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Article: “IMF moves to help Iraq condition undergoing regulatory program

The article is giving the opinion of a member of the CBI as well as that of the IMF. The CBI member Ismail said that the CBI believes that moving to a float would “slightly affect” the financial condition of the GOI positively while the IMF was saying that moving to a float would not positively affect government finances, in their view.

The argument from the IMF is that the vast majority of the government income is from oil revenue and is therefore from foreign countries (i.e., not in dinars). Thus, the IMF is probably correct with respect to solving the GOI financial crisis.

However, moving to a float will have a positive economic affect in the country over the longer term. …the Investment Law will allow foreigners to invest in Iraq with some guarantees… With the introduction of new investment from foreigners the float becomes a real possibility.

It will not only put a floor on the value of the dinar but, over time, will cause its value to rise. This is what we are looking for.  …the float WILL raise the value of the dinar, because the float will not be possible until foreigners begin investing in Iraq.

The influx of new money will allow for a reduction in the money supply and a rise in the value of the dinar.  This benefits us, but won’t affect the budget crisis much.  As KAP said…”a dinar is a dinar” within the country.