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MENAFN - Khaleej Times - 26/10/2013
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(MENAFN - Khaleej Times) "We formed a committee to decide on the details for the bond issue, which will most probably be of medium- to long-term maturity," Deputy Finance Minister Fadhel Nabi said in an October 22 phone interview from Baghdad. "The joint committee from the Finance Ministry and the central bank will also decide on the timing, which can be within a year," he said, declining to give more details.

Iraq, with the world's fifth-largest oil reserves, boosted income from crude sales by 23 per cent from June to August and earned 6.5 billion in September, data compiled by Bloomberg show. The country is pumping 3.3 million barrels a day amid attacks that killed more people in the first nine months of this year than in all of 2012. Government debt as share of gross domestic product should drop to 25 per cent this year from about 800 per cent a decade ago, Standard Chartered said on October 20.

The extra yield investors demand to hold Iraq's dollar bonds rather than Treasuries has tumbled 143 basis points, or 1.43 percentage points, since this year's June 25 peak to 510 basis points on Thursday, according to JPMorgan Chase & Co's EMBI Global indexes. The spread between Treasuries and Middle Eastern bonds narrowed by 37 basis points in the period.

"Iraq's yield is very attractive, underpinned by strong government finances and a fiscal position," said Ahmad Alanani, Dubai-based director for the Middle East at Exotix Ltd.

"I'd take Iraq risk today over some of the more vulnerable places in the Middle East."

The yield on Iraq's 5.8 per cent dollar bond maturing in January 2028 dropped to 7.275 per cent today from a high for this year of 8.803 per cent on June 24, according to data compiled by Bloomberg. The bond began trading at about nine per cent in 2006.

Iraq issued 2.7 billion in securities to help restructure debt accumulated during the era of former president Saddam Hussein. The bond is the country's only dollar-denominated debt and equates to about 1.2 per cent of 2012 gross domestic product, Geoffrey Batt, managing director of the 82 million Euphrates Iraq Fund, said in an October 22 e-mail.

"It's tiny compared to Iraq's financial resources, and there's little doubt the country can meet its obligations," he said.

As government borrowing continues falling as a share of GDP, Iraq may find it easier to return to capital markets, particularly for long-term infrastructure projects, Standard Chartered said in its report this week.

Nabi, the deputy finance minister, confirmed in his interview that Iraq's next bond would help pay to rebuild infrastructure damaged by decades of war and sanctions.

Even so, the government's plan for a second bond is less than certain. Iraq said more than two years ago, in July 2011, that it would come to market in a year.

Iraq's efforts to rebuild its economy 10 years after the US-led invasion that ousted Hussein are hobbled by political in-fighting and sectarian strife. A dispute between the central government and the semi-autonomous Kurdish region led the Kurds to suspend oil exports through a national pipeline in December.

 


Khaleej Times




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