May 16, 2010Iraq CBI's Sinan Shabibi ~ Gov't Bond Sale To Fund Budget
Iraq's central bank is pushing the government to sell bonds to fund a budget deficit and help wean the fragile country off of external support as it rebuilds its infrastructure and economy, its governor said Sunday.
"The government has planned this [a bond sale] as part of the financing of the budget," Sinan Al Shabibi said in an interview in Bahrain.
"We are pushing for both [bonds and T-bills] to deepen the market. Any kind of financing is welcome," Al Shabibi said, adding that plans for a bond sale "aren't progressing yet" but that he expected them to do so "quite soon."
"We are suggesting, and expect, the government to use all options available," Al Shabibi said. The central bank monitors all issuances to make sure it doesn't affect monetary policy, he said.
Iraq--still battling sectarian conflict after years of war--is banking on a boost in oil production to stimulate the economy. Al Shabibi said he hopes that international banks will also be involved in financing the government's reconstruction effort.
"We don't want to depend on the state for financing," he said, adding that economic growth hinges on oil "on the quantity side" as well as how oil prices hold up.
A large budget deficit projected for this year has had Iraq turn to the International Monetary Fund and World Bank for loans.
"The government is still in negotiations with the World Bank" for a $500 million soft loan, Al Shabibi said.
While the central bank is talking to many international banks interested in setting up in Iraq, the country's security situation is still a sticking point, he said.
"We are talking a lot to them, they are welcome," he said. "They are very sensitive to security questions. I think security problems are exaggerated, and we try to explain that."
He said a planned pullout of U.S. troops from the country "will be a sign of security."
http://www.iiss.org/whats-new/iiss-in-the-press/may-2010/wtos-lamy-g-20-yet-to-fill-regulatory-gap/iraq-central-bk-chief-govt-bond-sale-to-fund-budget/
