Administrator’s Weekly Report
Economy
May 15 -May 21, 2004
HIGHLIGHTS

A Ministry of Trade delegation attended the World Trade Organization General Council
meeting May 17–18, 2004 in Geneva Switzerland. This was the first formal participation in
the WTO by Iraq since receiving its observer status earlier this year.

The first microfinance loan has been made in Falluja -- $1,500 to an auditor to buy a car for
business travel.

As of May 21, 2004, estimated crude oil export revenue reached $6.2 billion for 2004 (crude
oil export revenue for 2003 [June - December] was $5.1 billion).
I. BUILD FINANCIAL MARKET STRUCTURES
Modernize the Central Bank; Commercial Banking System; Re-establish Baghdad Stock
Exchange; Restructure National Debt

Renovations of the Iraq Stock Exchange temporary site are complete, and interim regulations
have been drafted. Staff members are preparing contracts between the Depository and the
brokers and listed companies in support of the dematerialization process, by which investors
hand in their paper certificates for verification by the listed company, and deposit into the
Depository. Employee training is also underway.

At the New Iraqi Dinar (NID) auction on May 20, the settlement price was 1,465 dinars per
dollar, the same as the previous day, and unchanged from a week ago. The amount of dollars
sold at the auction varied over the week from $0.6 - $18.7 million.

New Iraqi Dinar monthly fluctuation:
 February 20 – March 20:
 March 20 – April 20:
 April 20 – May 20:
NID depreciated
NID depreciated
NID depreciated
0.4 percent
2.5 percent
0.7 percent
1
FOUO
Prepared by the Information Management Unit
Exchange Rate Movements
1600
1400
1200
12
/2
5/
2
1/ 00
1/ 3
2
1/ 00 4
8/
1/ 200
15 4
1/ /20
22 04
/
1/ 20 0
29 4
/2
2/ 0 0
5/ 4
2/ 200
12 4
/
2/ 20 0
19 4
2/ /20
26 04
/2
3/ 0 04
4
3/ /200
11 4
/
3/ 20 0
18 4
3/ /20
25 04
/2
4/ 0 04
1/
2
4/ 00 4
8/
4/ 200
15 4
/
4/ 20 0
22 4
4/ /20
29 04
/2
5/ 0 04
6/
5/ 200
13 4
5/ /20
20 04
/2
00
4
New Iraqi Dinars (NID) per US $1
1800
Street Market Price
Settlement Price (Auction)
Source: CPA Senior Advisor to the Central Bank of Iraq
Annualized Weekly Volatility of the NID
7.00%
6.00%
5.00%
4.00%
3.00%
2.00%
1.00%
5/
6/
04
5/
13
/0
4
5/
20
/0
4
4/
8/
04
4/
15
/0
4
4/
22
/0
4
4/
29
/0
4
4/
1/
04
3/
4/
04
3/
11
/0
4
3/
18
/0
4
3/
25
/0
4
2/
19
/0
4
2/
26
/0
4
0.00%
Settlement Price NID Volatility

The annualized weekly volatility of the New Iraqi Dinar this past week was 1.6 percent.
FOUO
Prepared by the Information Management Unit
2

The consumer price index (CPI) is computed and published monthly by the Central
Statistical Office (CSO). The April CPI declined by 3.7 percent relative to its level in March,
partially reversing the 9.2 percent increase in March. The decline was broad based (see chart
below). The large increase in March was dominated by that fact that rents are only measured
every six months and are reflected fully in the index only in those months. In addition,
monthly inflation data have a distinct seasonal pattern, with seasonally low rates in the late
spring and summer, but the index prepared by the CSO is not yet available in a seasonally
adjusted version.

As measured by the CPA, the April 2004 annualized inflation rate was 19.6%, down from its
peak of 47.7% in October 2003. Over the past six months the CPI has risen by 3.5 percent or
by 7.0 percent at an annual rate. The CPI has been virtually unchanged on balance since the
beginning of the year.
April 2004 CPI: Month/Month Non-Seasonally Adjusted Change
0.0%
Rent
-5.2%
Services
Medical
-4.3%
Overall CPI Change: - 3.7%
Transport and
communications
1.5%
Fuels / Electricity
-22.8%
0.5%
Furniture
Clothing
-6.6%
Tobacco / alcohol
6.0%
Food
-4.9%
-25.0%
-20.0%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
Source: CPA Senior Monetary Policy Adviser to the Central Bank of Iraq;
Central Statistical Office
FOUO
Prepared by the Information Management Unit
3
II. DEVELOP TRANSPARENT BUDGETING AND ACCOUNTING ARRANGEMENTS
Redrafting and Execution of 2004 Budget

On May 16, CPA Administrator L. Paul Bremer signed CPA Order Number 87, Public
Contracts Law, which promulgates a law for public procurement in Iraq. The Order
provides, to the maximum extent practicable, for full, fair and open competitive public
contracting procedures. The Order instills the principles of transparency, predictability,
fairness and equality of treatment in the Iraqi procurement process. The Order is designed to
bring Iraqi procurement procedures into accordance with internationally-recognized public
procurement standards.

As of May 20, the balance in the Development Fund for Iraq (DFI) was $10.2 billion,
comprised of $8.4 billion in the original Federal Reserve Bank of New York (FRBNY)
account, and $1.8 billion on deposit in DFI-Baghdad. Of this, $3.1 billion is already
committed to projects, and the remaining $7.1 billion is slated for projected 2004 budget
items. Since establishment, the DFI investment program at FRBNY earned $24.9 million in
interest. As of May 20, the total payments out of the DFI amounted to $8.7 billion.

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 May 18, $7.4 billion are
committed to Iraq relief and reconstruction efforts, 71 percent of the July 1 goal. As of May
11, $4.2 billion of funds are obligated with contractors (40 percent of the committed fund’s
goal). The following shows the money committed by sector as of May 18 against the July 1
target.
PMO: Supplemental Money Committed by July 1
6000
Millions of Dollars
5000
4000
3000
2000
1000
0
Oil
Electricity
Security
Water
Transport/
Telecom
ED &
Human
Rights
Roads/
Bridges
Private
Sector
Justice &
Public
Safety
2207 Report
1701
5539
3243
4148
500
259
370
184
1038
793
451
July 1 Target
1701
2079
3057
861
601
618
4
131
540
325
458
Updated Apportionment April 21
1701
2538
2976
816
467
259
270
136
825
512
451
Total Committed May 18
1447
1837
2062
490
221
37
213
59
404
214
351
Health Care Democracy
Source: Program Management Office
FOUO
Prepared by the Information Management Unit
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
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. DESIGN OIL TRUST FUND
Proposal for Oil Trust Fund

As of May 21, 2004, estimated crude oil export revenue reached $6.2 billion for 2004 (crude
oil export revenue for 2003 [June - December] was $5.1 billion).
IV. LAY FOUNDATIONS FOR AN OPEN ECONOMY
Provide IG Staff Capability; Trade Bank; WTO Observer Status; Develop Framework for
Collateralizing Movable and Immovable Property

Since opening in December 2003, the Trade Bank of Iraq has opened 206 letters of credit
totaling $789.01 million, financing imports from thirty-three countries. Included is one letter
of credit guaranteed by the Export-Import Bank of the United States for $6.9 million,
nineteen letters of credit for a total of $26.2 million pending issuance, and twenty-three
letters of credit to be funded with Oil for Food funds pending issuance.

A management information system (MIS) for tracking micro-credit loans was provided for
both CPA microfinance institutions partners, CHF and ACDI/VOCA. This MIS was
provided by USAID through Bearing Point as part of the technical assistance and training
provided to theses microfinance institutions. The system generates timely financial
statements, which adhere to international accounting and financial standards and will monitor
progress and impact as the program expands

The first microfinance loan has been made in Falluja -- $1,500 to an auditor to buy a car for
business travel. More will follow, as microfinance lender and CPA grantee, Al Thiqa,
establishes a presence in Al Anbar Province.

The non-profit Small Business Loan Committee (SBLC) in Mosul will expand its operations
with the purchase of office equipment and supplies. The SBLC has delivered more than 200
micro-credit loans to local businesses and individuals in the Ninewa province.

A Ministry of Trade delegation attended the World Trade Organization General Council
meeting May 17 – 18, 2004 in Geneva Switzerland. This was the first formal participation in
the WTO by Iraq since receiving its Observer status earlier this year. The Iraqi delegation
organized and attended a separate series of meetings with other member governments, and
the professional Secretariat of both the WTO and the World Intellectual Property
Organization. The subjects of these meetings were how best to assist the re-integration of
Iraq into the world trade economy.
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V. PURSUE NATIONAL STRATEGY FOR HUMAN RESOURCES DEVELOPMENT
Begin to employ workers in Public Works programs around the country

Ongoing security problems are still creating gaps in employment reporting. Multinational
Forces Iraq (MNF-I) Civil Affairs units estimate that the CPA has created 435,809 jobs for
Iraqi citizens (51 percent of the MNF-I target of 850,000):





Security/national defense employs:
National / regional jobs programs employ:
CJTF-7 employs:
Civilian contractors employ:
 Employed through PMO-related contracts
Governorate teams employ:
FOUO
Prepared by the Information Management Unit
248,391
44,031
54,738
87,099
25,654
1,550
6