Steven Chopade | Iraqi Dinar Gives a Bright 2016 Outlook for Investors
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Iraqi Dinar Gives a Bright 2016 Outlook for Investors

10 Jan Iraqi Dinar Gives a Bright 2016 Outlook for Investors

Iraqi dinar is making huge rounds in the popular financial news columns despite the unavailing impression of being devastated by war threats and bombings from the West. To the surprise of veteran economists, the currency yet furnishes a strong ground for investors to see favorable return on investment (ROI) according to the latest economic outlook for 2016.

All is not gold: Some factors could affect the dinar

While investors are not to panic about the projections of temporary downfall of the dinar, it is a knowledgeable step to keep tab on the factors that could value down the currency in the foreseeable future.

The fall of global oil prices

This is one of the reasons for spending issues in Iraq. The Iraqi government has been quite sagacious in withdrawing dependency on oil industry and adopting a stable budget to dodge the nail-biting oil prices. Expansion of public sector programs, however, has somewhat done the job for the West Asian country as the expected trend will ultimately also stimulate the economy through improving oil prices and subsequently lead to higher tax revenues.

The orphanage of non-oil businesses

Iraq is seemingly demonstrating the oil industry as its messiah. However, if the country is to ever become a resounding economy, it should create equal employment opportunities in non-oil business sectors too. Another problem to deal with is the effect of onerous regulations that restrict the growth of other sectors. Having that mentioned, the government has woke up to economic diversification where efforts are being made to release dependency on one industry i.e. oil.

The offset of import-export balance

International decline of oil prices did another defacement of the economy by disturbing the balance between imports and exports. In order to feed the growing economy, the country had been relying heavily on imports instead of exports, pushing the trade surplus down to 9.7%. Nonetheless, with recent developments in oil business, a counterbalance is expected to strike as oil prices continue to rise, thus increasing oil exports.

Iraq’s bright economy : Diversification is key

Stamping on the catastrophic events, of which include the barbarous onslaught of the Islamic State, and helpless times of counterattacks from the Western victimized nations, Iraq has displayed significant economic progress in the past few years. Its GDP accounts for 0.36% of the world’s economy.

Trade balance

If 2009 and 2010 are to be turned a blind eye to, the Iraqi trade has displayed an impressive balance of export to import figures rising to healthy values in merely three years.

2009: $-1729.8 million
2010: $7848.3 million
2011: $31877.6 million
2012: $44053.6 million
2013: $39792.9 million

Diversified GDP

Oil extraction: 55%
Services: 33%
Manufacturing: 8%
Agriculture: 4%

Oil production

2015: 4 million barrels/day

Healthcare

Spending: USD 12 billion in 2014 from USD 3.8 billion in 2010
Expenditure: 81% paid by government and 19% by citizens
Reach: 2504 primary healthcare centers for 60% patients
Frequency: 0.7 physicians and 1.49 nurses per 1000 citizens

Foreign direct investment

2011: $2 billion from $383 in 2006
IMF loan: $833 million
World Bank Loan agreement: $350 million
Total World Bank loans: $1.7 million

Construction

Infrastructure allocation: USD 15 billion
Reconstruction allocation: USD 150 billion
Current valuation: USD 25 billion
New homes: 3.5 million

Labor

Labor force: 8.9 million
Services: 59.8%
Agriculture: 21.6%
Industry: 18.7%

Iraq to replace Saudi Arabia

…as the most developed and affluent land within the next few years. Surprised? But that’s true given the fact that Iraq has dominantly supplied oil and gas to satisfy the unquenchable demand of the whole world. Don’t be surprised if the world starts seeing the nation as a regional and global energy and power base.

Oil Industry after Saddam’s ruthless reign

Every drop of oil in Iraq is aware of the prolonged negligence and mismanagement during Saddam Hussein’s darkest regime, which placed an artificially-low value on the dinar in 2003. However, there is a drastic change since then, majorly coming from huge oil reserves.

  • 145 billion barrels still remain to be tapped
  • 10 super giant (5 billion barrels each) and 25+ giant (1 billion barrels each) oilfields
  • Super-giant oilfields in southeast Iraq make the world’s largest concentration of such fields
  • Iraq’s huge oil reserve comes only from 2,200 oil wells drilled since 1925
  • Natural gas reserves are the fifth-largest in the world, approximately 115 trillion cubic feet

Advanced technologies to further boost oil production

The 2008 allies with Big Oil companies viz. BP, Total, Shell and ExxonMobil previously adjoined to Iraq Petroleum Company (IPC) have introduced the adoption of newer technologies. Directional drilling and hydraulic fracturing are two such advancements which are currently seeing the country’s oil production growing to untamable limits.

Should you buy Iraqi dinar?

If you have carefully understood this outlook for 2016, you would have an answer for that. The Dinar’s true value is dependent on the ever-rising value of Iraq’s oil wealth. While the nation’s economy excessively depends on its natural resources, any investor would like to continue buying the currency, as the country’s exceptionally mammoth oil reserves reflect as money in the bank. After being blessed with just the right geological formations for oil production, interesting international ties, new explorations, drastic economic progress and high volume of exports, Iraq is now deemed to be a major investment hub.

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