Identifier
Created
Classification
Origin
07BAGHDAD4179
2007-12-26 07:38:00
CONFIDENTIAL
Embassy Baghdad
Cable title:
IMF UNDERPLAYS IRAQ 2007 ECONOMIC GROWTH
how-toVZCZCXRO9270 PP RUEHBC RUEHDE RUEHIHL RUEHKUK DE RUEHGB #4179 3600738 ZNY CCCCC ZZH P 260738Z DEC 07 FM AMEMBASSY BAGHDAD TO RUEHAM/AMEMBASSY AMMAN PRIORITY 1408 RUEATRS/DEPT OF TREASURY WASHDC PRIORITY RUEHC/SECSTATE WASHDC PRIORITY 5001 INFO RUCNRAQ/IRAQ COLLECTIVE
C O N F I D E N T I A L BAGHDAD 004179
SIPDIS
SIPDIS
E.O. 12958: DECL: 12/25/2017
TAGS: ECON EFIN EAID IZ
SUBJECT: IMF UNDERPLAYS IRAQ 2007 ECONOMIC GROWTH
REF: BLEIWEIS - VINOGRAD EMAIL OF 12/14/07
Classified By: Economic Minister Charles P. Ries for Reasons 1.4(b) and
(d)
C O N F I D E N T I A L BAGHDAD 004179
SIPDIS
SIPDIS
E.O. 12958: DECL: 12/25/2017
TAGS: ECON EFIN EAID IZ
SUBJECT: IMF UNDERPLAYS IRAQ 2007 ECONOMIC GROWTH
REF: BLEIWEIS - VINOGRAD EMAIL OF 12/14/07
Classified By: Economic Minister Charles P. Ries for Reasons 1.4(b) and
(d)
1. (U) This is an action request for the Department, Embassy
Amman and Treasury. Please see para 6.
2. (C) On December 19, the Executive Board of the
International Monetary Fund (IMF) unanimously voted to
approve a new Stand-By Arrangement (SBA) for Iraq. In its
attendant SBA report, the Fund projects real gross domestic
product (GDP) growth for Iraq in 2007 at 1.3 percent and
non-oil real GDP growth at 0.0 percent (with estimated real
GDP growth in 2006 at 6.2 percent and non-oil real GDP growth
at 7.5 percent). The 2007 Fund projections for Iraq are based
upon incomplete data, and we believe seriously underestimate
Iraq's true economic performance. Should the IMF release the
new SBA report to the public with no caveats, enhanced
economic activity that has resulted from security gains would
be discounted. Our credibility would be seriously damaged
given our consistent public message throughout the latter
half of 2007 -- that the surge has successfully increased
security and stability which in turn has promoted greater
economic activity in Iraq.
3. (C) During a December 17 meeting, EMIN discussed the
Fund's 2007 macroeconomic projections with Finance Minister
Bayan Jabr. EMIN explained that the Fund's projections did
not support the assertion that the security surge had spurred
renewed economic activity and financial growth in both the
oil and non-oil sectors. Jabr admitted that he had not
reviewed the IMF report and agreed that the Fund's
projections were well below his expectations. EMIN
highlighted the latest International Energy Agency oil
production figures which state current Iraqi oil production
is at its highest level since spring 2004, thus discounting
any assertion that stagnant oil output could be blamed for
the Fund's 2007 economic growth projections. EMIN encouraged
Jabr to reach out to Fund staff immediately to contest their
projections, and Jabr agreed. EMIN also suggested that the
GOI prepare a formal letter to the IMF that would accompany
the Public Information Note scheduled for release by the Fund
in early January.
4. (C) The Fund's growth projections for Iraq are based upon
data received only through the first 6 months of 2007 (per
ref),a period of time during which troop levels were still
increasing, and levels of violence across Iraq remained
relatively high. Oil production projections are similarly
based upon first half of 2007 data. Production figures for
January 2007 were abnormally low, but, with the reactivation
of the northern Kirkuk-Ceyhan pipeline in late summer, oil
production for the latter half of 2007 is significantly
higher. According to a December 14 International Energy
Agency report, oil production averaged 2.01 mbpd during 2Q
2007 and climbed to 2.11 mbpd in 3Q 2007, contrasted with an
average of 1.90 mbpd for 2006. The report adds, "(Iraq's oil
production in 2007) has seen a steady improvement in net
supply." Inclusion of 3Q data in Fund projections would
substantially increase Iraq's growth outlook. Non-oil sector
data reflects only three types of activity: electricity
production, fertilizer production, and cement production.
Again, reliance on first half of 2007 data presents a
remarkably different picture than what the entire year has
witnessed. In recent months, electricity production alone has
reached record-breaking highs.
5. (C) Clearly, a lack of capacity on the Iraqi side is one
of the driving factors for slow and incomplete reporting to
the IMF. The Central Organization of Statistics and
Information Technology (COSIT) is responsible for the lion's
share of statistical reporting and in August had its deputy
head (and rumored future head) assassinated. The early
October assassination of the Director General for Budgets in
the Ministry of Finance also exacerbates the Ministry of
Finance's reporting problems.
6. (U) ACTION REQUEST: We encourage the Department, Embassy
Amman, and Treasury to urge IMF interlocutors to delay public
release of the SBA report for Iraq until 3Q 2007 data can be
incorporated into growth projections for 2007.
CROCKER
SIPDIS
SIPDIS
E.O. 12958: DECL: 12/25/2017
TAGS: ECON EFIN EAID IZ
SUBJECT: IMF UNDERPLAYS IRAQ 2007 ECONOMIC GROWTH
REF: BLEIWEIS - VINOGRAD EMAIL OF 12/14/07
Classified By: Economic Minister Charles P. Ries for Reasons 1.4(b) and
(d)
1. (U) This is an action request for the Department, Embassy
Amman and Treasury. Please see para 6.
2. (C) On December 19, the Executive Board of the
International Monetary Fund (IMF) unanimously voted to
approve a new Stand-By Arrangement (SBA) for Iraq. In its
attendant SBA report, the Fund projects real gross domestic
product (GDP) growth for Iraq in 2007 at 1.3 percent and
non-oil real GDP growth at 0.0 percent (with estimated real
GDP growth in 2006 at 6.2 percent and non-oil real GDP growth
at 7.5 percent). The 2007 Fund projections for Iraq are based
upon incomplete data, and we believe seriously underestimate
Iraq's true economic performance. Should the IMF release the
new SBA report to the public with no caveats, enhanced
economic activity that has resulted from security gains would
be discounted. Our credibility would be seriously damaged
given our consistent public message throughout the latter
half of 2007 -- that the surge has successfully increased
security and stability which in turn has promoted greater
economic activity in Iraq.
3. (C) During a December 17 meeting, EMIN discussed the
Fund's 2007 macroeconomic projections with Finance Minister
Bayan Jabr. EMIN explained that the Fund's projections did
not support the assertion that the security surge had spurred
renewed economic activity and financial growth in both the
oil and non-oil sectors. Jabr admitted that he had not
reviewed the IMF report and agreed that the Fund's
projections were well below his expectations. EMIN
highlighted the latest International Energy Agency oil
production figures which state current Iraqi oil production
is at its highest level since spring 2004, thus discounting
any assertion that stagnant oil output could be blamed for
the Fund's 2007 economic growth projections. EMIN encouraged
Jabr to reach out to Fund staff immediately to contest their
projections, and Jabr agreed. EMIN also suggested that the
GOI prepare a formal letter to the IMF that would accompany
the Public Information Note scheduled for release by the Fund
in early January.
4. (C) The Fund's growth projections for Iraq are based upon
data received only through the first 6 months of 2007 (per
ref),a period of time during which troop levels were still
increasing, and levels of violence across Iraq remained
relatively high. Oil production projections are similarly
based upon first half of 2007 data. Production figures for
January 2007 were abnormally low, but, with the reactivation
of the northern Kirkuk-Ceyhan pipeline in late summer, oil
production for the latter half of 2007 is significantly
higher. According to a December 14 International Energy
Agency report, oil production averaged 2.01 mbpd during 2Q
2007 and climbed to 2.11 mbpd in 3Q 2007, contrasted with an
average of 1.90 mbpd for 2006. The report adds, "(Iraq's oil
production in 2007) has seen a steady improvement in net
supply." Inclusion of 3Q data in Fund projections would
substantially increase Iraq's growth outlook. Non-oil sector
data reflects only three types of activity: electricity
production, fertilizer production, and cement production.
Again, reliance on first half of 2007 data presents a
remarkably different picture than what the entire year has
witnessed. In recent months, electricity production alone has
reached record-breaking highs.
5. (C) Clearly, a lack of capacity on the Iraqi side is one
of the driving factors for slow and incomplete reporting to
the IMF. The Central Organization of Statistics and
Information Technology (COSIT) is responsible for the lion's
share of statistical reporting and in August had its deputy
head (and rumored future head) assassinated. The early
October assassination of the Director General for Budgets in
the Ministry of Finance also exacerbates the Ministry of
Finance's reporting problems.
6. (U) ACTION REQUEST: We encourage the Department, Embassy
Amman, and Treasury to urge IMF interlocutors to delay public
release of the SBA report for Iraq until 3Q 2007 data can be
incorporated into growth projections for 2007.
CROCKER