Administrator’s Weekly Report Economy

Administrator’s Weekly Report Economy May 29 —June 4, 2004 HIGHLIGHTS As of May 31, 2004, estimated crude oil export revenue reached $6.9 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 June 15th is the anticipated opening date of the Iraq Stock Exchange (ISX). Final employee training is underway, and companies that have met the listing standards are about to sign newly-drawn up contracts with the ISX. The depository will run an old system and a new system in parallel, with the old system operating on a temporary basis until all parties have confidence in the new system. The Board of Governors has approved sound spending procedures and is using internationally accepted accounting standards. At the New Iraqi Dinar (NID) auction on June 3, the settlement price was 1,460 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 $.9 - $19.8 million. The Central Bank of Iraq’s Central Statistics Organization (CSO) has completed surveys for seven economic sectors; these data will be used for estimating gaps in GDP and in balance of payments for Iraq. The surveys included: the manufacturing industrial survey; the oil refining products survey; the private imports survey; the transportation and communications survey; the construction materials survey; a survey on remittances through families; and a hotel occupancy survey. The gathering of this information is helping Iraq to meet data requirements for the International Monetary Fund (IMF) in preparation for an IMF stabilization program in Iraq, which is tentatively scheduled to begin in July. New Iraqi Dinar monthly fluctuation: March 4 – April 3: NID no change April 3 – May 3: NID depreciated 1.8 percent May 3 – June 3: NID depreciated 0.7 percent Source: CPA Senior Advisor to the Central Bank of Iraq The annualized weekly volatility of the New Iraqi Dinar this past week was 0.5 percent. II. DEVELOP TRANSPARENT BUDGETING AND ACCOUNTING ARRANGEMENTS Redrafting and Execution of 2004 Budget As of June, the balance in the Development Fund for Iraq (DFI) was $10.3 billion, comprised of $9.0 billion in the original Federal Reserve Bank of New York (FRBNY) account, and $1.2 billion on deposit in DFI-Baghdad. Of this, $3.7 billion is already committed to projects, and the remaining $6.5 billion is slated for projected 2004 budget items. Since establishment, the DFI investment program at FRBNY earned $28.7 million in interest. As of June 4, the total payments out of the DFI amounted to $9.6 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 June 2, $7.8 billion are committed to Iraq relief and reconstruction efforts, 75 percent of the July 1 goal. As of May 11, $3.7 billion of funds are obligated with contractors. The following shows the money committed by sector as of June 2 against the July 1 target. 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. DESIGN OIL TRUST FUND Proposal for Oil Trust Fund As of May 31, 2004, estimated crude oil export revenue reached $6.9 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 254 letters of credit totaling $1.057 billion, financing imports from thirty-six countries. Included is one letter of credit guaranteed by the Export-Import Bank of the United States for $6.9 million, fifty-nine letters of credit for $245.3 million pending issuance, and twenty-one letters of credit to be funded with Oil for Food funds pending issuance. CPA Administrator L. Paul Bremer signed the CPA Order 93, Anti-Money Laundering Law. The Anti-Money Laundering Law governs financial institutions in monitoring financial transactions. The law makes it a crime to launder money, finance crime, finance terrorism, or structure transactions designed to evade reporting requirements. Ambassador Bremer signed CPA Order 95, Financial Management Law and Public Debt Law. The Financial Management Law establishes a comprehensive framework for fiscal and budgetary policy that comports with international best practices. The Public Debt Law would permit Iraq to replace unsound borrowing practices with a viable market-based approach to issuing public debt, under which debt will only be issued as required to finance the Iraqi budget. 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. Security/national defense employs: 249,572 Governorate teams employ: 1,550 PAGE PAGE 4 FOUO Prepared by the Information Management Unit PAGE 1 Prepared by the Information Management Unit