25 April 2006
Iraqi Government Laying Foundation for Market Economy
U.S., Iraqi officials meet to discuss fiscal, monetary issues
By David Shelby
Washington File Staff Writer
Washington – Iraqi economic officials have made tremendous progress in laying the foundation for a self-sufficient market economy, but face challenges in the energy and banking sectors, according to Deputy Secretary of the Treasury Robert Kimmit.
“In spite of the difficult security situation and the improving but still evolving political situation, I think the Finance Ministry and the central bank … have done remarkable work in laying the foundation for a market-based economy in Iraq,” Kimmit told reporters in Washington April 25 after meeting with Treasury Secretary John Snow, Iraqi Finance Minister Ali Allawi and Iraqi Central Bank Governor Sinan Shabibi.
The U.S. and Iraqi officials met as part of the U.S.-Iraq Macroeconomic and Financial Forum to discuss fiscal and monetary policy issues, Iraqi debt and economic regulation.
Kimmit said the Iraqi government has rescheduled $28 billion in bilateral debt and issued $2.6 billion in sovereign debt instruments. He said Iraq’s currency is stable and foreign reserves remain strong. He also said business registrations are on the rise.
The deputy secretary said the Iraqi government must address certain structural weaknesses in the economy to ensure continued growth. For the energy sector, he said, Iraq needs to clarify its investment laws to encourage foreign participation, and it needs to draft oil import legislation. He also said the government should cut fuel subsidies.
He said the banking sector is dominated by two state-owned banks that have a historic monopoly over processing government payments and observed that these institutions could hamper growth of private banks.
“We need to make sure that they do not stifle the development of a good private banking system, and we talked about efforts being made to make ensure that private banks can compete for government business, which of course is the major form of business available in Iraq right now,” he said.
He said the government also should continue to make anti-corruption measures a priority and work to counter the funding of the insurgency.
For additional information, see Iraq Update.
(The Washington File is a product of the Bureau of International Information Programs, U.S. Department of State. Web site: http://usinfo.state.gov)
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