Iraq has announced a wave of financial reforms, including the entrance of foreign banks and allowing 100% foreign ownership in all sectors, except natural resources, which will form the basis for the rebuilding of the country’s financial infrastructure.
Speaking in Dubai at the recent IMF/World Bank meetings, Iraq’s newly appointed finance minister, Kamel al-Keylani, promised to build a “free and open market economy in Iraq”, but few details about funding were given. A critical donors’ conference is to be held in Madrid in late October.
Mr al-Keylani’s changes were described as a “recipe devised by Washington” but they nevertheless met with strong approval, as well as scepticism. The finance minister said foreign banks would be able to set up branches and subsidiaries, and six (unnamed) international banks would be able to buy up to 100% of local banks within the next five years. He also announced a new law to make the central bank fully independent, and a new national currency, the new Iraqi dinar, available from October 15. A maximum marginal tax rate of 15% will come into force in January 2004, and a flat 5% tariff will be imposed on all but humanitarian imports.
The reforms have the support of the US-backed Governing Council and the Coalition Provisional Authority (CPA), which faces a financial crisis – reports are that the CPA had only $200m to pay for day-to-day operations and project work at the start of September.
With oil revenues well below expectations, there is considerable budget pressure and high expectations for the Madrid meeting. Although the Iraqis held discussions in Dubai, there were no announcements of financial commitments from countries and organisations that attended.
