Economy
Inflation in Iraq slumps says central bank chief
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04 September 2007 (Gulf Daily News)
Iraq's core rate of inflation has been driven down by monetary policy and the central bank is ready to take further action if needed, Iraq Central Bank Governor Sinan Al Shabibi said yesterday.
"Inflation is our over-riding concern," he said in an interview on the sidelines of an annual central bankers retreat in the Grand Teton mountains organised by the Federal Reserve Bank of Kansas City.
Bitter sectarian violence has greatly damaged economic activity by driving up prices and inflicting terrible hardship on the country's millions of poor and unemployed.
Shabibi has raised interest rates to 20 per cent and lifted the value of the dinar against the dollar, reducing monthly inflation, excluding food and energy prices, to 17pc in July from 35pc in June.
"Our monetary policy is functioning well," he said, adding that future action "depends on developments in inflation, taking into account developments in the economy and investment."
Shabibi said the dinar had taken back its rightful role as the currency of choice for Iraqis.
The Iraq dinar has appreciated to around 1,240 against the dollar from as low as 2,200 in the aftermath of the war.
Business is booming in the semi-autonomous region of Kurdistan in northern Iraq, but is much more subdued in the rest of the country, which relies almost exclusively on oil revenues for the foreign currency it needs to pay for imports.
Shabibi conceded that the poor security conditions were a big constraint on business, but argued there was a great deal of activity quietly taking place that was hard to spot but remained a source of reassurance.
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