Iraqi economy looks promising, sort of

Business Money
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timesonline.co.uk/article/0, … 77,00.html

[quote]Rising cost of oil may be saviour for Iraqi economy
By Richard Beeston, Diplomatic Editor

DESPITE violence, chaos and political deadlock, Iraq still has good economic prospects, thanks to the high price of oil, the International Monetary Fund said yesterday.

In its first assessment of the Iraqi economy in more than 25 years, the IMF reported that the interim Government needs to tackle chronic security and political problems if it hopes to rebuild the country. The cost of security and insurance cover swallows 30 to 50 per cent of reconstruction funds.

But unlike most forecasts on Iraq, the conclusions of the IMF were not entirely negative. Gross domestic product increased by nearly 50 per cent last year, largely because of the rising price of oil, which accounts for three quarters of the economy. According to the IMF, Iraq is approaching prewar oil production levels of 2.5 million barrels a day, and this is expected to increase.

[b]

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Just to add to this… this is from www.xe.com

A number of people have begun touting so-called “investment” opportunities in the Iraq Dinar as a “sure way” to make a lot of money with little or no risk. Many of our clients have asked our opinion on the legitimacy of this.

Is “investing” in the Iraq Dinar a sure way to profit? We don’t think so. In our opinion, buying the Iraq Dinar is a high risk investment with a poor outlook.

A Little History

The official rate of the old Iraq Dinar, $3.22 USD (U.S. Dollars), was set in 1982 by Saddam Hussein. The old Iraq Dinar could not be freely traded, so this rate was never tested or upheld on the world market.

The current Iraq Dinar (IQD) was introduced between October 2003 and January 2004 by the Coalition Provisional Authority in close consultation with financial experts from Iraq and the international community. The IQD is currently valued at a little less than seven hundredths of a US cent. (1 USD = 1460 IQD). The old “Saddam” Dinar has no current value and is worth only what a collector is willing to pay for it.

What’s Happening Now?

The IQD is not freely traded, and is not being used in any significant international transactions. We are unable to locate any official bank or foreign exchange office outside of Iraq that will exchange the IQD.

The IQD trades on a very small, tightly controlled exchange. The total volume of IQD traded by the Central Bank of Iraq is in the thousands of dollars, compared to the $1,900 billion dollars traded on the Foreign exchange market every day. This small number of trades makes the IQD’s value effectively immaterial.

The Central Bank of Iraq’s stated objective is not to promote the free trade of IQD, as is the case in a true free market economy, but rather to keep the value of the IQD stable. The only way the Bank can ensure the semblance of stability is by tightly controlling the exchange of IQD on the market, and by ensuring that the currency cannot freely trade on the open market. They evidently fear that open trading of the IQD would lead to a rout in which the value of the IQD would sink to practically nothing.

Consider the situation. Why tightly control the trading of the IQD if it is likely to appreciate in value? If the value of the IQD were to surge, this could be held out as evidence of a surge of confidence in Iraq’s economy. So why not open the IQD to free trading? Why would this be done unless the Iraqi Central Bank itself feels that the IQD would decline in value in a free market?

A Snapshot of Iraq Today

The current situation in Iraq is pretty grim:

Over a decade of international economic sanctions and a devastating war has left the infrastructure in tatters
$125 billion of external debt
Millions of dollars in post-war debt
No stable government
Insurgency steadily on the rise
Oil facilities and pipelines are sabotaged regularly
Many (including the former Prime Minister of Iraq) predict out-and-out civil war
These aren’t the kind of conditions typically conducive to the creation of booming economies. More to the point – a 450,000% increase in the value of the IQD (as predicted by some of its promoters) seems ridiculous in the face of these challenges.

But Surely There’s Oil Under Those Dunes?

I’ll let u read the rest at xe.com/iqd.htm

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I agree that Dinars will not make anyone rich this year, or even next year. I gave myself a ten year time limit before I wrote off the investment.

Your points:

a) Infrastructure is run down. True. But the Iraqis are well educated. Given the chance they CAN fix it themselves, unlike the Saudis.
b) I thought a lot of that debt was forgiven?? No??
c)post war debt; debt is not necessairly a bad thing when the money is put in the right places
d) yes, now. How about next year? The consitution is nearly done, and needs to be ratified, then elections…all within 3 years of invasion…not too shabby IMO
e) this is debatable
f) I haven’t read much about oil pipelines being bombed recently…either it’s slowed down or not being reported, or IM just not seeing it…
g) Even if there is a civil war, one side will probably stick with the New Iraqi Dinar as it has international approval…I can imagine that the “winner” of the civil if there is one, would choose to stay with the NID because they’d want to sell their oil quickly to make some revenue.

from your link:

[quote]If it Sounds Too Good to be True…

Ask yourself one question: if the Iraq Dinar is such a hot commodity, why would anyone in the know be willing to sell it to you? If you thought that the IQD was going to multiply in worth by hundreds of thousands of percent, would you sell it? Of course not – you’d be too busy buying as much of it as you could.
But if you thought that the IQD was going to go down in value over time, well, then you might start trying to convince people that it was a “great deal” so that you could get rid of all of yours before it nose dives.

Remember the old saying: if it sounds too good to be true, it probably is. Be careful!

More Information

Additional information on this issue can be found through the following links:

May 18, 2004: Dinar Dupe: Currency Con Man Touts Value of Iraqi Money (NBC/KFOR)
Jun 15, 2004: Dinar Falls Victim to Violence (IPS)
Aug 10, 2004: Stupid Currency Tricks: Iraqi Dinar (CNN)
Jul 10, 2005: Allawi: This is the Start of Civil War (The Times) [/quote]

Also, I might add, if you thought it was good, wouldn’t you want people to think they were the sucker at the table for buying it? lol

Good points, but I’m still confident. Eyebrows raised, not jumping up and down. :slight_smile:

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I would never invest in anything not very liquid. While chance-taking can increase your fortune a fair bit, the risks associated with Iraq are still big - and to some extent unknown.

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Fortunately for me, I am pretty much invested in boring stuff…this is a big risk, but one I can offord to take. If I hit it big, great. If not, I’m not out much.

There’s a difference is taking risks in investing and being a risky investor. The latter ONLY takes risks.