Mnt Goat Extensive Updates

If you remember a couple months ago, at just about this timeframe, the Iraqi economist Yasser Al-Mutawali asked the question to the Finance Ministry and to the general public – “Is It Time To Remove The Zeros” ?

So, another month has passed and we still didn’t see this project executed. But should we? We have been since told by my CBI contact on the committee that we should expect to see the ramped-up Project to Delete the Zeros sometime soon after the U.S. election period is over sometime in November. This period of time through December will begin the process for the swap out with the newer lower denominations. To me this also means about a 1:1 at par rate of the IQD with the US dollar. But remember this is IN-COUNTRY only. Also remember these actions ALWAYS have dependencies. Nothing is a guarantee! I want to make this VERY CLEAR to you today.

Then the news media from Iraq tells us about the “cash center” that recently opened in Karkh. It is used solely for the intake of the three zero dinar notes or dollars. Folks they are already sucking in the three zero notes. What more do you want? It’s mid-October already just 14 days to the US elections. With the electronic banking and the reorganization of the banks, the citizens seem to have regained confidence in their banking system.

The reason why they had to open this new cash only center, according to my CBI contact, is that there was a huge response to ditch these three zero notes before they may become obsoleted and the lower notes replace them. Citizens remember what happened in 2004, when they had to turn in their Saddam Hussien notes by a deadline. Many people got stuck with these notes, as they forgot or did not trust the banks. They lost millions when the deadline came and they were obsoleted/voided. The CBI has not yet announced a deadline but still the citizens remember what happened back 20 years ago. So in reality, unofficially, the process of deleting the zeros has already begun. Yes, it is underway according to my CBI contact.

Once again, the Project to Delete the Zeros raises its head up in many new articles in October too. But why is this? Is it close at hand?  But also remember the past. I know from experience from many of my conversations with my CBI contact that they pivot on goals, set them and then move in that direction. Often, they underestimate the timeframes needed to get there. They have to get there first and hope for the best.

So today is the third week of the month and as usual I want to give a short summary of the progress of Iraq has made this period.  I also like to call them benchmarks, accomplishments or maybe even a recap.

So, let me now list them and summarize them for you below. But first I have presented a very current article below from the CBI information on the strategies they have developed and have been using for these reforms. Do not take this article lightly. It is jam packed with information. Yes, there are strategic plans to get them where they want to go.

You may ask why I do this summary?

I want to help all of you to truly understand the progress in Iraq in these reforms. We all ask at some point why it has been taking so long. Now you can see for yourselves why.  When it is time, it will be on FOREX and with the kind of rate we all anticipate. Today the IQD rate in the Quantum Financial System (QFS) is $3.96. When they decide to allow the IQD back on the exchanges, the rate will be mapped over to the exchanges from the QFS. There is also a series of other currencies that are also expected to be mapped over to. Don’t ask me what they are as I am not going to play that game. Currencies revalue and devalue ever day. That is the nature of the currency exchanges.

Remember QFS has been in beta mode testing since 2012, when it was slotted by the IMF to be first mapped over in early January 2013 but was held up due the Obama administration, that redefined the reform plans and requirements for Iraq first, thus halting the process that was underway by Dr Shabibi for the reinstatement at that time.

We must remember that the RV is not an event by itself that will just happen someday but it is a byproduct of the reforms. It can not happen without the reforms and one of the reforms (besides all the banking, insurance and stock market reforms) is the currency reform. The Project to Delete the Zeros will begin the final stage. The reason why they do not list this currency reform on the diagram in the White Paper, as one of the reforms in the Pillar of Financial Reforms, is that it is a byproduct of the other reforms. Get it? In other words, if these strategies are completed the likelihood of seeing the IQD on FOREX again is extremely high. I believe it is inevitable.

It is a very nice summary of why we are still waiting so long for the RV. It summarizes the strategies of the CBI and why the hold up.  I hope you can take a few minutes read through it and learn exactly what is going on in Iraq. Then go through my summary list of items for October progress.

BANKING REFORM METHODOLOGY AT THE CENTRAL BANK (2016-2026)

The steps of banking reform that the Central Bank has been taking since 2016 began when Mr. Ali Mohsen Al-Alaq was appointed Governor of the Central Bank of Iraq on 9/9/2014, which is a difficult and complex stage in Iraq’s security and economic history.

Iraq was facing security and economic shocks due to the occupation of 40% of the country’s territory by the terrorist ISIS and the global drop in oil prices in June 2014 by 75%. Al-Alaq was reassigned again on 1/23/2023 after the emergence of new crises and challenges at the economic, financial and banking levels, focusing on the lack of control over the unprecedented rise in the US dollar exchange rate and the rise in the annual inflation rate to (7.5%) in January 2023.

The Central Bank worked from 2016 to 2020 to address the effects of the economic and security shocks, the most prominent of which was the government’s inability to pay employees’ salaries on time. The Central Bank was able to use its foreign exchange reserves and the method of rediscounting treasury transfers from government support in the amount of 16 trillion dinars, and the crisis was overcome at the time.

In 2015, in light of these difficult economic conditions, the Central Bank began to move to develop its plans for the coming years and draw up a methodology for banking reform and structural, technical and administrative development of the Central Bank.

THE ISSUANCE OF ITS FIRST STRATEGY (2016-2020):

This resulted in the issuance of its first strategy for the years (2016-2020), which included 5 main objectives and 140 sub-objectives, 129 of which were achieved, at a rate of 92%, during the years of implementing the strategy. It contributed to establishing the basic structures and pillars for moving to a new stage of financial and banking reform, accompanied by the strategic banking projects plan for the years (2019-2023) and the issuance of the second strategy (2021-2023).

THE ISSUANCE OF THE SECOND STRATEGY (2021-2023):

The issuance of the second strategy (2021-2023) was to complete the achievement of the sub-objectives that could not be implemented in the first strategy, numbering (11) sub-objectives, during which the government continued to resort to the Central Bank and obtain (30) trillion dinars, and the total amount owed by the government became (46) trillion dinars.

During the second term of the Governor, which began in 2023, the Central Bank worked on studying the achievements of the two previous strategies and diagnosing the foundations of the desired reform. The efforts to prepare the third strategy continued throughout 2023, and the foundations and foundations were built to set the goals for this new strategy for the years (2024-2026),

THE ISSUANCE OF THE FOURTH STRATEGY (2024-2026):

The next strategy, the fourth for the years (2024-2026), which derived its main and sub-goals from the state’s general economic policies and its strategy for financial and banking reform adopted by the government in the government program and from Central Bank Law No. 56 of 2004. It included programs with clear goals and initiatives for a period of three years in a special, complex economic and financial circumstance fraught with risks and challenges at the level of internal and external economic and financial relations.

The third strategy identified the main goals with 7 goals, 24 sub-goals and 75 initiatives to achieve the main and sub-goals, and charted the path for banking and financial reform according to the following strategic goals:

• Supporting and enhancing monetary stability.
• Enhancing digital transformation, activating electronic payment and supporting cyber security.
• Enhancing financial inclusion .
• Maintaining a sound financial system
• Developing the organizational structure and developing human resources capabilities.
• Enhancing the position of the Central Bank locally and internationally.
• Enhancing compliance of the banking sector and the non-banking institutions sector in line with international standards.

Programs, policies and initiatives have been identified to achieve the goals, and perhaps the most prominent program is the launch of the National Strategy for Bank Lending in Iraq (2024-2029) and the approval of the Council of Ministers to implement it, which will restructure banking financing in Iraq in addition to leaving the electronic platform and adopting correspondent banks in foreign transfers, protecting the financial system, enhancing financial inclusion, managing monetary and financial stability, developing oversight and supervision, developing regulation in the banking sector, completing the development of the infrastructure for digital transformation, licensing digital banks, implementing regulatory policies in the Central Bank in accordance with the frameworks and technologies adopted in global central banks, raising the capabilities of human resources, developing banking operations, strengthening the bank’s internal and external relations, and representing it locally and internationally.

What has been presented for the ten years of the financial and banking reform process confirms that the next two years will inevitably result in the transition to comprehensive and radical reform of the Iraqi banking sector and its transformation into a solid sector that contributes to sustainable development.

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IRAQ: SUMMARY OF ACCOMPLISHMENTS FOR OCTOBER 2024 PERIOD:

• Announced that removing zeros from the local currency is a process that has taken place in more than 60 countries over the past years,” said Mazhar Mohammed Saleh, the Prime Minister’s financial advisor. “This step comes after economic inflation occurs in countries, and therefore they resort to deleting zeros in order to keep up with prices in the markets,” he explained.

• The Trade Bank of Iraq announced the opening of the cash deposit center in the Karkh side. He explained that “this center receives all cash deposits only for all customers,” indicating that “this is a new service that the bank will launch with the aim to contribute to reducing the pressure of cash deposits on its other branches in Baghdad.

• The Central Bank of Iraq decided to close the Babylon Bank. Refer the bank to forced liquidation based on the provisions of Article No. 69 of Banking Law No. 94 of 2004. The reorganization of the banks. Some were merged or liquidated, as my CBI contact told us was coming.

• At the start of 2024, the Cabinet approved a contract with UK-based professional services firm Ernst & Young (EY) to study the merger of Industrial Bank, Real Estate Bank, and Agricultural Bank [Agricultural Cooperative Bank into a single entity.

• The Governor of the Central Bank, Ali Al-Alaq, announced today, Wednesday, the success of the digital transformation and electronic payment plan in Iraq, while stressing that digital banks will allow citizens to manage their operations through the phone.

• The Prime Minister stressed that the government has made great strides in the financial and banking reform file, and 95% of bank transfers have been completed through the electronic platform, and less than 5% remains to be completed by the end of this year,

• Iraqi Prime Minister Mohammed Shia al-Sudani announced that Iraq will switch to a correspondent banking system to conduct 100% of foreign transfers early next year. Currency auctions end the end of 2024.

• MP Sharif Suleiman praised, on Tuesday, the visit of Prime Minister Mohammed Shia al-Sudani to New York to participate in the 79th session of the United Nations, stressing that Iraq is qualified to control “important” files and is on the verge of “major” economic changes and an urban revolution in line with global developments. 

• Al-Sudani on the sidelines of the United Nations General Assembly to discuss reforming the Iraqi banking sector, financial relations with the United States, and combating illicit financing.” According to the statement, “presented to al-Sudani the significant progress made by Iraq in reforming the banking sector, which has led to expanding Iraq’s international financial outreach and increasing financial inclusion.”
• Prime Minister Mohammed Shia al-Sudani expressed, on Thursday, Iraq’s readiness to enter into a partnership with American companies in the oil industry sector, revealing at the same time his government’s intention to establish a new Iraqi bank.

• PM Al-Sudani participated in a dialogue session held in New York by the American Chamber of Commerce and Al-Monitor, in the presence of an elite group of investors, businessmen, representatives of American companies, and the Iraqi-American Business Council. His Excellency pointed to the new reality of Iraq, which is witnessing an economic and developmental renaissance in all its sectors, and has also taken great strides in the field of energy investment and associated gas.

• The revealing the drafting of an integrated draft law to regulate electronic payment operations.

• Advisor to the Prime Minister and Chairman of the Supreme Committee to Support the Iraqi Dinar, Qasim Al-Dhalimi, announced the committee’s success in restoring the citizen’s confidence in the dinar, while indicating that it provided mechanisms to preserve the solidity of the dinar and the financial bloc.

• The Securities Commission announced the launching of its new website to promote investment in Iraq. While it indicated that an agreement had been concluded with Egypt to update the electronic trading system, it confirmed the development of a strategy to transform Iraq into a regional investment center.

• As part of its financial reform efforts, Iraq’s Cabinet has approved the allocation of 4 billion dinars [$3 million] to the Iraqi Securities Commission for the modernization and maintenance of electronic systems used for stock and bond trading.

• The Patriotic Union of Kurdistan confirmed that it is working to support and assist the disputed areas and is  working to activate Article 140 of the permanent Iraqi constitution and implement all its paragraphs

• Iraq increased its gold holdings to 152.6 tons, after its gold holdings were 148.3 tons, which represents 11% of its remaining reserves.

• The Undersecretary of the Ministry of Oil for Refining Affairs, Hamid Younis, announced the start of aviation fuel export operations from Iraqi ports.  He pointed out that the export process is a step in the right direction, to enhance Iraq’s role globally among the countries producing and exporting oil and its derivatives.

• The Central Bank of Iraq told Kurdistan that the agreement concluded between the Kurdistan Regional Government and the federal government obliges all employees to open bank accounts. That employees who do not open a bank account and do not register in the “Hesabi” project until March 2025, will not be able to receive their salaries.

• The Supreme Committee for Digital Transformation, headed by Prime Minister Mohammed Shia Al-Sudani, approved the strategic plan for digital transformation.

• Rafidain Bank announced that the number of effective and completed branches of the comprehensive banking system has reached 44 branches, distributed in Baghdad, Anbar, and Najaf, in addition to the border crossings of Zurbatiyah, Safwan, Arar, and Trebil.

• The results during 2023 and 2024 recorded a qualitative leap in the volume of transactions in electronic payment operations and the use of modern banking technologies. The rate of digital transformation and electronic payment increased to 48.5% compared to 20% in the past years.

• The Securities Commission announced today, Thursday, the signing of an agreement with the International Finance Corporation to develop the Iraqi market, and while it indicated the preparation of a guidebook to raise the transparency of companies, the new website of the Iraqi Stock Exchange will cover spot stock prices and is a qualitative leap.

• The Iraqi Securities Commission revealed a project with the Qatar Stock Exchange that will allow for the joint establishment of companies, leading to “dual listing” that will allow the listing of Iraqi shares in both the Iraqi and Qatari markets.

• Indicated that the meeting coincides with the launch of financial transfers to Turkey, according to a new mechanism carried out in the euro currency and implemented within Turkey through its banks.

• The Ministry of Finance said in a statement received by the Iraqi News Agency (INA): “The World Bank issued the Business Ready 2024 (B-READY) report, which showed that Iraq is witnessing a major transformation in improving the business environment and public services, which has made it competitive globally.

• The digital transformation process in the Iraqi banking sector, which is proceeding at an accelerating pace, coincides with the emergence of so-called digital banks, which are a new experience for the entire world. The CBI received about (60) to (70) requests to work with digital banks

• Iraq has become an economic power that should not be underestimated, and has all the qualifications and capabilities to join the World Trade Organization (WTO) after completing all preparations for that.

• Council of Ministers approves the National Strategy for Bank Lending in Iraq on 8/18/2024, which was launched by the Central Bank on 5/25/2024,  CBI makes a clear announcement of the beginning of the actual phase of implementing its third strategies for banking reform, which includes the national strategy for lending, environmental and social standards, and corporate governance for banks.

• CBI draws a clear roadmap in agreement with the global Oliver Wyman Company to start developing the banking sector.

• The Federal Court interprets the phrase Iraq is fully sovereign in the Constitution Today, Tuesday (October 8, 2024), the Federal Supreme Court issued a decision that included the interpretation of the phrase (fully sovereign) contained in Article (1) of the Constitution of the Republic of Iraq for the year 2005.

• The US Energy Information Administration announced that Iraq exported more than 54 million barrels of crude oil and its derivatives to the United States during seven months of the current year.

• The Parliamentary Finance Committee is expected to discuss the 2025 budget next November, amid a general trend to pass it easily and not amend it significantly.

• Finance Minister Taif Sami Mohammed stressed, on Thursday, the need to adhere to timetables to achieve economic reforms, as outlined in the strategies.

• The Parliamentary Finance Committee expected, on Sunday, that non-oil revenues in the 2025 budget would reach 30 trillion dinars, represented by electricity collection, taxes, and revenues from the Baghdad Municipality and all municipal departments

• The International Labor Organization confirmed on Wednesday that the current government has developed programs and policies that help facilitate the transition to the formal economy.

The Prime Minister stressed that “the government has regained citizens’ confidence, which is an important achievement that must continue, especially in the service sector,” noting that “infrastructure projects are a priority for the government, and it is imperative to complete them, especially the stalled ones.