Administrator’s Weekly Report Economy — establish Baghdad Stock Exchange; Restructure National Debt — 15 آذار 2004 Arabic

Administrator’s Weekly Report Economy March 13-19, 2004 HIGHLIGHTS -- As of March 15, 2004, estimated crude oil export revenue reached $3 billion for 2004. -- According to a recent poll, purchases of electrical appliances by Iraqis has increased dramatically since April 2003, indicating improvements in individual and disposal income. -- As of March 18, the CPA Administrator had appointed Inspectors General (IG) in 15 Ministries, and another five Ministries had selected nominees (out of 26 total). I. BUILD FINANCIAL MARKET STRUCTURES Modernize the Central Bank; Commercial Banking System; Re-establish Baghdad Stock Exchange; Restructure National Debt CPA is finalizing the laws on issuing government securities and anti-money laundering for submission to coalition partners for review this week. Visa International has agreed to provide computers and satellite connections for the Visa network to the Iraqi private banks joining the Visa Payment System. Specialists from the Federal Reserve Bank of New York completed their assessment of Central Bank IT and payment system technology in Iraq. The report offered a number of recommendations to facilitate the provision of an electronic payments system in the coming months and to foster automation in the Iraqi banking system. The New Iraqi Dinar (NID) has now been stable the past month and a half. At the NID auction on March 18, the settlement price was 1,410 dinars per dollar, compared to 1,415 the previous day. The value of dollars sold at the auction varied over the week from $15 - $22 million. The total net purchases of U.S. dollars by the Central Bank of Iraq from October 4, 2003, until March 14, 2004, was $1.24 billion. The exchange rate on the Baghdad streets was 1,413 dinars per dollar on March 18, the same as the previous two days. During the past week, March 13-18, the NID appreciated 0.5 percent against the U.S. dollar. New Iraqi Dinar monthly fluctuation: December 19 – January 18: NID appreciated 6 percent January 19 – February 18: NID depreciated 1.8 percent February 19 – March 18: NID appreciated 0.5 percent Source: CPA Senior Advisor to the Central Bank of Iraq Source: CPA Senior Advisor to the Central Bank of Iraq The annualized weekly volatility of the new Iraqi dinar this past week was 2.7 percent. Oxford Research International conducted a random sample of 2,737 Iraqis in face-to-face interviews across Iraq from February 9-28 through two Iraqi polling groups. One part of the survey focused on current satisfaction levels across a number of areas, compared these with pre-war, and sought expectations over the next year. Current job opportunities received the highest negative responses, although many Iraqis expect job availability to increase in the future. The following graphic shows answers regarding job availability. SHAPE \* MERGEFORMAT The following two charts show the results from polls conducted by the Iraqi Center for Research and Strategic Studies (ICRSS) and by the Independent Institute for Administration and Civil Society Studies (IIACSS). All results derive from face-to-face interviews in the homes of the interviewee and have over 1,000 valid interviews. The totals shown for January and February have been adjusted to compare only same-city-to-same-city results. ICRSS asked the following question in Baghdad, Basrah, Mosul, and Babylon during January and February. The results of the poll show that every city showed an increase in the number of people saying their financial situation has improved (compared to pre-war) in February vice January, except for Mosul. The explanation for the drop in Mosul is unclear. IIACSS asked questions to establish the amount of retail purchases occurring throughout the country compared with pre-war levels, and noticed that Iraqis have been on a shopping binge. By asking what electrical appliances households owned before the war and after, they determined the total change in the number of many specific types of appliances, and thereby inferred the percentage of pre-war appliance levels purchased since the end of the war. Percentages purchased since April 2003 are The Iraqi delegation had positive initial discussions with the International Monetary Fund (IMF) concerning Debt Sustainability Analysis (DSA) in Beirut this past week. The Iraqi delegation agreed to provide additional data by the end of March, and the IMF agreed to revise its DSA by mid-April, at which point further discussions will take place. II. DEVELOP TRANSPARENT BUDGETING AND ACCOUNTING ARRANGEMENTS Redrafting and Execution of 2004 Budget The 2004 budget allocations for March are Operating budget (without salaries) NID 172.86 billion ($115.24 million) Salaries NID 425.64 billion ($283.76 million) Capital budget NID 17.28 billion ($11.52 million) The capital budget is relatively low because the majority of capital projects are funded by U.S. supplemental funds and will also be funded by international donor assistance in the future. Salaries account for a large portion of the budget because of the move to the new 11-step civil service salary scale. The Minister of Finance requested an extra 40 percent added to the entire government wage bill to cover the cost of implementing the new salary scale. Salaries range from NID 69,000 – 920,000 per month on the 11-step scale, and NID 1.5 – 3 million per month on the executive scale. Baghdad receives a majority of the government’s monthly budget compared to the other governorates Operating budget (without salaries) 82 percent Salaries 71 percent Capital budget 94 percent As of March 18, the balance in the Development Fund for Iraq (DFI) was $7.1 billion, comprised of $6.1 billion in the original Federal Reserve Bank of New York (FRBNY) account, and $1 billion on deposit in DFI-Baghdad. Of this, $4.3 billion is already committed to projects, and the remaining $2.8 billion is slated for projected 2004 budget items. Since establishment, the DFI investment program at FRBNY earned $15 million in interest. As of March 18, the total payments out of the DFI amounted to $6.8 billion. State Department and U.S. Agency for International Development (USAID) assistance to Iraq disbursed in FY 2003/2004 totals $3.1 billion as of March 19, 2004: USAID/ Asia and Near East (ANE): $2.5 billion USAID/ Office of Foreign Disaster Assistance (OFDA): $87 million USAID/ Food for Peace (FFP): $426 million USAID/ Office of Transition Initiatives (OTI): $104 million State Department/ Bureau of Population, Refugees, and Migration (PRM): $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, $3.6 billion are currently committed to Iraq relief and reconstruction efforts, 35 percent of the July 1 goal. As of last week, $2.1 billion of funds are obligated with contractors (20 percent of the committed fund’s goal). 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 Jul 04 in time for the 2005 Budget Develop Public Procurement Framework with Regulatory Oversight The Ministry of Finance has identified a budget formulation team and set a tentative timeline to prepare for the formulation of the 2005 Iraqi Budget consisting of staffers from the Ministry of Finance, the Ministry of Planning and Development Coordination, and from each of the line ministries. IV. DESIGN OIL TRUST FUND Proposal for Oil Trust Fund As of March 15, 2004, estimated crude oil export revenue reached $3 billion for 2004 (crude oil export revenue for 2003 [June - December] was $5.1 billion). V. 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 As of March 17, the Trade Bank of Iraq has issued 112 letters of credit totaling $496 million, covering imports from 24 countries. In addition, there are 38 letters of credit in the pipeline, including one letter of credit guaranteed by the Export-Import Bank of the United States, one letter of credit guaranteed by the Japanese Export Credit Agency (ECA), and 12 oil for food letters of credit. The Board of Directors of the Trade Bank of Iraq approved an increase in paid-in capital from $5 million to $100 million to better support lines of credit received from ECA’s following the transition. VI. PURSUE NATIONAL STRATEGY FOR HUMAN RESOURCES DEVELOPMENT Begin to employ workers in Public Works programs around the country The Ministry of Labor and Social Affairs (MoLSA) opened two new employment centers this week, bringing the countrywide total to 17. The new centers are in Basrah and Sulaymaniyah. MoLSA is on target to have 28 centers nationwide open by June 30. In addition, MoLSA began a campaign to reach out to international companies doing work in Iraq to hire registered Iraqi workers through the employment centers. Combined Joint Task Force 7 (CJTF-7) Civil Affairs units estimate that the CPA has created 381,611 jobs for Iraqi citizens (45 percent of the CJTF-7 target of 850,000): Security/National Defense employs 222,713 Regional Jobs Programs employ 37,521 CJTF-7 employs 51,673 Civilian contractors working under CPA contracts employ 68,154 Governorate Teams employ 1,550 VII. INITIATE PUBLIC SECTOR MANAGEMENT REFORM Civil Service Salary Review As of March 18, the CPA Administrator had appointed Inspectors General (IG) in 15 Ministries, and another five Ministries had selected nominees (out of 26 total). All current Ministries are expected to have IG appointed by the end of March. PAGE PAGE 5 FOUO Prepared by the Information Management Unit PAGE 1 FOUO Prepared by the Information Management Unit Expectation for a Year’s Time Compared to Pre-War Current Assessment