Economic growth in Iraq at 12% in 2011 ~ Restructuring of state-owned Iraqi banks to be completed in June 2011
March 2011
IMF Country Report No. 11/75
Iraq: Second Review Under the Stand-By Arrangement, Requests for Waiver ofApplicability, Extension of the Arrangement, and Rephasing of Access—Staff Report; Press Release on the Executive Board Discussion; and Statement by the Executive Director for Iraq.
Financial Sector
We are in the final stages of completing the export metering projects and the certification of the export metering systems. Considerable progress has also been made in completing the installation of a comprehensive domestic custody-transfer metering system and almost 50 percent of the envisaged metering points have been installed. We expect the entire project to be completed by end-2011 (a new date for this structural benchmark initially envisaged for end-December 2010).
These systems will also allow us to move ahead with the planned full review of the domestic oil sector to reconcile the flows of oil and oil products with the financial flows between the state-owned oil companies and the budget (a structural benchmark for end-June 2011). In this connection, we also plan to conduct a streamlined Public Expenditure Review of the oil ministry, together with the ministries of health, education, and public works, with the assistance of the World Bank.
*We will continue to ensure that no direct subsidy is placed on any fuel products in Iraq. To eliminate hidden subsidies, we will ensure that all ministries, governmental agencies, and public enterprises will pay domestic market prices for fuel purchases starting in 2011.
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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:
(i) deal with all legacy external liabilities taking into account the government’s actions in the context of Iraq’s external debt restructuring
(ii) indentify and propose to write-off non-performing loans to defunct state-owned enterprises;
(iii) propose a course of action for other remaining unreconciled accounts; and
(iv) after the balance sheets have been cleaned up, revalue the remaining foreign currency denominated balance sheet items. The BRU will work under the supervision of the Restructuring Oversight Committee (ROC), consisting of the Minister of Finance, the Governor of the CBI, and the Chairman of the BSA. The BRU will send its recommendations for final approval to the respective boards of the two banks.
Through this process, we aim to complete the restructuring of the balance sheets of Rafidain and Rasheed by end-June 2011 (a structural benchmark).
http://www.imf.org/external/pubs/ft/scr/2011/cr1175.pdf
