Administrator’s Weekly Report
Economy
March 27-April 3, 2004
HIGHLIGHTS

As of March 28, 2004, estimated crude oil export revenue reached $3.7 billion for 2004
(crude oil export revenue for 2003 [June - December] was $5.1 billion).

North Bank, the first new private bank chartered since the liberation, held its grand opening
at its new headquarters in Baghdad. It plans to open four branches in Kirkuk, Irbil, Suli, and
Dahouk in the very near future.
I. BUILD FINANCIAL MARKET STRUCTURES
Modernize the Central Bank; Commercial Banking System; Re-establish Baghdad Stock
Exchange; Restructure National Debt

Twelve of the eligible private banks signed up for the Visa payment system. An
announcement event is scheduled for April 13 at the Central Bank of Iraq.

North Bank, the first new private bank chartered since the liberation, held its grand opening
at its new headquarters in Baghdad. The bank plans to open four branches in Kirkuk, Irbil,
Suli, and Dahouk in the very near future.

Planning has begun for a Private Bankers Association to be established by mid April. The
association will be limited to private banks and act as a compliment to the Iraqi Bankers
Association.

The New Iraq Dinar (NID) has been stable for the past two months. At the NID auction held
on April 1, the settlement price was 1,425 Iraqi Dinars to the dollar, unchanged over the past
five days. The value of dollars sold at the auction varied over the week from $10.9 to $16.4
million. The exchange rate on the Baghdad streets was 1,427 Iraqi Dinars per dollars, on
April 1, unchanged over the previous four days. During the past week, the NID appreciated
0.21 percent against the dollar.
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NID appreciated 20.7 percent
NID depreciated 4.8 percent
NID depreciated 1.4 percent
Exchange Rate Movements
1800
1600
1400
1200
12
/2
5/
20
03
1/
1/
20
04
1/
8/
20
04
1/
15
/2
00
1/
22 4
/2
00
1/
4
29
/2
00
4
2/
5/
20
04
2/
12
/2
00
2/
19 4
/2
00
2/
26 4
/2
00
4
3/
4/
20
0
3/
11 4
/2
00
3/
4
18
/2
00
3/
25 4
/2
00
4
4/
1/
20
04
New Iraqi Dinars (NID) per US $1
New Iraqi Dinar monthly fluctuations:
 December 31 – January 31:
 February 1 – March 1
 March 2 – April 2
Old Saddam Rate (10K per $)
Street Market Price
Settlement Price (Auction)
Source: CPA Senior Advisor to the Central Bank of Iraq
Annualized Weekly Volatility of the NID
80.00%
70.00%
60.00%
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%
12
/2
5/
20
03
1/
1/
20
04
1/
8/
20
04
1/
15
/2
00
4
1/
22
/2
00
4
1/
29
/2
00
4
2/
5/
20
04
2/
12
/2
00
4
2/
19
/2
00
4
2/
26
/2
00
4
3/
4/
20
04
3/
11
/2
00
4
3/
18
/2
00
4
3/
25
/2
00
4
4/
1/
20
04

Settlement Price NID Volatility
Street Market Price NID Volatility
Source: CPA Senior Advisor to the Central Bank of Iraq
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II. DEVELOP TRANSPARENT BUDGETING AND ACCOUNTING ARRANGEMENTS
Redrafting and Execution of 2004 Budget

As of April 2, the balance in the Development Fund for Iraq (DFI) was $9.3 billion,
comprised of $8.4 billion in the original Federal Reserve Bank of New York (FRBNY)
account, and $0.9 billion on deposit in DFI-Baghdad. Of this, $2.7 billion is already
committed to projects, and the remaining $6.6 billion is slated for projected 2004 budget
items. Since establishment, the DFI investment program at FRBNY earned $17.4 million in
interest. As of March 25, the total payments out of the DFI amounted to $7.6 billion.

In the finalized 2004 budget, salaries account for 12.7 percent of the budget, the Facilities
Protection Service receives 0.3 percent, capital costs are 12.7 percent, and ministerial
operating costs (not including salaries) represent 10.0% percent of the budget. The
remainder of the budget is for expenditures such as local/regional governance grant, fuel
importation, public distribution system, and other national programs.

State Department and U.S. Agency for International Development (USAID) assistance to
Iraq disbursed in FY 2003/2004 totals $3.7 billion as of March 30, 2004:







USAID/ Asia and Near East (ANE):
USAID/ Office of Foreign Disaster Assistance (OFDA):
USAID/ Food for Peace (FFP):
USAID/ Office of Transition Initiatives (OTI):
State Department/ Bureau of Population, Refugees,
and Migration (PRM):
$2.6 billion
$101 million
$426 million
$161 million
$39 million
The Program Management Office (PMO) intends to commit $10.4 billion (56 percent of the
$18.4 billion supplemental) toward contracts by July 1, 2004. As of last week, $4.3 billion
are currently committed to Iraq relief and reconstruction efforts, 41 percent of the July 1
goal. As of last week, $2.3 billion of funds are obligated with contractors (22 percent of the
committed fund’s goal). The following chart shows the money committed by sector against
the July 1 target as of March 26.
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PMO: Supplemental Money Committed by July 1
6000
5000
Millions of Dollars
4000
3000
2000
1000
0
Oil
Electricity
Security
Water
Transport/
Telecom
ED &
Human
Rights
Roads/
Bridges
Private
Sector
Justice &
Public
Safety
2207 Report
1701
5560
3243
4332
500
280
370
184
1018
793
458
July 1 Target
1701
2079
3057
861
601
618
4
131
540
325
458
Updated Apportionment Mar 26
1600
1708
2483
496
165
203
119
70
526
330
458
1141.4
1402.7
1145.4
31.9
137.2
22.6
24
0
149.7
30.9
259.7
Total Committed March 26

Health Care Democracy
Source: Program Management Office
Section 2207 of the Emergency Supplemental Appropriations Act for Defense and for the
Reconstruction of Iraq and Afghanistan, FY 2004 (Public Law 108-106) enumerates the
allotments granted to CPA for each sector and levies a quarterly reporting requirement to
Congress detailing PMO’s spending.
III. DEVELOP FRAMEWORK FOR SOUND PUBLIC SECTOR FINANCES AND
RESOURCE ALLOCATION
Increase Capacity of Ministries of Finance and Planning to Manage Public Resources
Increase International Coordination to Manage Foreign Assistance
Develop an Inter-Governmental Policy Framework by July 04 in time for the 2005 Budget
Develop Public Procurement Framework with Regulatory Oversight

CPA Order 54 introduced a 5 percent reconstruction levy on most goods imported into Iraq.
Implementation of that order was deferred from April 1 until April 15. Revenue generated
by the levy will be deposited in the general fund to be used for the betterment of the Iraqi
people. Certain goods, including food, medicines, medical equipment, books, clothing, and
goods imported for humanitarian assistance are exempt, as are public and private
organizations involved in the reconstruction of Iraq. People entering the country with goods
valued under 500,000 Iraqi Dinars (intended for personal use and not for sale), are also be
exempt.
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IV. PRIVATE SECTOR INITIATIVES
Streamline existing commercial code/regulations; Facilitate lending to private businesses;
Technical Assistance for Small and Medium Enterprises (SMEs); Iraqi Participation in
Reconstruction Subcontracts; Business Development

A Nationwide Credit Demand Survey was recently completed under the Economic Recovery,
Reform, and Sustained Growth Project by BearingPoint. The results will enable partner
microfinance institutions to better target potential clients for the development of new
financial services and products. In total, 2,352 small to medium-sized enterprises were
surveyed. Findings included:

In each governorate there is little experience with loans from formal entities

With the exception of Dahuk and, to a lesser extent, Qadisiyah and Maysan,
micro-entrepreneurs do not have other sources of income.

In each governorate, access to loans from moneylenders is virtually non-existent.
On the other hand, access to loans from informal sources—friends, relatives, and
neighbors—seems to be widespread except in Sulaymaniyah, Basrah, and
Muthanna.

Willingness to borrow is significantly higher in Maysan, Qadisiyah, Wasit, and, to
a lesser extent, Muthanna and Babil.

Micro-entrepreneurs in all governorates expect sales to pick up next year.
V. DESIGN OIL TRUST FUND
Proposal for Oil Trust Fund

As of March 28, 2004, estimated crude oil export revenue reached $3.7 billion for 2004
(crude oil export revenue for 2003 [June - December] was $5.1 billion).
VI. LAY FOUNDATIONS FOR AN OPEN ECONOMY
Provide IG Staff Capability; Trade Bank; WTO Observer Status; Draft Intellectual Property law
to IGC by April 15, 2004; Develop Framework for Collateralizing Movable and Immovable
Property

Since opening in December, the Trade Bank of Iraq has issued 132 letters of credit totaling
$519.2 million, covering imports from twenty four countries. In addition, nine letters of
credit totaling $82.6 million are pending issuance. There is also one letter of credit
guaranteed by Export-Import Bank pending issuance and 20 letters of credit under the Oil for
Food Program are being processed for issuance.
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VII. PURSUE NATIONAL STRATEGY FOR HUMAN RESOURCES DEVELOPMENT
Begin to employ workers in Public Works programs around the country

Combined Joint Task Force 7 (CJTF-7) Civil Affairs units estimate that the CPA has created
399,736 jobs for Iraqi citizens (46 percent of the CJTF-7 target of 850,000):





Security/National Defense employs:
232,119
Regional Jobs Programs:
43,721
CJTF-7 employs:
54,738
Civilian contractors working under CPA contracts: 67,608
Governorate Teams:
1,550
VIII. INITIATE PUBLIC SECTOR MANAGEMENT REFORM
Civil Service Salary Review

As of April 3, the CPA Administrator had appointed Inspectors General (IG) in 23 of 26
Ministries. The Ministry of Defense and the Amanat (Baghdad City Hall) continue to work
towards appointments by the middle of April. A number of IGs attended two, one-day
workshops on Delivering Good Government arranged by the U.K. Department for
International Development, involving about 70 Directors General across the ministries.
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