Ladygolddinar: I read on another forum that we need article 8 from the imf before Iraq can reval, is there any truth to this?
Tlm724 Administrator Bondlady’s Corner: Yes there is truth in that. You might find it informative to read this chat we did about Iraq and multiple currency practices.
BLC Chat 01/13/2016 IMF Letter of Intent Comparison and Investment Law
(Blast from the Past too)
[tlm724] I was reading an old chat BondLady did regarding Iraq’s Letter of Intent to the IMF – Thursday, July 14, 2011
[tlm724] I was comparing that LOI to the new one
[tlm724] the one from 2011 was pretty specific ie: exchange rate
[tlm724] BUT the important part was the audit, let me show you current events first
[tlm724] emmaduke translated a document from the CBI and the best I can tell it has to do with an audit, thanks emmaduke !!
[tlm724] now the new LOI has several mentions of the audit, let me show you those first
The government will not resort to the accumulation of arrears to finance the deficit. It commits to a zero ceiling on external arrears (continuous quantitative target, Table 1) and regular inventories of domestic arrears with a view to ensuring that new arrears do not accumulate and to paying them down after proper audit, as will be done for the existing stock of domestic arrears
[tlm724] Survey, audit and pay domestic arrears. As a first step, the Ministry of Planning will complete, by end-February 2016, a survey of domestic arrears on investment spending accumulated by all ministries as of end-September 2015 (structural benchmark, Table 2) and the Ministry of Finance will complete a survey, also by end-February, on current spending arrears accumulated by the same units as of end-September;
in addition, similar surveys of arrears as of end-December 2015 by end-March 2016, and as of end-March 2016 by end-May 2016 will be completed. On the basis of each of these surveys, the government will prepare plans for the orderly payment of the arrears, which will include an independent audit of the arrears and a repayment schedule in line with the government’s financing capacity.
As of end-April 2015, the government identified ID 7.3 trillion in domestic arrears, out of which ID 5 trillion accumulated in 2015 (¶13); the Board of Supreme Audit will audit these arrears to check their validity by end-February 2016. So far, the government has included ID 2.4 trillion for the repayment of domestic arrears in its revised 2016 budget (¶25).
As a first step to restructure these banks, the Ministry of Finance will, by end February 2016, appoint international auditors to audit the latest financial statements of Rasheed Bank and Rafidain Bank according to international standards (structural benchmark, Table 2), in cooperation with the Executive Committee for the restructuring of these banks and the World Bank.
[tlm724] Appointment of one or several international auditors to audit the latest financial statements of Rasheed Bank and Rafidain Bank according to international standard
[tlm724] this auditing process must surely include a note count no ??
[cat] uh huh
[RCS1947] one would think
[tlm724] ya can’t audit without knowing how much money you have anywho thats the recent LOI now lets go back to 2011
[tlm724] wait btw I think Ernst & Young are going to be the auditors and here is why
Zebari discuss with Ernst & Young, the company improve the banking system March 4, 2015 21:46 (Independent) ..
Search Finance Minister Hoshyar Zebari, on Thursday evening, with a representative of Ernst Young (EY) accounting and advisory services Ahmed judge and a number of the company’s experts how to improve the banking system in Iraq, according to international standards. They also discussed ways to settle the Iraqi debt in light of the procedures of the Paris Club, as well as increase the efficiency of the banking system in Iraq contact with major international financial institutions. (End)
[tlm724] ok 2011
Financial Sector 12. Financial intermediation is at a very low level in Iraq. A functioning banking sector is essential for the development of a strong private sector.
We have begun to embark on our banking sector reform strategy:
A critical step will be to complete the financial restructuring of the two largest state owned banks, Rafidain and Rasheed, based on their completed financial and operational audits. In this regard, we formed a Bank Reconciliation Unit that comprises technical level staff from the banks, the CBI and the Ministry of Finance, and with the assistance of Ernst and Young (who were the agents of the Ministry of Finance in the external debt restructuring process) to:
****A critical step will be to complete the financial restructuring of the two largest state owned banks, Rafidain and Rasheed, based on their completed financial and operational audits.*****
[tlm724] THEN Bondlady breaks this out :
MAY 31ST, 2011 The Central Bank of Iraq (CBI) and the Ministry of Finance indicated that the restructuring of the balance sheets of the two largest state-owned banks, Rafidain Bank and Rasheed Bank, will be completed at the end of June 2011.
The restructuring plan is being implemented by a Bank Reconciliation Unit (BRU), chaired by the CBI, with the participation at a technical level of staff from the CBI, the Ministry of Finance and other stakeholders.
The BRU’s objectives are to deal with the legacy assets and liabilities of the previous regime to identify and propose to write-off non-performing loans to defunct state-owned enterprises to propose a course of action for other remaining un-reconciled accounts and to revalue the remaining foreign currency denominated balance sheet items.
[tlm724] and to revalue the remaining foreign currency denominated balance sheet items.
[tlm724] here’s what she said and there’s some stuff in between but here’s the wrap up REMEMBER THIS IS FROM 2011
[BondLady] sooooooooooooooo with all of this being shown and the cbi saying this….
********* after the balance sheets have been cleaned up,*********
which we say as I’ve provided all the articles with links to show it imo appears to me everything has been done to bring on this statement by the cbi
******** revalue the remaining foreign currency denominated balance sheet items. ***********
this is pretty huge imo, I realize it says revalue the foreign currency but it has to be talking about Iraq’s currency because it can’t revalue another country’s currency it can only revalue its own, so imo this to me says that after the audit was completed and they knew how much iqd was in country and out of country and how much their debts were and all the banks to be prepared all of the deductions that needed to be included in the audits then with the remainder of the currency to be revalued? I sure hope I’m on target with all of this if not I’m sure I’ll hear about it if I’m not lol…hope u all enjoyed this and ty all who helped contribute to this post……drops the mic and walks off …BondLady
[tlm724] claps really loud cheers
[cat] u bet
[cstacy] tlm724 hmmm thanks
[tlm724] just something to consider Wink
[RCS1947] Very Happy
[cat] tlm724 thanks
[tlm724] yw but BL does the work Wink
[RCS1947] Scooter always said the R & R banks had to come clean!
[tlm724] RCS1947 thats right !
[tlm724] the point is this, IF Iraq has plans on making the dinar the sole currency for the country then an audit is the logical step and the IMF agreement (the current one) has a stipulation on MCP’s
[tlm724] I’ll show you
The government will gradually remove remaining exchange restrictions and multiple currency practice (MCP) with a view to eliminating exchange rate distortions. Such a move towards acceptance of the obligations under Article VIII of the IMF’s Articles of Agreement will send a positive signal to the investment community that Iraq is committed to maintain an exchange system that is free of restrictions and MCPs for current international transactions and thus facilitate creation of a favorable business climate.
[tlm724] that Iraq is committed to maintain an exchange system that is free of restrictions and MCPs for current international transactions and thus facilitate creation of a favorable business climate.
[tlm724] no more MCP’s
[tlm724] The government will gradually remove remaining exchange restrictions and multiple currency practice (MCP)
[tlm724] and just as important
[tlm724] As a first step, the government will, by end-February 2016, amend the Investment Law, or issue clarifying implementing regulations, to remove the limitation on transfer of investment proceeds that gives rise to an exchange restriction, as recommended by a recent technical assistance mission of the IMF
[tlm724] the Investment Law will remove the limitation on transfer of investment proceeds that gives rise to an exchange restriction
[tlm724] you getting this ?
[cat] uh huh
[tlm724] over a short time (IMO) Iraq will make the changes needed to their currency to become compliant with the obligations under Article VIII and everything that was needed to be done is now a structured plan under the tutelage of the IMF
[tlm724] no do overs, no slacking off, we will see great strides as long as the creek don’t rise and the dam holds. ok I’m done and tis a beautiful thing if ya ask me
[RCS1947] tlm724 the IMF calls for two quarterly reviews as in 3 months . What are your thoughts?
[cat] tlm724 great stuff we all love you and bondlady for all the help you do
[tlm724] cat yw
[tlm724] RCS1947 my thoughts are that is awesome ! that is of no concern to me at all I know the IMF has control as far as monetary policy, they proved it yesterday, doesn’t get much better then that IMO
[cat] *its coming*lol
[tlm724] yeppers lol
[tlm724] the difference today is the IMF is in charge ! This is a pivotal, defining time in Iraq. It’s their moment in sun (2016), thanks everyone !