be less than 90 percent.
Overall, our economic program continues to be on track and we believe that the policies set forth in the attached Memorandum of Economic and Financial Policies are adequate to achieve our objectives. In support of our policies, we request the Executive Board of the IMF to complete the second review and approve the third disbursement under the SBA of SDR 297.10 million. We remain fully aware of the many challenges ahead and we are prepared to take additional measures if necessary. We will consult with the IMF on the adoption of these measures and in advance of any revision to the policies contained in our economic program, in accordance with IMF policies on such consultation. The Iraqi government and the CBI will continue to provide the IMF with the necessary information for assessing progress in implementing our program, as specified in the attached TMU, and will maintain a close policy dialogue with IMF staff. We authorize the IMF to publish this Letter of Intent and its attachments, as well as the related staff report, on the IMF’s website following consideration of our request by the IMF’s Executive Board.
Sincerely yours,
/s/ /s/
Dr. Rafe Al-Essawi / Dr. Sinan Al-Shabibi
Minister of Finance of Iraq / Governor of the Central Bank of Iraq
