DUBAI: Iraq plans to establish a state-funded investment bank to help finance big infrastructure projects and steer money toward private sector companies which need it, a senior government official said Monday.
An underdeveloped, inefficient banking system has hindered efforts to mobilize funds for investment in Iraq. Bankers at a financial conference in Dubai Monday described how some Iraqi corporate executives carried around tens of thousands of dollars in cash to settle transactions that are too inconvenient to do through the banking system.
“We need this [state-funded investment bank] to push forward the economy,” Sami al-Araji, chairman of the National Investment Commission, told Reuters on the sidelines of the conference. “Our existing commercial banks do not have the skills or experience.”
The new institution, Investment and Development Bank of Iraq, would receive 1 percent of annual state budget allocations over seven years under a proposal that will be sent to Parliament for approval, he said.
That arrangement, if it goes ahead, could eventually provide the new bank with over $10 billion to invest; this year’s state budget is estimated at 174.6 trillion dinars ($150 billion).
Despite the militant violence plaguing Iraq, the economy has managed to keep expanding on the back of oil output; the International Monetary Fund forecasts annual gross domestic product growth of more than 6 percent from 2014 to 2018.
Iraq already has 23 private conventional banks and nine private Islamic institutions, as well as seven state banks and 16 foreign banks operating in the country, according to the central bank website.
Araji said a dedicated investment bank could participate in financing some of the tens of billions of dollars of infrastructure projects which the government plans over the next several years.
It could also help arrange funding for small- and medium-sized enterprises, which authorities want to develop to create jobs and diversify the economy beyond oil.
The proposal for the investment bank is part of a series of planned amendments to investment laws which will be submitted to Parliament, Araji said. A parliamentary election is scheduled for April 30, so the proposal would probably be considered by Iraq’s next parliament.