Public Disclosure Authorized

A.S. 20 RESTRICTED

Th's report is restricted to use within the Bank.

Public Disclosure Authorized

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

FIRST LOAN ADMINISTRATION REPORT ON THE LOAN TO IRAQ

Public Disclosure Authorized

OF
June 15, 1950

Public Disclosure Authorized

June 3, 1954

Departmert of Operations
AsD U&& 2

a.UU&

]East

CURRENCY EWUIVALENTS

UNIT

iraqi dinar 280.00

.357 143

U.S. cents per currency unit Currency units per U.S. dollar

FIRST LOAN _ADaNISTRATION REPORT

VOTJ rrxV

`C)AW Tr) TPAnl

IN1TRODUCTION 1. This report deals with the loan to Iraa cn the 11adi Tharthar Project, Loan No. 26-1cn^ signed June rl, 1950r -It covers the period from that date to April 30, 1954. Following the Vice-President:s visit to the Middle East in l7arch 1949, a Bank mission went to Iraq in Nay of the same year to study the cuun-ry's economic situation, the possiDblitles ior the establishment of a development agency, and the e:dsting plans for flood control projects. After studying the mission!s recommendations, Bank representatives went to London in August 1949 to discuss with British and !raqi officials the f-inancing of flood control measures, and the capital needs of the Iraqi Railways. Shortly thereafter the Export Credits Guarantee Department of thae United hLingdom made a 3 milaion railway development loan to Iraq. After further discussions with the Iraqi Government, the i-adi Tharthar flood control project was considered for Bank assistance. Negotiations were started in jondon in April 1950 and culminated in the signing of the Loan Agreement and two supplementary agreements (an Indenture of Assignment and a Project Funds Agreement) in
T

20

Iiashington on June 15, 1950.

3. later that year various additional development schemes, involving irrigation projects, the purchase of agricultural machinery, and the erection of grain storage facilities, were brought to the Bank's attention. A Bank mission examined the proposals, and in Februarx 1951 the Bank expressed its willingness to negotiate loans to aid Iraq wfith these projects. Iraq, however, felt that her imDroved financial oosition warranted financing them from her owqn resources. An oil refinery proe ect was also discussed with a view to Bank assistance but, when the Bank and Iraqi representatives disagreed on its technical justification, the latter made their own financing arrangements. At the request of the Iraqi Government, a General Sur-vey 1Mission from the Bank visited the country in the spring of 1951. Its report was oresented to the Goverunent in February 1952. 4. In I4arch 1953, in the course of a tour of Middle Eastern member countries, the President of the Bank visited Iraq.

- 9-

A it aI

M tnD

[lir

T n A T Al

LlV2t.LI

5.

Te L,oanl

was

uiaue onl

U1Ue

15,

1950V aLU

Ut,.V

cti-f1eJJV on

July 12, 1951. It is a 15-year loan for 112.8 million and carries an interest rate of 3-3f47, incl-uding 1, sbLaUUU-Y QoIfMllss1n. SemiL-anU1ual payments are due to begin in April, 1956 and will retire the Loan on uctober 1, 56>'. 6,6066,996.93 had been disbursed by April 30, i95I4 and another ,4h,723.35 had been committed under irrevocable letters of credit guaranteed by the Bankc.
6, Schedule 4 of the Loan Agreement designates a part of tne Loan,

amounting to "l,700,000, to cover interest and loan charges durinr the

construction period; payments for both have been charged to the Loan Account when due. The Borrower has not been reauested to deliver bonds to the Bank as provided in article VI of the Loan Agreement, 7. Unlike other loan agreements concluded by the Bank, the one for the IJadi Tharthar project does not include the "Negative Pledge Clause". In its place, an Indenture of Assignment assigns to the Bank as security for the payment of the Loan and the Bonds any and all of Iraq's rights to oil royalties under the concessions held by the Iraq Petroleum'Company, the Basrah Petroleum Company, and the ilosul Petroleum Company. In the event of the Bank having to invoke the security provision, Iraq has arranged with the British Treasury that palnyents to the Bank out of its oil revenues, accruing in sterlings may be exchanged for the currencies required for the service of the Loan. As pointed out in Part III below, as a result of an agreement signed in 1951, Iraqts oil royalties have increased far more rapidly than they twere expected to increase when the Loan Agreement was signed. A Project Funds Agreement between the Iraqi Government, the 3ank nrovidpes thnt snecifiPe aqmountq. required for the internal costs of the project, are to be said out of oil royalties into a Project Funds Account. A orocedure has been established which ensures that, funds withdrawn from this Account are spent 80

National Bank of Irq;. and thp

only on the nroiect.

Additional data may be found in the followring reports circulated to the Executive Directors: (a) P.5 - Report and Recommendations of the President to the Ekecutive Directvors on the proposed Loan for the 'Wadi Tharthar FLood Control Project of the Kingdom of Iraq, June 12, 1950,(R.g33 4 ). (b)L.85.a-Technical Report on the ladi Tharthar Flood Control -Project in Iraq, June 7, 1950,(R-334).

B.

THE PROJECT

9. The Tigris runs swiftly and rises suddenly. Its annual floods, fed by heavy rains and melting snow from the Zagros Ranges flanlcing southern Turkey, are often uncontrollable. Even a local rainstorm in the Zaeros can produce great changes in the river level in a few hours, and a rise of from 8 to 12 feet in one day is not unusual. At Baghdad the river discharges a minimum of 11;900 cubic feet per second in September and a maximum of 106,650 cubic feet per second in April, with a rise in ltevel of 18 feet, Leves hiiilt to contain peak floods have in the past proved inadequate and, to protect Baghdad from disaster, it has often been necessary to breach the river's eastern banks far upstream, thus flooding valuable crop lands. The Wadi Tharthar Project is designed to+.r protect i~v-,-banare-as and p,%eTrevent crop Incses by, divrtin ptetill ThI~.e+ -r1 -Ja~ F- -~ ,rv-,-E, I,+4-V dangerous floods from the Tigris to thel'Jadi Tharthar depression, a barre o V 11w-1or lyr;rg b-4,^.- +1ho rlgw; -4 +h -,hnA -h^k-+ an o1 v aaa Y -s ul . , ren _l v_ I_ arh. Ep l Ua _ _ u. 60 k iv meters from Samarra and approximately 65 kilometers northwest of Baghdad. 10.
h1ensive IL L cojUIIp1otnen
k

The Project was conceived as the first stage of a more compre-

unAertakin, VIN 11 vvvU .- provide, Igwh4sch mfu'd Lu UiU A

L U,

in aJi-l4,&:on L..LL CL'JUL .

WteI-.c vU_J.g xIl.L

UV

L.J'(4

-o

-lo'JV - -4- L - --

water storage and regulation for power and irrigation purposes.

U_L IJele 1UUUooIu convurUo.

The basic

prUJojecU

d U.1.Ltdg: d(l..UvR ay

the Tigris near Samarra (approximately 100 kilometers upstream from Baghdad) to dam the floods, and a floodway along which the water diverted by the barrage would flow to the 1iadi Tharthar. Ancillary to the dam and floodway were tne necessary levees and training works, an inlet channel with a regulator, and the relocation of the existing roads, railways and structures near Samarra. 11. The diversion of Tigris floods to the wadi Tharthar will reduce the public expenditure on relief and repairs of flood damage. The unusually disastrous floods in the spring of 1954 provide a striking example of the enormous sums that are involved. One and one-half million acres were flooded and the damage from this flood alone has been conservatively estimated as high as ID 20 million. C. PROGRESS OF THE PROJECT

12. The Loan Agreement provides that the Project will be supervised by an engineering consultant or firm, and that the construction work will be carried out by con-tractors in each case satisfactory to the Bank. The preliminary estimates and engineering designs for this project we re carried out by the Irrigation Development Commission which was the agencyiemployed by the Ministry of Public Works to prepare plans for the developmieit of Iraq's water resources. The Government of Iraq engaged Messrs. Coode, Vaughan-Lee, Fran'k a-d Gyther of London as its consulting engineers for the project, This firm was charged with the responsibility of reviewing the preliminary designs, preparing final designs and specifications, Snd supervising both the award of contracts and the work of the contractors.

13. The contract for the first part of the project - the excavating of the channel and the related works - was awarded on the basis of competitive bidding to 11Iessrs. Balfour Beatty & Co, Ltd,of London towrards the end of 1951. Both the consulting engineers and the contracting firm were regarded by the Bank as being entirely satisfactory. Representatives of the Bank have periodically visited Iraq to inspect the progress being made on the project and satisfactory progress reports on the diversion bund and channel have been received by the Bank regularly since the summer of 1952.
WJork on the first nart of' the nroipct. which started in December 1951 advanced more slowly than had been expected as there were considerable delavs in thp dpliverv of Paluinmpnt Followinn' the arrival of the maior part of the plant during the third quarter of 1952, however, some of the lost ti me was made p10 and progress hy the end of that year was felt to be satisfactory although the final items of equipment were not received until well into 1953. lb.

As

on nrno monntriio+; Pr1prI

+.in opnp-'l

I wirniirh nnri tPc;

an

nf

.hp.

project have been changed appreciably. The main objective is still the diversionr of flood waters but, as now plare -he brgull be huilt so as to make possible ultimately the irrigation of from 200,000 to 300,000
acres betvwveen
Samarra and BPahi-inda

and thae g-,eneration of possibly a's r.u-h

125,000 kw. of electric power,

-pposite +he to-W
of Samarm...7 ..

The barrage itself has been relocated

dAW.
-e

fror. -LA1t.he

site and

its

height has been increased to create an enlarged storage reservoir. A power intakle st is no -cur ----4ted ln the Aand4 esign -4 e ntv t4--4othe, Ishaqi irrigation canal is to be built into the barrage structure as well.
The unesucso he oirlna design have been eli.-,inated. The capac,t

of both the regulator and the floodway to the Wadi Tharthar have been increased. Although the capacity of the floodwVay has been increased, it has been possible to reduce the size of the excavated channel to the Wadi Tharthar
to tLh.aLt s terequi1red0 toUf-rnish propIe uT raVals for i.B bIuiiu. The crianges

have been made to improve the project and broaden its scope, and at the same bime to reduce the cos=ts of some elements of it. Some of the cnanges have been prompted by the experience gained from the devastating flood in the
sp-Lng of 1,..L4.
.. It

ofr'I

Contract No.1 for the first stage of the project, the excavation of the channel and related works had to be amended on account of the decision to move the site Of the barrage, wnicl IS to be built under Contract No.2. The original plans called for a diversion channel of some 60 Km. with a bund about 50 hm. long, Mioving the barrage dowin stream has made it possible to shorten the channel and bund construction by about 7 Km. and to straighten the aiignment of- the barxrage, regulator, and embankments so as to save a considerable amount of embankment. The work now consists of a bund or embankment and pilot channel with only about 10 Km. of excavated floodway through
high land.

16.

17.
wardred

by the Development Boardr in Fphriaqrr 19<

Contract No.2 for the construction of the Samarra barrage was

to the Genman firm E.D.

Zublin, Duisburg, on the basis of international bidding. The decision to relocat.e +.he b'arrag and proriAde for the ul+mate inqt2AAnon of nn-wer was not made until after this contract had been awarded. As a result of this relocatio. it has been possib1e to reduce the len.gth of he barrage and to carry the highway to Samarra over the barrage, regulator and embankmrents, and to ear.Wr a railuygn2
dJirn"oJ^"

overny

+vrO of

+thei e.m19aI,m.ts

andt +

regulator, thus eliminating separate bridges. Also, at the present site the barrage can be built "in the dry"- to the rIght of the main channel an.d a closing bank constructed across the main channel after the barrage is

-1spetd-A T I+ -ua -closi 1 'ne to IA4 1 the ng bar=- before the -floods in the spring of 1956. The present contract will include the intake structure

Por _
.LUs

'

4z_

11:A- kdX | i~.J.lv

dD .L

_P _ o_1 V p jJv5LJ.
Z

U Uy

nt

.L.VU

gIIU - -

-.

X_ Liig

UllLUJ

.z-r

e.

11

Vi

n rl >.non I_. rUV.

capacity. The drawings for the engineering and design of the main dam and associated works ha-ve not yet been compleTed but thI contra2ctor has star;t ed to make borings and carry out other prelimirary work in accordance with general plans.* Revised specifications and cost schedules are also being prepared by the consulting engineers, The elimination of the highway and railway bridges, the shortening of the channel and Dunad the straightening of the alignment of the barrage, regulator, and embankinents, and the elimination of the undersluices of the original design have all affected savings. On the other hand, the addition of the intake structure for the power plant, the increase in the size ofA the regulator and floodwTay, and the raising oI the height of the dam have all increased the cost of the project, The final
cost will be higher than the original estimate of ID 10.22 million.

18. The last visit made to Baghdad by Bank engineers was in the latter part of April 195h. At that time it was found that, although the first part of the project was behind original construction schedules, it was progressing in a reasonably satisfactory manner. It is expected that construction -will have advanced sufficiently to permit diversion of flood waters in the spring of 1956. 19. Disbursements of IBRD funds have thus far been made: (a) for earth-moving equipment required for carrying the first stage, or Contract No.l, the contract for the diversion canal, and (b) for capitalized interest and commitment charges. An amount of 25.7 million is allocated in the List og Goods for the equipment needed for Contract No.1 and over $5.4 million has been disbursed. The Iraqi Government has followed all the requirements of the Project Funds Agreement and has duly paid to the National Bank the T amounts of local currency set out in Schedule 1 of that Agreement. Jp to June 1, 1954, according to the Development Board's Directorate of Accounts, the actual sums paid to the contractors, in Iraqi dinars, were ID 2,646,900 on Contract No.1 and ID 1,219,000 on Contract No,2. 20. The Bank-financed eqLipment, which is being supplied to the contractor and which will become his property on completion of the contract, is being paid for by the contractor by deductions from gross earninps.

These deductions, which amounted to only ID 61,900 up to the end of June

17;95ns

were

sched-t A,'LeU lV toT

inJUthIrL'r "Iia Vrltl

Uarter and tInere-

after.

By the end of December 1953 ID 463,900 had been deductedl, and the
of thet dirllarL equi-J-VcA.LUri VI Ulthe cost of the equiLLz1R,-1iW) V 4,1oUU.iQ-i1

rer,mainder

to about ID 1,660,100, is to be deducted from earnings over the 2-year period to Decel-uber 1955. 21. The amount payable under Contract Tno.2 for the erection of the dam has not been determined because physical quantities have not yet been established and detailed cost estimates have not been prepared. The List of Goods for the project will have to be revised to reflect the several

changes in design of the project and the new cost figures.

The changes in

the project are such that the project description in Schedule 2 of the Loan

Agreement should be rewritten and the figures of estimated costs,in Schedule 4 revised. The estimates of dinar costs for Contract No.1 haveinot yet been revised to take account of the new design. Under both contracts the
new designs are expected to result in reductions in local currency expendi-

tures. If these expectations are realized the dinar payments to be made to the National Bank in terms of Schedule l of the Project Funds Agreement (which was set up under the loan agreement to assure the availability of local currency for the project) will prove to be more than are needed.

- 7PART TI

POT.TTT(AT. STT'TATTON

229 Iraq is one of t A 9 the of en the Ottoman Empire. It was originally administered by Britain under a League of ;;ations madate. It has been an independent constitutional monarchy since 1932 and has been fortunate in having had relatively stable government. Iraq is n active mrermber of the Aab T-enage J I+t ; aare of -t strategic importance and has dealt firmly with the local Communist

C.,?

43

ILIU~

d.4

LZ

LJJA.OC14II

-e.Lt. ;

Iiiiuitjer

V-J

LX

UL1idUA:I.LJ

V.Jj

UC.'JUV.LJU0

are elected on the basis of one to every 20,000 male Iraqi subjects; lfJLiUiwhose nuL Luers miia-y notJ exceeIu one-fow-th thU4 nuuUber of 1i L4L e U4 are appointed by the King from among those who "by their acts have,gained
thie

confidence and trust ofi tvhe people and tohose whco have an honorable

past in the service of the Governanent and the country". 24. Dissatisfaction with the slow progress made in i'tplementing development plans springs in part from pUiblic awareness of the recent great increase in oil revenues. At the same tilre a good deal of the criticism levelled at the Government on this score undoubtedly arises from public ignorance of the considerable time that must elapse between the inception of a project and its realization.

PART

III

GENERAL EC010,TC CONDITIONS

25. The outstanding feature of the Iraqi economy in recent ye;ars has been the rapid increase in oil production and the corresponding rise in oil revenues accruing to the Government. In August 1951 the Iraq Petroleum Company, which is owned by English, French and American interests, made an agreement, retroactive to January 1951, under which it and its associated companies undertook to turn over to the Iraq Government onehalf of the profits from their combined operations and to raise the annual rate of production from 6.7 million tons in 1950 to 30 million tons by 1955. 26. Oil production has developed even rmore rapidly than scheduled. It was 8eh million tons in 1951, 13.1 million tons in 1952, and 28.2 million tons in 1953. Production in 1953 almost reached the 195%1target. Royalties rose to about m 13 million in 1951, ID 38 million in 1952. and more than ID 50 million in 1953, The 1953 revenues were approximately Tm 8 million more than had been scheduled.

_ 827. Lf 0

A 11

IIJ1I.L.U

1J4.

-4P

d.fIVJL

has
liiao

enabled 11CLJ4tU

WLi

r--AApid
djJ4-U

4-crs

production to take place.

whch
Js

Oil consumption in the Eastern Hemisphere,

Ea.sterlrn SlourceUsUp s.5 unLcd-.L1ag

main.ly su-,plp

au a

rate of 5-6% per year.

Danias Syr wit

In 1952 a 555-mile, 30" pipeline from Kirkuk to

lliorn tons per year, was comipleted,

a capacity ofla L4

and in September 1953 a 65-mile 24"? pipeline from Basrah to Fao on the Fersiarl Gualf, -. with a capacity of o million tons per year, was compieteao
Also, the marketing of Iraq oil is easier because the coumtry accepts

sterlin.g.

Finally, a substantial part oI thie production lost in Iran has

On the other hand, if Iran should come back into

been supplied by Iraq.

production, it is not expected tnat Iraq would suffer significantly. The increase in world demand should be sufficient to absorb Iranian oil. Iraq output, in fact, could increase still further if' the termmial of the Kirkuk-Haifa pipeline, whlich is now unused because of the irab boycott Of Israel, is moved to Lebanon. 28. The risinR:, revenues have given Iraq large resources with wThich to finance its development program, The Government established a Developmrent Board in 1950 to plan and carry out a program, and originally all of the income from oil was earmarked for tVe Board. In Mlarch 1952, however, new legislation was adopted under which 30% of future revenues were assigned to thle ordinary Government budget. This action has not resulted in a reduction in the funds that had been estimated in 1950 would be available to the Board; oil revenues have increased so rapidly that the 70% remaining to the Board has actually exceeded the total original 1950 estimates. The Board was originally given a large degree of autonomnr, but Ln July 1953, as a result of a reorganization, it was more closely integrated waith Government proper, and a member of the Cabinet, the 1Uinister of TDevelopment, was made in large part responsible for its operations.
... )p Thp Boardl inrow earr-yangf out an imnvrestmentpro> rntmof about ID 155 million covering the 6-year period ending in 1956. About ID 32
millinn r had been nn+.ii,l 1r allrc-ni-ate+d ton the 1it-m theo11,ll + r
3

+Iha fiscral .

ending March 31, 1953. An estimated additional m 35 million was allocatedt+o+he 1,o'nd in 1Q53-54. As of Marcih 31, -QI).g -toa + h,men+s including loans, advances, etc., I 31,327,h30, of which I g million 1ere
was 1.ri+.thdrav.nm for th,e orrinar,rn
hl,e+.. of
+-h "nimore in der

+h-

Tm

million consists of loans to other government departments and agencies sucht-h Bagh.l_d b_l sen-r1ce, as tr o refiney the A ric',,1 e Machinery Administration and various municipalities. It is impossible to
+vhe

say howr

r..uch of

the latter

t+vwrO

nmo,vn-ts

released

to

the C.vA

its

agencies has been actually disbursed. The fact that actual expenditure on development has bencnidrby'ottrr than. the available income is not surprising because it takes time in any country to plan and get longterm proJects u*d-r jay on a sound basis. Iraq has bQeen handicapped in-

addition by a shortage of experienced engineers, administrators and other

thrbedimen task for whicuh -L has ben
rbl1 itUl

va-d

the imLmense task for which it has been made resnonsible.

- 930. Expenditures under the capital works item of the extraordinary budget (against the amounts approved by the Development Board for disbursement by the Government) were ID 2.76 million for 1951-52 and ID 4.59 million for 1952-53. The Development Board has approved capital works expenditures of ID 4 million for 1953-54 and ID 6 million for 1954-55. 31. The 30% of oil revenues allocated to the Government since M4arch 31. 1952 have enabled Government expenditures to rise. Regular budget expenditures rose from ID 28 million in 1951-52 to iD 51,227,58h in 1953-54. The 195h-q5 budaet. already apDroved by the Cabinet, amounts to ID 54 million. Expenditures have reached these magnitudes without thus far throwing the hbudget nit nfn bnalan ReGeints in 19q9-0 were swelled by a snecial ID 7.5 million settlement of the Gold Clause dispute with the Iraq Petroleum Company. There hnR even hbpn some reduition nf the internal debt; whilh stnod Pt only ID 7 million as of lMarch 31, 1954. 32. Almost every type of expenditure has been increasing. Outlays for defence and police, for example, were budgeted at ID 18.3 million in 1953-54 as compared with only ID 9.7 million in 1951-52. Expenditures on health, education, agriculture, and public works have risen significantly. Also, the Government has provided out of its regular budget for increases in the capital of government banks, including the Industrial Bank, the Agricultural Bank, and the Chattel ilortgage Bank, and the Realty iHortgage Bank. 33. The rapid increase in oil production and the rapid rise in oil revenues accruing to the country has not yet had much effect on production elsewhere in the economy. Oil production has increased without adding significant numbers to the permanent working force in the industry in Iraq and without requiring a significant volume of subsidiary or ancillary domestic investment. Also, the effects of the increased exports of oil are different from those of increases in exports of other commodities. The oil producers hold concessions from the Government. so that a very large part of Iraq's income from oil exports accrues in the first instance to the Government rather than to the local population. The incomes of

the latter will increase only as the Government spends the oil revenues
locally alnd as outout outside the oil industrv rises as a result of the

increased domestic investment.

34. Available figures indicate that agricultural production did not change much in 1952 and 1953 as comnpreri with IQ1i - nereai PnArt+s

dropped sharply in 1952, but it is difficult to know whether this was

due to a decline in outputn ii reased domestic consumption, or to a

combination of both.

Ulheat and rice output rose slightly in 1953;

the

barley crp may have increased by asnucith as 20% * Date production, however, has tended to fall slightly. The trend of prices has been down, so t-hat incom-.e h-as pnrob%ablvy fallen ansd e iJncorm .rom. Lo-rt gra%J I4ns '-,as also

fallen.

The terms of trade for commodities other than oil have moved

a small part of total production, increased slightly over the period.

10

35. The value of exports other than oil is now in the neighborhood of ID 20-25 million. By contrast receipts from oil were more than ID

50 million in 1953.
36. Imports have risen markedly since 1950. Imports other than oil company imports were approximately iD 29 million in 1950, rose to about ID 42 million in 1951, to about ID 47 million in 1952 and to ID 5.5r million in 1953, The large increase in imports has been inanced, or course, by the rising oil revenues. It has been made possible by the relaxation of import restrictions. 37. Imports of both conswuption goods and investment goods have risen substantially. The increase in imports of investment goods has been caused principally by the increase in actual investmnent expendituures of the Development Board and the Government itself, and to a lesser extent by the increase in private investment expenditures. These increased investment expenditures, together with tl;e rising expenditures of the Government on defence, internal security, and social services, have resulted in higher employment and enlarged purchasing power for the population as a whole. This increased purchasing power, howJever, has apparently been used alnost as rapidly as it has been created, to purchase imports. The money supply, therefore, has remained remarkably stable over the past 4 years and has only recently shown a tendency to rise. Iraq - Currency, Deposits, Credit and Prices (Mioney values in millions of dinars)

End
1950

End
1951

Fnd 1952

RnM 1953

Notes and coins in circulation (net)

Deposits with romnrr=r-i1 hbanksm Commercial bank credit outstanding a/

3h.5
M

.8

32.2 1,,A
11.3

30,0
lJ.g

34.3
I 3
1565

o.0

10.8

Cost of liZrir
b/

WIholesale price index b/ e 7

'

103 91

112 98

116 101

96 91

j/

Bills discounted and advances to other than government. 1949 - 100 1949 100, Baghdad

38. It should be noted that, in the volume of commercial bank of the economy, there are as yet Despite the recent rise in money have fallen quite sharply. This

although there was an increase in 1953 credit extended to the -rivate sector no signs of a domestic inflation., supply, wholesale and consumer prices fall in prices is probably accounted for principallv bv the lioeral import policy, tnae.,r wii+h a f * the cost of certain imported consumer goods, as well as by better crops in 1953

i1

39. In spite of the growth of imports Iraq has had very suobstantial surpluses in its ovrerall balance of payments in recent years. In 1952 Iraq's foreign assets increased by approxdmately ID 11 million, and in 1953 by almost ID 23 million. In January 1954 there was a further increase of about ID 10 million. At the end of January 1954 Iraqts foreign assets stood at more than ID 93 million which was about double what they had been four years earlier. 40. It is abundantly clear that thus far at least Iraq's financial resources have increased more rapidly than the country has been able to spend them, The rate of development expenditure is increasing, hcw-. ever, and it remains to be seen whether it will rise to a level at which all oil revenues will be currently used. The economic and financial situation is basically sound. The free iimort policy has kept internal prices down, enabling Iraq thus far to avoid the sort of domestic inflation that might adversely affect the sound development of the non-oil sector of the economy, especially the competitive position of exports,

- 12 -

R A Q

BASIC STPTISTICS Area Population (estimated) Trade statistics (millions of Iraqi dinars) 179000 sq. miles 5 million

1950 Total exports by foreign oil companies

Total imports, c.i.f.

1951

1952 102.9 37.1 83.0

61.8

1953 11h5.4 125.6

68,7

50.3 28.7
37.6

66.1
51.0

by foreign oil companies

Principal e:xports (thousandsof metric tons)

8.4

8.7

14e4

13e2

1950
Barley 463

1951
440

1952
339

1953
489

Dates Petroleum

211 6,070

339 7,957

24X2 17,701

251 26,869

Balance of payments (milliors of Iraqi dinars) 1950 Transactions oF foreign-owned oil companiies (net foreign exchange surrendered) Other goods and services (net balance) + 7.9 + 1951 + 19-3 1952 4 39.7 - 25.9

.9

809

Surplus, current account

t 8.8

10.1

+ 13,8

Foreign assets* (millions of Iraqi dinars)

Other banks Total

8&2 50.1

9.9

15.3

1807 83.2

505

61.5

*Almost exclusively sterling

Money suppLy (millions of Iraqi dinars) 1950 Currency Deposit monev yVTotal

End of year 1951 32a2 ,7 n 1952 1953

34.5
-,o

30e
)y l.a

34h3
IIv
A.

Prices

1949

100
192 116
1953

19
-41olesale prices (All goods)

1951 112

103

96

Cost of iiving (Baghdad) Budget (millions of Iraqi dinars)

91

98

104

91

1950/5J
Revenue Expenditures Surplus or deficit

1951/52 36.7
2842
+
*

1952/53 * 1953/54 48.8

32.2 28.3 +

o.2
8.6

142.3

U.o
5.7

3.9

8.5

Estinates

Development Board (inillions of Iraqi dinars)

1951/52
Receipts Planned

1952/53

1953/54

Actual
Disbursements

10.5

8.ei

2065
23.7

33.9

Planned expenditure on econonic

development

9.4

20o5

2FLJ

Actual

22.0