Recent economic development in Iraq

RETU No. E-136a RESTRICTED 67059 This report is restricted to use within the Bank. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT RECENT ECONOMIC DE\, ~LOPMENTS IN IRAQ January 29. 1951 Economic Department Prepared by: J. C. de Wilde  TABfE OF CONTENTS Iraq Basic Statistics S~~ry and Conclusions i-vii Introduction .... .... .................... ............. . '" '" '" 1 Production ................................. ., .............. . 2 Agriculture ................................... , 41 . . . . . . 2 Industry .................................................. 3 fublic Finance .................... " ........................ . 5 The Budget ................... '" ....... '" . ., ........... ., . . 5 Public Debt ........ 11 ................................. . 7 To"'be. cc 0 1.1onopoly .................................... . S Autonomous Public Agencies ••••••••••••••••• 9 ~oney, Banking and Prices ...................................... 11 Money Supply ............................. ........... . .. '" '" '" 11 Prices 12 ...... •••••••••••••• 0 •••••••••••••• " •••••• Banking '" '" . '" ...................... '" .............. '" ....... . 12 Long-Term Capital 15 BaJ.ance of Trade and Pa"nnen;t§. .......................... 17 Foreign Trade • 0 .................................. ,. • • 17 Foreign Exchange and Balance of Payments •••• 19 Import Controls .••..••••••••••••••••••••••• 22 Currency Agreements vIi th the U. K. •. •. ••• ••• 23 Future Economic DevelOPMent .. ., ............... . Obstacles to Development ••••••••••••••••••• 25 Organization of the Development Board •••••• 27 Oil Revenues for Development •••••.••••••••• 29 Agricultural Development .••••••••••••••••.• 31 Industrial Development ••••••••••••••••••••• 36 Ancillary Expenditures ••••••••••••••••••••• 36 hole of the International Bank ••••••.•••.•• 37 Appendix Tables Nos. 1 .- 25  IRAQ ~S:tg~~tT4'tI~ Population (1949 est.) 4,990 ,000 Currency: Unit Dinar Parity 1 Dinar = $2.80 Outpyt of Princina1 Products (thousands of metric tons) 12.42 1950 Wheat 450 520 Barley 750 800 Dates 170 250 Petroleum 4,033 6,350 Foreign Trade (millions of dinars t excluding imports and exports by oil companies) 12l& ~ 6 mos. 19~0 Imports 36.0 30.2 14.0 Exports 8.7 12.4 9.4 foreign Exchange Assets (millions of dinars) End 1947 59.0 End 1948 45.5 End 1949 43.7 Sept. 1950 48.2 B<!ldget (milli~ns of dinars) ~ 19L..9L':iQ ;t.25 0Lil actual) Tactual) (esti:.na. te) r~~c!~'2ll~L~.h 32.0 28.9 28.0 Ordinary 28.1 26.5 24.1 Capital 3.9 2.4 3.9 Revenue 23.7 27.0 27.4 Deficit 8.3 1.9 0.6 Public Debt (millions of dinars) March 31, 1249 October '1,-19~ Internal 10.6 11.35 Bonds': 6.0 6.5 Treasury Bills 4.6 4.85 3.0 10.6 14.35  Summary and. Co!)clusiQW'l 1. Despite a trade depression in 1949/50 which tended somewhat to obscure the basic trend of economic development, the eeonomic sitvation in Iraq has improved considerably since the summer of 1949. 2. The progress which lraq had made in the immediate post-war years in overcoming the wartime legacy of inflation had reeeived a serious setback owing to a harvest failure in 1947, followed by another bad crop in 1948 and the o'IJtbreak of the Palestine war in 1948, "\-thich led to larger military outlays and the clOsing of the oil pipeline to Haifa. These de- velopments created a large deficit in the balance of payments and caused a decline in sterling holdings from a post-war peak of ~ 70 million to about ~ 43 million in September 1949. Another effect was a substantial budget deficit amounting to 7.7 million dinars in 1947/48 and 8.3 million in 1948/49. 3. Good harvests both in 1949 and in 1950 have been the primary faetors responsible for the improvement in Iraq's economic position. Additional contributing factors were an increase in the production of oil resulting from the opening of the second pipeline to Tripoli in 1949, and a greater volume of industrial output, especially in the fields of textiles, cement and leather. 4. Public fina~ces have improved at the same time. The government's budget deficit was reduced to 1.9 million dinars in 1949/50 as the result of an incr52.;;-:' i;l revenue by 3.3 million dinars and a cut in expenditures by 3.1 million. The budget esti~Btes for 1950/51 made a further reduction of about 1 million in total expenditures and anticipated a deficit of only 613,000 dinars. The trend of actual receipts and expenditures during the  -ii- first four months of the fiscal year indicates tl1at the 1950/51 budget will close on Harch 31 with a substantial surpJus. From the close of the 1948/49 fiscal year to the end of Octcber 1950 the internal public debt rose by only 750,000 dinars; in addition a ~ 3,000,000 lean was contracted on behalf of the Iraqi State Railways in June 1950. Even counting this loan, hcrvlever, the total public debt at the end of this period amounted to only 14,350,000 dinars or about half of the annual budget expenditures. The $12.8 million loan obtained from the IBRD in June 1950 is not yet effective. 5. The only \Ulfa"orable aspect of :public fb.ance is the precarious financial condition of the rail\-lays. In the plst the railvays have spent 5.1 million dinars of their reserve funds as well as most of the;);, ':,0('0,000 loan on a rather e)..-t:re"agant capital development program much of ,,;hic'1 has no direct relationship to operating efficiency. Meanwhile, essential re- newals of track, rolling stock and locomotives ha"e been neglected~ It is quite probe. ble tha t the ra ilwa:,·s must find, O'Jer the next 6 :rea rs, a bout 8.6 million dir~rs outside of their 0wn revenues to finance essential renew~ls, complete the capital development program on a modified basis, and reJ.:8y the l. 3,000,000 loan. Presmna.bly the recently established De7elopmert Board will have to furnish these funds. 6. In the field of money and creai t there have been no very signi- ficant developments recently. The exodus or impending exodus of the com- mercially and financially important Jewish community produced some credit stringency and hesitancy in buying during 1949/50, which was reflected in a temporary increase in currency circulation and cash hoarding as well as a decline in bank deposits. Since that time the effects of these develop- ments ha"e largely been OVercome.  -iii- 7. The newly established National Bank of Iraq, which took O'ler the cu:-rency-issuing function from the Iraq Currency Board, began function- ing in the middle of 1949 but has not yet exerted a significant influence on credit. Its advances are swall, its assets consisting almost wholly of sterling holdings, government securities and cash. It was given, however, general supervisory functions over banking by the Earu~ing Control Act which became effective on January 1, 1950. This Act not only required the regular submission of bank accounts to the Nationel Bank and laid c.mlU banking standards, but also stipulated that, subject to certain variations, the equivalent of 15% of total bank deposits be kept on deposit 'Hith the National Bank. and the equivalent of 50% of deposits be invested in Iraq. The Act has apr..arently not had a marked effect on commercial banks, but its requirements have contributed to drivinG a number of snaIl 1:::azaar banks or sar:::'8fs out of business. 8. Primarily as the result of good crops, the 1::alance of trace and payments has improved substantially. Exports other than oil, ",hich con- sist almost wholly of agricultural and aniTI".a1 products, rose from. 8.7 mil- lion dinars in 1948 to 12.4 million in 1949, and amounted to 10.4 minion in the first seven months of 1950 as compared Hith only 3.8 roill~_on in the same period of 1949. At the same tine imports dropped from 45.5 mil- lion in 1948 to 40.5 million in 1949, and 1{ere slightly lower in the first seven months of 1950 than in the corresponding period of 1949. The trade deficit, excluding both imports and exports by foreign oil corer-anies, probably totaled only 11.4 million di~~rs in the entire year 1950 as com- pared with 17.8 million in 1949 and 27.3 million in 1948.  -iv- 9. The resulting improvement in the balance of payments was notable. In 1948 there was such a deficit that sterling holdings dropped by about t 13 million. In 1949, however, the reduction was only ~ 1.1 million and in the first 10 months of 1950 there was an actual increase of • 4.8 mil- , . _lon. Normally the deficit in the balance of trade is Primarily offset by receipt of royalties and other payments from oil companies and the ~oreign exchange income from 100al currency expenditures by such companies. le. The shortage of hard currency, "1hlch together vIi th devaluation caused a shift from dollar imports, has been significantly alleviated by new agreements for the release of hard currency from the sterling area pool. Under a tentative agreement, which was negotiated in October- November 1950 and "Jill probably be approved by the U.K. Treasury, Iraq will in the futUre receive enough hard currency to meet her essential re- quirements, instead of fixed annual allocations as in the past. Under another prOVisional agreement negotiated at the same time, Iraq is also insured over the next few years against a drop in free sterling working balances belm~ a level of ~ 10 million through appropriate de-blocking of frozen sterling. 11. Iraq faces an urgent task of developing her existing resources in such a "lay as to ensure a general raising of the prevailing low standard of living ar.d thereby provide a more stable social and political foundation for the countr.,:. The existing poverty and inadequate development in the past is attributable primarily to a seriom: sl:.ortage of capital, low stancards of education and public administration and to the fact that most of the land is in the hands of medium and large landovmers and is actually tilled in relatively s~all plots by share-croppers using rather primitive  -v- agricultural techniques and surrendering for the most part about half of their crops to the landowner. 12. A few of these obstacles to development are being overcome. The government has established a Development Board of two ex officio members and six other memters including one American and one British citizen to plan and carry out a develoFment program. This Board, which is just begin- ning to function, will ensure a continuity of development work which the chronic instability of governments has made difficult in the past. More- over the Board has 'been e:1dol-1ed by law with the oil revenues of the govern- ment, '.-Ihich prcmi~e to increase sharpl:r in the futUre. As a result of both the anticipated rise in oil ,roduction and a new royalties agree~~nt con- cluded in AU5JSt 1950, the revenue accruing to the Board will probably rise from 6.4 million cinars in 1951/52 to 11.8 million in 1952/53, 18.8 million dinars in 1953/54 and 20 .. 6 million in 1954/55. This accrual of revenue may even outrun the Board's capacity to plan and execute well-conceived de- velopment projects. 13. While there are opportunities for the development of industries using domestic ~Bterials, Iraq should devote most of its funds to the development of the country 1 s agricultUral resoUrces because, except for oil· 1 these are the country's princiral source of "/salth, and the oil resources, which are being developed with foreign capital, will one day be exhaueted. There are large untapped land and water resources 1..Jhich, if properly utilized through the extension of irrigation, land reclamation, colonization and mechanization, co"Uld ulti~.ately increase the area de- voted to agricultural use ~rom 11.2 to 29.7 million acres. It is impor- tant, above all, that the Beard concentrate on the development and colonization of extensive state lands, for this offers the best opportunity of converting a considerable number of impoverished  -vi- share-croppers into inde:?endent, more prosperous fat'mers, and also, through this development, of ameliorating the economic condition of the remaining snare-crQPpers. A srr.all teginning in this type of development has already been l!'£de. 14. In anticipation of the formulation of a more comprehens:!.ire development program, the government of Iraq has submitted to the IBRD a number of projects involving agricultural mechanization, irrigation and flood control, and grain storage facilit:tes t.,rhich would entail a foreign exohange expenditure of about $8 million. In the future Iraq will probably continue to require some dollar financing, because the rising oil revenues will accrue in the form of sterling rather than dollars. 15. In ~!iew of the recent improvement in government finances and. the prospect:'ve accrual of oil royalties, Iraq shOUld have no serious difficulty in fir~ncing the local costs of capital projects. IraqIs ability to ser~Jice addi tio~l fo!"eign indebtedness also appears reasonably well assured. While the coun-:'ry's balance of trade and }:8yments may fluctuate sharply from year to year in accordance idth the success or failure of crops, agrioultclral production in the long-run is likely to increase. Deficits occasioned by harvest failures can be cushioned by IraqIs existing foreign exchange reserves. Out of the future accrual of oil ro~~lties, Iraq should be able to set aside for loan service an annual sum up to at least 2.5 million dinars (07,000,000). Although Iraq herself has a dollar deficit, she will probably experience no serious difficulty in obtaining from the sterling area pool sufficient dollars against sterling with which to service dollar indebtedness, particularly since the sterling area gold and dollar reserves have increased substantially and the United Kingdom has  -vii- a definite interest in the continued supply of sterling oil from Iraq. A special assura~ce that the necessary dollars would be forthccming in the last analysis could be soueht from the United Kingdom as in the case of the first IBRD loan to Iraq.  RECEN'l,' ECONOMlc DEVELOFMEN'IS IN IRq,g Introduction 1. Like many other countries Iraq emerged from the War with a legacy of inflation. large IrJ.litary expenditures by the Allies in Iraq, together with the wartime scarcity of goods, had driven prices up five to six times the levels of 1939. Some improvement had been effected and prices were declining when a harvest failure in 1947, followed by another bad crop in 1949, brought about a renewed rise in prices and an adVerse balance of international payments. The outbreak of the Palestine war in 1948, leading to the closing of the oil pipeline to Haifa and to heavier militar;<{ outlays by Iraq, had an additional unfavorable impact on the economy of the country. Imports rose and exports declined. Iraq's sterling balances which had risen to ~ 70 million by the close of the vJar dropped conM.nuously to a low level of ~ 43 million in September 1949. The government budget, which had been balanced during the War, shewed a deficit for the first time in 1946/47; and in the next year the deficit reached 7.7 million dinars - a not inconsiderable figure for a poor country 'Hith a population of less than 5,000,000. 2. Since the fall of 1949 there has been, however, a continuous improvement in the economic situation. An excellent harvest in 1949 was prirrarily responsible for a decided improvement in the balance of trade '·Ihieh is 1i1;:ely to continue in view of another goed harvest in 1950. The country's sterling balances accordingly increased by ~ 5 million from September 1949 to October 1950. Oil output has also risen follow- ing the opening of a new pipeline to Tripoli in June 1949; and industrial  -2- production, although still modest, has continued to increase. Simult8- neously, government finances have improved. The budget deficit was substantially reduced in 1949/50, and l>dth a rise in receipts and a significant curtailment of expenditures, particulal~ly in defense, the budget nay actually show a surplus in 1950/51. Thi.s basic im.provement in the country's economic position was partly obscured by a trade depression which developed in the last half of 1949 and continued until the spring of 1950. This depression was pri~brily caused by the mo~ or less enforced exodus of the Jews (of the 120,000 Jews in Iraq, 83,000 had declared their intention of leaving and 18,000 had actualLy depsrted by november 25, 1950).. The liquidation of Jewish holdings brought about an immediate tightening of credit, some curtailment of buying and renewed hoarding of currency, and a virtuslly complete cessation of new construction. By the summer of 1950, however, the first impact of this situation on the economy had been largely over- come, and international develop:r.lents precipitated an increase in prices and buying~ Building, however, has continued to lag and long-term capital is still more difficult to obtain than formerly. b:,.oduction !griculture 4. Since over 80% of Iraq's active population are engaged in agri·. culture, and agricultural and livestock products account for virtually all of the country's exports other than oil, the development of agricultural production is obviously of decisive importance for the economy. Fortunately the bad harvests of 1947 and 1948 were succeeded by good crops in 1949 and  -3- 1950. Production of winter wheat and barley ,which are still the main- stays o~ Iraqi agriculture, has increased substantia11t. The barley crop, ,,,bleh ali10unted to only 5CO,CCO and 570,COO tons in 1947 and 1948 re ... s~ectively, rose to 750,000 tons in 1949 and 800,000 tons in 1950. The wheat harvest, '''hich totaled 2.35,000 and 450,000 tons in 1947 and 1948 respectively, recovered to 500,000 tons in 1949 and 520,000 tons in 1950. HO'l..Jever, the rice crop amounted to only 212,000 to!}B in 1949 and 25 0 ,000 tons in 1950, as compared with an average, according to official statistics, of 271,500 tons in 1947 and 1948. The production of de tea, e prinei pa 1 export, 'I.Jas relatively srr.all in 1949 .... 170,000 tons ... but rose to 250,000 tons in 1950. The output of stm~er crops - cotton, legumes and oilseeds .,.. has continued to inc!"ease, although it reIl".ains sIr;all in relation to winter crops. Stimulated by high prices, cotton has registered a Farticularly rr~rked increase, prod~ction rising from 5,700 tons in 1949 to 25,000 tons in 1950; and it appears likely that even with a decline in price there will be a continued extension of cotton acreage in the future. (See Table 1, Appendix, for detailed crop statistics.) 5. Crude oil production which had dropped from 4,702,000 metric tons in 1947 to 3,202,000 tons in 1948, largely ot-ling to the closing of the Baifa pipeli~e, recovered to about 4,032,681 tons in 1949 because of the opening of the r.ew l6-inch pipeline to Tripoli in the latter part of the year. In 1950 oil output increased substantially to an estimated 6,3CO,OCQ tons. 6.. Uo index of industrial production is available, but there is no doubt that output has risen "lith the establishment and expansion of a nu."llber of new; modern plants in the last few years.. A cotton and arli-  -4- ficial silk spinning and weaving plant, which began operations in 1947 with 5,000 reconditioned spindles and 84 looms, is expanding its facilit:_es by the addition of 22,000 spindles and 500 automatic looms and will be able on completion to produce 6 to 7 million pounds of yarn annually and 15 to 18 million yards of piecegoods (about a quarter of Iraq's total require- ments of cotton piecegoods). Current annual production is 3,600,000 pounds of yarn and 6,900,000 yards of cloth. Competition ~J cheaper lndian goods is forcing the mill, however, to shift at least temporarily to the production of artifi.cial silk eoods. 7. Output in other industrial lines is also increasing. A cement plant, ,,[bich began operations i;.'1 19L8, is currently preducing at an annual capacity of 70,000 tons and has even entered the e~~port field. Four modern tanneries are now in production and a fifth is in the course of erection; present output equals about 80% of the COll.11.try's requirements for up;Jer and sole lea tr:ers. A srral1 soap factory, supplementing a vegetable oil extraction plant, also started operat.ing in 1950; and a modern flour mill has been erected. 8. Nodern industrial enterprise is still on a modest scale, how- ever, for the total number of people employed in ,.,hat may be characterized as modern industrial plants (except for oil installations) is less than 2,000 and total employment in industrial enterprises of ever,y kind (ex- cluding oil) is procably no more than 20,000. Moreover, in tbe last year plans for fUrther expansion have remained unexecuted because capital has been even more difficult to obtain than previously.  -5- Public Finanee The Budget 9. Government finances have shown notable improvement over .the last two years. The total deficit declined from 8,281,000 dinars in 1948/49 to 1,857,000 in 1949/50; and the estimates for 1950/51 anticipate a deficit of only 613,000 dinars. Ordinary budget receipts in1949/S0 were about ~mil1ion dinars higher than in 1948/49, largely owing to the improvement in the general economic situation which, for instance, in- creased the revenue from customs and excises by 1.5 million dinars. At Governmant Budgets* (in thousands of dinars) 1950/51 (estimates) OrdinarY Budget Revenue 21,210 23,247 23,955 Expenditures 28;074 26,513 24,095 Balance :-6,864 ~3,:266 - 140 Capital1iJorks Budget Revenue 2,515 3,805 3,410 Expenditures 3,929 2,396 3,883 Balance -1,414 +1,409 - 473 Total Bud@t Revenue 23,722 27,052 27,365 Expenditures 32,003 28,909 27,978 Balance ...8,281 -1,857 - 613 *For detailed budget figures, see Tables :2 and 3, Appendix. the same time the income from oil royalties credited to the capital works budget rose by 1.2 million dinars. On the other side of the ledger,  -6- ordinary budget expenditures declined by about 1.5 million, while capital outlay dropped by approxiwBtely the same amount. 10. The 1950/51 estimates envisaged a further net reduction in total expenditures of about 0.9 million dinars, after taking into account a decline of a little over 2.4 million in ordinary budget expenditures and an increase of 1.5 million in capital works outlay. Expenditures on defense and police were to be cut by 1,686 thousand dinars to a figure which \-,ould still represent almost 38% of the total budget. On the other hand, the government expected virtually no increase in total receipts, despite the fact that in 1950 it enacted a number of tax increases designed to yield 2 million dinars. AmonG these tax measures 'Viere a 5% levy on exports, selected increases in import duties, and higher stamp, cigarette and urban propert:T ta.xes (see Table 4, Appendix). 11. Present indications are that the actual budget results for 1950/51 'Hill be even more favorable than the forecast. Actual expendi- tures for the first four months of the fiscal year 1950/51 (the fiscal year begins on April 1) were 7,496,000 dinars, or Sll-,OOO dinars less than in the same period of 1949/50, and ~By at this rate be significantly less than budget estimates. At the same time the rather low forecast of revenue, resulting to some degree from the pessimism created by the trade depression, is likely to be exceeded by about 1.3 million dinars. In the fjI'st four months of 1950/51 ordinary bUdget receipts totaled 7,395,000 dinars in comparison with 6,788,000 in the corresponding period of 1949/50. (See Table 5, Appendix.) Thus the actual 1950/51 budget will probably close ~ith a surplus, unless the rate of expenditure or receipts was drastically altered in the balance of the year.  -7- .public Debt 12. Since 1948/49 l..Jhen net borrowing by the go'\~ernment through bond and Treasury bill 5.ssues amounted to 6,100,000 dinars, the internal public debt has increased by only 749,000 dinars. The government did, however, borrow ;J:" 3,000,000, repayable over a four-year period ending 1955/56 tJ'rCUf'f: the Exports Oredi ts Guaranty Department of the British Board of Trade in June 1950. This loan was made in order to pay out- standing bills and to meet immediate corrilldtments of the Iraqi State Railways which operate under a ser~rate budget. In addition, the govern- ment contracted at the same time an lBHD lean of ~~12. 8 million for the Wadi Tharthar flood control project, but none of these funds have as yet been drawn. ~ub;I,ic Dfi'bt of lrag (in thousands of dinars) ll.ar.31, 1948 Mar .. 31. 1949 :t-:ar.31, 1950 Oct.~195Q Internal Debt Bonds 3,000 6,000 5,999 6,499 Treasury bills 1,500 4,600 4,250 4,850 -----.--------~------~----------------~----------~--- Sub-total 4,500 10,600 10,249 11,349 3,000 Total 4,500 10,600 10,249 14,349 13. The entire domestic debt, except for about 1,611,000 dinars consisting probably 'ltlho1ly of 10-dinar bonds vlith a lottery feature, is held by the t'8nks (see Table 6, Appendix); and it may be noted, paren- thetically, that in spite of the recent improvement in government budgets these 10-dinar bonds are being sold at a niscount of about 18% because of the liquidation of Jewish holdings. There is virtually no market for  -8- government securities outside the banks, for whatever capital does . accumulate is generally either hoarded or invested in commerce or land. 14. Despite the 1948/49 budget deficit the public debt in that year actually fell by 350,000 dinars; and in the first seven months of 1950, in spite of the improvement in the budget position, the internal debt rose by 1,100,(:00 dinars, including 500,000 dinars borrowed by the government from the coa~ercial banks on a five-year loan to finance ex- penditures on the Habbaniya water storage and irrigation project in the 1950/51 capital works budget. This dispar~ty between the budget position and government borrovring is not unusual since there is no exact confonni ty in anyone year between receipts and expenditures credited and debited to the budget under existing accounting methods and the actual cash income and disbursements of the government Treasury. Thus government budgets, while affording a good index of the trend of government finance over a nQmber of years, do not necessarily have an immediate bearing on the goverrimentts cash position. :robecco Honorolv 15. In Iraq this discrer..ancy between budget and Treasury opera- tions has been aggravated by the rather large differenoe bet\Oleen the cash receipts and expenditures of the Tobacco Nonopoly, \-Ihich pass through the Treasury, and the "profits" of the Monopoly credited to the Budget. In 1948/49 the Treasury's surplus of cash receipts over expenditures on behalf of the Honopo1yamounted to 1,924,000 dinars, but the Nonopoly's "p:,ofitsll credited to ths budget totaled only 342,000 dinars after taking into account the substantial decline in the inventory of the lionopoly. In 1949/50 the cash surplus increased to 2,191,000 dinars, but tlprofits" credited to the budget Here only 429,000 elinars since the Nonopoly re- valued its stock at the end of the year at "costll prices instead of "salest! prices as hitherto, thus making it appear that there was a sharp drop in stooks even though the latter actually increased in quantity. Purchases of tobacco in 1950/51 may "rell be considers bly larger than sales, which would make the cash surplus of the Honopoly srr.aller this year than in 1949/50. At the same time the improvement in the stock position is likely to result in a larger credit to the budget because this accounting credit is computed as the sum of the net change in stocks plus the surplus of cash income over expenditure. (For details of the Tobacco lIonopoly's operations, see Table 7, Appendix.) Autgnomous Public Ap,'encies 16. With the exception of the State Railways, the financial condi- tion of the autonomous government a~encies appears to be sound. The total 1949/50 actual budget, including capital expenditures, of the Port of Basrah was virtually in balance, and that of the Fao Bar Dredging Scheme showed a surplus of 157 thousand dinars. The budget estirr.ates of both these agencies contemplate a considerable increase in capital outlay, but the surpluses acclli~ulated over past years should be enough to finance the futUre expenditures of these agencies. (See Tables 8, 9 and 10, Appendix.) 17. The financial condition of the railways on the other hand is very unsatisfactory. &ff the end of 1949/50 they showed a cumulative budget deficit of 5,676,863 dinars over the past four years. (See Table 11, Appendix,,) In the past the railHays were authorized to carry out an a~bitious ca~ital program, the most notable and costly feature of which has been the erection of an imposing new railway station in West Baghdad  -10- for both the metre and standard-gauge lines, and the rebuilding of rail- way yards, goods stations and other appurtenant facili ties around the new terminal. Funds which had been set aside out of operating revenue for renewals of old equipment and which amounted at the end of the fiscal year 1949/50 to almost 2.6 million dinars, as well as other reserve funds aggregating over 2.5 million, have been spent on this program much of which has no direct relationship to the operating effic5.ency of the railways. Horeover, of the I. 3 million loan obtained in June 1950 all but t 458,200 had been paid out by November 11, 1950 on overdue bills, and the balance had been earmarked for existing contractual obligations. Meanwhile, essential renewals of track, locomotives and rolling stock have been seriously neglected. It is quite probable that in the next six years about 6.5 million dinars will have to be spent on such renewals, and that a further amount of 3.0 million dinars v!ill have to be devoted to needed improvements and the completion, on a modified and less ambitious scale, of the existing half-completed capital program. In addition the t 3 million loan will have to be repaid within this period. To meet this total outlay of 12.5 million dip~rs, the railways are likely to have at most 3.9 million from their operating revenues. (See Table 12, Appendix.) Thus, unless the railways are permitted to raise their rates - Which is politically difficult - it seems inevitable that the government's recently established Development Board will need to finance the balance of expendi- tures out of its revenues. Meanltlhile, the rai;Lltlays are able to make ends meet only by further postponement of essential renewals and delaying capital expenditures.  - 11 ... Honey, :Banking and Prices ~ronei( Sun"lX 18. Both money circulation and bank deposits ,·Iere influenced by the trade de~ression of 1949/50. Currency in cireulation rose from 35.5 million dinars in June 1949 to 36.4 million at the end of 1949 and a peak of 39.6 million in July 1950. (See Table 1), A"nendix). A substantial nart of this increase was apparently due to liquidation of stocks and. pro- perty and to increased cash hoarding. A rise of 1.1 million dinars in the amOu."1t of lOG-dinar notes issued in. the :'Jeriod June 1949 - February 1950 gives some indication of this hoarding. At the Same timet as a fUrther reflection of the preference for cash, total com~ercial bank deposits dropped from 16.4 million dinars in June 1949 to 16.0 million at the end of the year, and a 10"" of 14.7 million ,.,as reached in March 1950. (See Table 14, Appendix). Recovery from the trade denression reversed these trends. Currency circulation dropped to 37.8 and 38.0 million dinars in September and October, 1950, respectively; Rnd bank deposits bega.n a slo\>, rise in April 1950 to a total of 1599 million in September 1950. There is no reason to exnect more than normal seasonal changes in the immediate fu,ture. 19. Although under the law currency in circulation may be baCked up to 30;~ by Iraqi government securities and the balance by gold and for~ign exchange, sterling holdings of the National Bank provided almost 100% cover for the amount of currency in circulation during 1949. and in- creased sufficiently in 1950 to constitute consistently more than 100% of the currency in circulation. In October 1950 the ratio apnroximated 106%. Undoubtedly there is a marked preference in Iraq for 100% cover  ~ 12 - because it strengthens confidence in the currency by safeguarding the country against excessive expansion of credit. Prices 20_ Wholesale prices during the past ;vear have shmiln the t,·rin effects of devaluation and the trade depression. Follo~dng devaluation, the ",ho19sa1e price index in Baghdad (1939 = 100) rose from 421 in Septe~ber 1949 to 472 in January 1950 and then dropued to 447 in April 1950. By August 1950, i t had recovered to 479. Thecost-of-Uving index in Baghdad, on the other hand, failed to react to devaluation and has hovered bet"Teen 500 and 480 since Se:otenber 1949. (See Table 15, Appendix). Except for possible repercussions of international developMents, there is no reason to ~~ticipate drastic price changes in the near futUre. Banking 21. In order to prescribe standards and give the }rational Bank some control over bank investments, the Iraq govern~ent passed a banking law effective January 1, 1950 \·!hich laid do\~'Il certain reCl.uirements regard- ing banking practices and bank reporting, and in uarticular specified that banks must keep the equivalent of 15% of their demand and time deposits on deposit 1Ii th the National Bank and keep 50% of these deposits in the form of cash and investments in Iraq. The National Bank "fas empovered to reduce the first of these percentages to 10% and to vary the second be~ t\veen 30 and 70%. One of the objectives of the 1a,,' "'as apparently to force commercial ban1::s t all but tuo of '''hieh are :British, to invest a larger proportion of their assets in Iraq. Although in the absence of published bank balances for 1949 it is difficult to gauge the effect of the law in  - 13 - this re~)eet, the commercial ba~~s evidently had no difficulties in complying 'Ii th the la,,, and have continued in 1950 to transfer their assets from abroad to Iraq even thouo;h the requirements of the lav had been met. Thus from the end of February to the end of Sent ember 1950 deposits and investments payable abroad declined by 1.8 minion dinars ",hile cash on hand in Iraq rose by 1.9 million, deposits in the national Bank by 2.:; million and investments, advances and rtiscounts in Iraq by 0.5 million. (See Table 16, Appendix). The bank control la'llT '(-ras instru- mental in closing about 10 out of 17 bazaar banks (sarrafs) vhich specialized in the financing of small business. because the sarrafs could not meet the requirement of submittinG accounts and divorcing bank- ing ancl trading operationso The impending exodus of the Jells \'rhO con- trolled these small banks vias, hO;lrever, an inmortant contributory factor. In any event, curtailment of the number of sarrafs aggravated the credit stringency", 22. In api te of the bank control lat'!' the Uationa1 Bank has not been able fdgnificant1y to inflUence credit operations in Iraq. The com- l11ercial banks have beon so liquid that they have not found i t necessary to rediscount their commercial bills. In October 1950, 98.2% of the assets of the National Bank consisted of sterliug (40,269,000 dinars), Iraq gov- ernment securities (6.160,000 dinars), n.nd cash (2,587,000 dinars). Total advances amounted to only 820,000 dinars of ".'hich ,500,000 dinars renre- sented an advance of the government's share of the 1949 profits of the Bank pending final accounting, and the balance, modest loans to the :):ndustrial Bank, Mortgage Bank and the Baghdad ivater Board. (See Table 13, Appendix).  -u- 23. In view of the liquidity of the commercial banks, the govern- ment hopes to use them as a reservoir for further government borrowing. Toward the end of 1950 it sought to borrow 2.25 million dinars from the banks for the purpose of financing certain minicipal improvements. The banks, however, have been reluctant to absorb more goverrment obligations, because the National Bank has not yet undertaken to rediscount Treasury bills and neither Trea6~ry bills nor government bonds can in effect be sold in emergencies whenever the banks need cash. Provided the National Bank furnishes rediscount facilities or is prepared in case of need to resort to open-~arket operations in government bonds, there should be no serious danger in further modest government borrowing from the banks, particularly in the interim period pending a rise in government revenue restuting from further development of the country or the sharp rise in oil royalties anticipated in 1952-53 and 1953-54. Any increase in govern- ment borrowing and spending would probably be orfset at least in part by increased cash hoarding Which would not be felt in the form of increased purchasing power; and the country's current foreign exchange reserves should be sufficient to cushion any mild inflationary effects. It ~By in fact be undesirable to keep ordinary budget expenditures at the existing low levels necessary to balance the budget. In a country like Iraq where the population is largely illiterate, largely impoverished, poorly clad and ill-housed, there is urgent need to increase the government outlay on education and social welfare. Moreover, it uay be desirable at the present time to launch and finance certain capital development proj- ects in anticipation of the sharp rise in oil revenues which will accrue  I. - 15 - in 1952/53 an~ 1953/54 • Long-Term Oanital • ,t 24-. The country has continued to suffer from a cMonic shortage of capital for long-term investment. Excent for investment in government securities. the ordinary commercial banks provide only short.term credits for norm?l trade onerations. The Rafidain :Bank, a state bank \,rhich serves as a government denositorYt as Fell as a regular commercial bank, also :provides "rorking c!'.pi tal but for tems no longer than one ~,ear. The government has established three institutions - the Agricultural Bank, the Industrial :Bank ~nd the Hortgage :Bank ... to furnish c[tpital for longer- term investment t but their total resources of less than 2,500,000 dinars have been l~holly inadequate to meet the demand for medium and long-term credit. Each of these institutions has an authorized capitA.l of 1,000,000 dinars t but o"ring to a shortage of funels the government has paid no capital into the rJlortgage Bank I'md only 550,000 and 600,000 dinars into the Agri- cul tural Bank rtnd Industrial Bank respectively. :By obtaining deposits and loans from other sources these banks have to some exteLt supplemented their capit~l resources, but many demands for credit remain unsatisfied or are met by priVate money-lenders charging usurious rates of interest. The banks themselves charge 7% interest plus expenses on their loans. 25. The Agricultural Bank extends loans un to fi ve ~'ears and in sums up to 1,000 dinars. Since its loans must be secured by pronerty other than crops in the field or stored on the farm, the share-cropners '"ho cultivate most of the soil in Iraq Can obtain no credit from this instltution{> Ev~n so, the Bank came to the end of its resources by November 1949. forcing it to suspend further credit operations e~cept for  - 16 .... small amounts. Only by the middle of November 19.50 "laS i t able to resume lending on a modest scale" The total amount of loa..'1s outstancling on Narch 31. 1949, amounted to only 780,891 dinars. 26. The Industrial Dank not only makes loans to industries. 1·rM.ch m~v extend up to 15 years, but also actue.lly nartici~ates in the oapital in- vestment of a number of enterprises. As of October 31, 1950, the a~oUl1t of outstanding loans "~las 260,758 d.inars o A considerable proportion of these loans has been difficult to collect; of the totfl.l amount of :nest loans ,·,h ich had fallen due by November 30. 1950, only 48.1% had actually been collected, 38.9% had. to be postponed A.nd the rem~dnd.er Nas in process of collection. Capital participations totaled 603,212 ilina.rs A.S of October 31. 19.50. Alt:hough the Bank had. ori.';inally hoped. to divest itself gractually of such l,articipations and thus to obtain fur..da for ne,,,, loans ancI narti- ci:pations. the lack of private capital fl.nd the absence of a securities market have wade this impossible. A large 11art of the :Bam;:1 s assets have therefore become at least temporarily frozen, thereby greatly restrictirg tl:e Bmlki s assistance to ne,'r industrieso 27. The Mortgage Bank begp.n operations only at the beginning of 1950. althOUGh i t \ffi,S authorized by a 1a'" enacted in 1948.. Previously there Lad been no inst! tution to finance mortgages on urban property, and loans uhich "rere obtained generally carried exorbitant interest rates. Since the Bank has not yet received a~~ capital its operations have been modest. Total resources consist of a 250,OOO-dinar loan from the National Dank and a time deposit of equal amount from the Directorate of Hinors of the Hinistry of Justice.  - 17- :Balance of Trade and Payment s Foreign Trade 28. OHing to the marked improvement in the generAl economic situa" tion and :;articularly the increase in agricultural production in 1949 and 1950, the surplus of imports over e:JCports (excluding oil) 0.eclined sharply beginning 1,i th the last quarter of 1949. As indicated in the table be10H, the trade deficit dropped from 36.9 million dinars in 1948 to 28.1 million in 1949 and in the first seven months of 1950 amounted to only 11.1 mi1- lion as conr.;ared Hi th 18.7 million in the corresnonding :neriod of 1949. If imports financed by the oil com:panies from their O1'1n foreign exchange resources are eXCluded, the deficit declined from 27.3 million dinars in 1948 to 17.8 million in 1949 and only 4.6 million in the first half of 1950. The deficit for the entire ~,.ear 1950, hO'llTev6!', 'VTaS ::pro'oabl~! about 11.4 million since, ouing to the increase in import licenses, purchases abroad in the secon0 half of the year a1"'''arently rose markedly. Forei~n Trade of Iraq (in millions of dinars) ___I=I!l'Port $* ~ Exoorts** Inroort Surnlus 1948 ~ 19j,Q. Jan.-Mar. 12.32 9.64 9.03 2 0 09 1.61 5.61 10.23 8.03 3.42 Apr .. ...June lO.64 9.68 9~46 1.38 1 .. 64 3.66 9. 26 8.04 5.80 Jan.-Jul;,{ 25.81 22 .. 58 2:+,,52 3 .. 91 J,B7 10,44 21·20 1B.71 11.0B July-Sept. 11.83 8.88 1.07 1.89 10.76 6.99 Oct·tlTov. 9 ... ZL ~2031 }!62 Z... 2B QIlc6 211 03 Jan.-Dec. 45.52t 40051 8.. 66t 12.42 36.31 28.09 Including imports by oil companies ** Excluding oil. t Including corrections on annual basis.  - 18 - 29. This improvement Fas due principally to the inerea.se in e~ ports Fitich follo"led the good :harvest of 1949 and is likely to oontinue at lel1st into 1951 ot'ling to another excellent harvest in 1950. Exports in the last quarter of 1949 were almost double those in the same ~eriod of 1948, and in the first seven months of 1950 ~'rere almost 2.7 times as high as in tIle corresponding period of 1949. ~orts of grain, flour and :pulses ,rhieh normally account for over half of IraqIs exports ,·rere valued at only 422,000 dinars in 1948 m·ring to the crop failure in 1947. but rose to 6,11.5,000 dinars in 1949 and 6,48.5,000 d.inars in the first half of 1950. The value of date exports, h01:i9ver, drop1'Jed by about 10;8 million ("!.inars from 1948 to 1949. (See Tables 17 ~nd 18, Appendix). 30. A decline in imports by about .5 million dinars from 1948 to 1949 and by aboo..:.t 1 milJion from the first sev~n mont11s in 1949 to the same ~eriod in 1950 also contributed to the improvenent o Imports of textiles and clothing dro:o:ned from 9.7 million dinars (21.87~ of total imports) in 1948 to 7.9 million in 1949, or by almost 19%. A shift to cheaner sources of imports 1tras primarily responsible for this development for the volume of textile piecegoods imported fell by only 2%0 Imports,of sugar also decreased by 104 million t Rnd imports of cement have drop:ned, particularly ill 19.50. O\'Jing to the increase in domestic production. (See Tables 19 and 20. Appendix). The further decline in iaports in the first half of 1950 "las undoubtedly a reflection of the trade denression referred to earlier. In the second half of the year, h01lrever, imports rose once more, for import licenses granted :in the third quarter Nere 27% higher than in the corresponding quarter of 1949.  - 19 .. 31. Reductions in the allocations of hard exchange from the ster- ling area pool, togetl'1er Hith the effects of devaluation in Septe~ber 1949, brought about some shifts in the geographic distribution of trade. In the first half of 1950 imports from the sterling area amounted to 12.1 million dinars or 65% of total imports as com:;ared Nith 904 million or 49% of the total in the corresponding half of 19490 Over the same :'leriod imports from the hard currency area dropped from 2.8 to lor million dinars or from 14 to 9% of the total. ~le decline in imports from the United States alone amounted to 1 million dinars. ~e nattern of changes in e~ ports "TaS somel'lhat obscured by the large increase in total exports. Exports to the sterling area rose from 1.4 million cUnars in the first half of 1949 to 2.1 million in tLe first half of 1950, but the proportion to the total dronned from 45 to 231;", Exports to the hard currency area increased from 8% of the total to 14%i primarily because of increased shipments to Japan l-Th1ch ,-ras still regarded as part of the dollar area in the first half of 1950. !lOther countries" accounted for exports of 4.1 million d.inars or 45% of the total in the first half of 19.50, tiS compe.red pith only 1 million dinars or 337~ of the total in the corresponding half of 1949. Increased shipme~ts of grain to the Netherlands end higher exports to Iran lar&el~ accounted for tIlis development. (For the dist:::-ibution of foreign trade, see Table 21. Appendix). Foreip,n ExchSlnge and :Balance gf Pf-!.YIl1ents 32. The favorable development of the balance of trade has brought about a simultaneous improvement in the balance of international payments. There is some doubt about the magnitude of various types of payments and receipts on international acoount, but the development of Iraqts foreign  - 20 .. exchange assets gives an accurate indication of the overall trend. Since Iraq is a member of the sterling area, these assets are held in the form of sterling except for small ','orking balances in other currencies. In 1948 the balance of payments \'las so unfavorable that total foreign ex- change assets dronped from 59.0 million dinars to 45.5 million, or by 13.5 million. In 1949. hO\-Iever, the loss \·ras reduced to 1.8 mnUon; and in the first nine months of 1950 there "ras actually aT}, incrense of 4.5 mil- lion. Since, 1'1 th a larger inflo\'T of imports, the current account c,uring the last quarter tended to be evenly balallCed. the net addition to Iraqts foreign exchange reserves lor the entire year 1950 Nas probably about 4.5 million dinars. In October 1950, the last month for "'hieh figu.res were available, IraqIs total sterling assets amounted to 48.3 million dinars as compared \'lith 43.4 million at the end of 1949 and 45 .. 1 at the end of 1948. (For more detailed figures, see Table 22, APpendix). A large part of the increase in :1,950 might be attributed to the dra1'iings on the J: 3, 000,000 railway loan "hicn probably amounted to I, 2,750.000, but it should be remer:lber-ed in this connection that a considerable arount of these dra\-,ings went to payoff debts for goods and services contracted in previous years" 33. In tl1e Iraqi balance of pnyments the defiCit on merchandise account is offset on the other side of the ledger by government receipts in the form of sterling from the oil companies, including royalties on production, dead-rent paid by the non~producing companies end pay~ents in lieu of taxes" These receipts dropj)ed from about 4.8 million dinars in 1948 to 1,,4 rr~llion in :1,949, not because production declined but because advances ,-rere received in 1948 on ps.yments due in 1949. In the absence  - 21 .. of these advances, the bala::lce of payments Hould have been more favorable in 1949 and even less favorable in 1948. In the first half of 1950 recei~ts from oil companies amounted to about 2.2 million dinars, and for the "Thole year they probably approximated 4.7 million. In the future these recebts should inorease markedly Fith the anticipated rise in the production of petroleum. In addition, Ire.q receives substantie.1 amounts of sterling PoS the result of the local expenditures of the oil compa.nies. These recev}ts amounted to 7.0 million dinars in 1948, 6.5 million in 1949 and probably about 502 million in 1950. In the next feN years they \'rill presumably increase significantly becanse of larger expenditures on the construction of }Jipelines in Iraq, and local investment exp"'nflitures required to raise oil output in accord~'1ce 'I'Tith enh,rged pineline capacity., The remaining items on the current account of the balance of :naYMents ShOltlec1 a surplus of approximately 1.4 million dinars in 1948, 2.3 million in 1949 and possibly 2.4 million in 1950. Among these items are expendi- tures of the 13ritish forces in Iraq "Thieh dropned by about 0.5 million from 1948 to 1949, and, on the other side of the ledger, exp~nditures on the purchase of surplus stores, Iraqi military expenditures abroad and sund17 itemst the total of Nhich declined by about 1.0 million <'tinars from 1948 to 1949.  -22.. S~riz~d Balance Qt: Pa:yments of lrag* (in millions of dinars) ~ 19A? 1950 ... , (est.) - Current Account Merchandise 1/ -26.5 -16.1 - 8.9 Oil company :r;ayments + 4.6 + 1.4 + 4.7 Oil company local expenditures + 7.0 + 6.5 + 5.2 Other Total ,. -- + 1.4 -1.3.5 + 2 •.3 - 5.9 *' 2.4 + .3.4 Ca:eital Account ;, - ; Hovement of Iraqi balances abroad +13.5 + loS - 4.5 Other - 0 • .3 - 0.6 + 2.5 Total +1.3.2 + 1.2 - 2.0 ~rand Total - 0 •.3 - 4.7 + 1.4 Errors and Omissions + 0 • .3 ... 4.7 - 1.4 * For more detailed data, see Table 22a,Ap~endix. II After adjustments for ll.'1der -and over-valuation and contraband trade. Import Controls 34. The increase in starling holdings resulting from the improve- ment of the balance af international payments has permitted some relaxa- tion af controls over imports fram non-dollar areas in 1950. The list of imports for which special licenses are necessary has been expanded; and while imports of all kinds, including those for which no special permits are necessary, are still li~ited by global foreign exchange allocations - these allotments have been increased. Certain imports are entirely pro- hibited if they are regarded as either dispensable or adequately available in Iraq. Among these are certain vegetables and nuts, vegetable oils and  -23- seeds, butter and ghee, cotton yarn, beer and oement. All imports from dollar areas remain under strict license. Currencv Aereements with th~ U.K. 35. The availability of foreign exchange to Iraq in the future will depend not only on current earnings, but on the extent to which the United Kingdom will release hard or dollar currencies from the sterling area pool against sterling and will consent to further releases of blocked sterling. 36. Throughout most of the year ending September 30, 1950, there was no definite agreenent regarding the release of hard currency and al- locations were being given only on a month-to-month basis at a yearly rate of $12,000,000 in contrast to releases of $25.3 million over a fiftee~months per~od ending Septemcer 30, 1949. Only in August 1950 was it finally agreed to allocate $20 million to Iraq during the year ending September 30, 1950, for expenditures in the hard currency area; and, for the first time, Belgium, Jaran and "it/estern Germany were no longer included in the definition of this area. Iraq accordingly had a substan- tial carrJover of hard exchange allocations into the year beginr~ng October 1, 1950. In the course of negotiations which took place in October-November 1950 agreement was also reached, subject to firBl approval by the U.K. Treasury, that Iraq would in the futUre get no further specific annual allocations of hard exchange but would be permitted to draw such amounts as the Iraqi gover~~ent deemed necessary for its essential requirements, ,,,ith the understanding, however, that require- ments arising from substantial oapital development projects would be the subject of special negotiations in each case. It is not certain whether  -24- the latter understanding applies also to amounts required to service external loans contracted to finance capital projects. 37·. During the October-NoveMber negotiations a tentative under- standing, likewise subject to final approval by the U.K. Treasury, was also reached on further releases of blocked sterling. PreviouslyreJ.eases had been governed by an agreement valid for five years from July 15, 1947. This agreement provided that abo1,.1t half of Iraq IS offj.cial sterling balances, which amounted to about ;J;, 60 million at the beginning of the period" we:."e gradually to be released as free sterling to a No. 1 accolJ.nt and that the balance was to rerrain blocked in a JlJo. 2 account. Under the new tentative agreement the National Bank 1s permitted the irt'lI'ilediate transfer of ~ 2 m:U- lion from the Ho. 2 to the No. 1 account in order to increase its ,Jorking balances. The Ba.nk is entitled to further transfers up to a total of' ;b 6 million over the next two years whenever such tranefers are necessar:;r to maintain its :ree sterling working balances at a minimum level of ;b 10 mil... lion. Thus in effect the Bank obtains a guaranty of minimum liqu~dity of its sterling reserves. By the end of Octcber 1950 "bloclced!! s~e!'ling holdinas had alread~T been reduced to about ~ 31 :mil1ion; and free sterling holdings had risen to about ~ 17.3 million from a level of only ~ 5.9 mi1.- lion at the end of 1948. (See Table 22, Appendix.) FutUre Econom1.c pevekoum~n~ 3S. The future eoonomic evolution of Iraq will largely depend on the effectiveness and speed ~ith which its resources will be developed. Aside from oil, which is already under exploitation by foreign oil companies, and possibly some other minerals, the rrirr.ar~7 natural resources of the country are land and water. The land area of the country is about 1.8  -25- times that of the United Kingdom, although the population is a l'ittle less than 5 million. To be sure, of the total area of about 107.1 mil- lion acres only 29.7 million are actually cultivable. At the salUe time, only 37.7% or 11.2 million acres of the total cultivable area is devoted to agricultural use and almost one-half of this lies fallo'\-, ever'! year in the normal crop rotation. (See Table 23, Appendix.) In the irrigable zone 11 million more acres could be put under cultivation if water were available; and in the rain~fed zone of the north there are still large areas which could be put to the plow with the help of modern agricultural machiner"J_ In the Tigris and Euphrates Rivers and their tributaries, Iraq possesses ample water resources l;hich could be used far more fullY than at present for irrigation and even for the generation of power. ObRtacles to Develonment 39. Despite the countr"J's resource potential, the standard of living of all but a slna.ll minority of the people is deplorably 101t.. The prevailing poverty and inadequate development of the country can be attri- buted primarily to the follmring factors: (1) Lack or cau:ital - Savings are very sJr.;al1. Savings deposits in oonks and postal savings deposits together amount to only 3.1 mil... lion dinars and have sho\.Jn no tendency to increase. Hoarding is still a prevalent form of saving, which is typical throughout the East. Any available capital is attracted principally to trade uhere returns are high. There has been very little foreign capital in- vested in the country' except in the fields of oil and foreign trade. Oil royalties and other receipts from oil companies have provided the means for some public lnvestnent in the past; and prospects for a sharp increase in the future are fortur~te1y bright.  -26- The socj§l:economic struc~ure of the counta - The wealth • of the country is concentrated in re},atively few hands. Except for parts of the northwest and the northeast, nearly all of the !and is held by large and medium landowners a few of whose holdings run as high as 300,000 acres. Although an increasing n1.'.mber of these landowners have tended, under the stimulus of high prices, to farm at least part of their lsnd directly, most o~ them are absentee landlords taking little interest in f~rming or the welfare of their tenants. Nea:-ly all of their land is farmed by share-cropPl9rs who, in the greater part of Iraq, must surrender about half of their crop to the landlord although in the rain-fed zone the landlorc's share drops to about 10%. The average tenant-holding in most of Iraq is only about 12 acres, so that, in view of the landlord's share and the low prcductivity achieved with poor agricultural techniques, the peasant ekes out only a bare living. Peasants live in prim-ttive mud huts and in great poverty and ignorance. Because of the harsh conditions of life on the land, there has been a migration of labor to the cities where life apparently is more attractive despite the squalor of living conditions and the lack o~ employment opportuni- ties. Thus there is a shortage of labor on the land at sowing and harvest time, "Jhile at the same time there is unemplo;yment and under- emplo~rment in the cities. (3) Lew standard pf ed~cation - This is the inevitable by- product of the first two factors mentioned above. Ninety-five per- cent of the people are illiterate, so that the reservoir of educated or technically trained people on which government agriculture, bank-  -27- ing, commerce and indust~J can draw is extremely limited. Without a much wider diffusion of priFary education and vocational training, it is difficult, if not impossible, to bring about the application of more modern production techniques. (4) Deficien£ie,s of public admin2·stration - In a country where private capital is scarce, the need is all the more urgent for a govel~ment administration capable of planning and carrying out publio investment efficiently. Although the standard of public administration does not compare unfavorably with that of neighbor- ing countries, it is low owing to the factors outlined above. Long-range planning of development has been inadequate; and the instability and short duration of ministries has not been conducive either to consecutive planning or to the execution of development plans. Q,tP'f.!n:i. 7,8 tion..,.Qf thp. Develo'Dtlent Beard 40. The goverpJnent has recently shown a determination to pursue development more energetically. Under the terms of a law effective }f;ay 27, 1950, it has established a Development Soard of eight members. This Board is charged with the elaboration and the execution of development programs. Although its budget and overall program require parliamentary approval, it is independent of parliamentary appropriations since the law has assigned to it the government's income from oil royalties and permits it to contract internal and external loans. The Board has two ex officio  -2S- members: the Prime Hinister, who is its chairman; and the Finance l1inister. The other members are appointed by the governrr.ent and must devote their full time to the Board. They are: Arshad al Ureari - Deputy Chairman of the Board; member of the Senate since 1945; mayor of Baghdad 1936-1944; Ali Mumtaz al Defteri - Minister of Finance in four cabinets sin~~ 1941/42; member of the Chamber of Deputies; Jalal Baban - :Hinister of Connnunicat;'ons and Public works in six cabinets 1932-1949; formerly also Comptroller and Auditor-General. Abdul Emir EI-Uzri - Hinister of Cornmunications·and Public . Works from 1944 to 1946; Director-General of Irrigation from 1946 to 1950; S;r J.W. Eddington Hiller - a British government nominee; long- time member of the Sudanese civil service; formerly Financial Secretary in the Sudanese government; ~onald B. Adams - U.S. government nominee; a constr~ction engineer; until recently President and Chairman of the Board of Thompson &Starett Company, general contractors. 41. The establishment of the Board will undoubtedly help to ensure a certain amount of continuity of planning and development. The Board can hardly expect, however, to be immune ~rom political interference or govern- ment instability. The ex officio members who necessarily change ,,,ith every government will presumably always exercise considerable influence in the Board; and the Board's overall program and budget will be subject to p:1rliamentary approval. Above all, the activities of the Board will be highly controversial politically, because through developmental schemes the Board will be able to affect profoundly the future social and political as well as economic structure of the country.  - 29- Oil Revenues fot Development 42. The shortage of capital '\."hich has handicay)!'ed development in the nast should be largely overcome v!i thin the next fe,-, years as the re ... suJ. t of substantia.l increases in revenue accruing to the Development Board from the rising 011 production and revision of oil roynlties agreement ,'Ti th the Iraq Petroleum Corn:pa!'I.Y in August 1950 0 The out:out of the largest oilfield, that of !PC at Kirkuk. is eXl)ected to inoreHse sharply "rith the completion of the 30-inch pipeline to Banias, Syria~ Construction of this pipeline from the Banias terminal has begun; and the plan is to link i t by the middle of 1952 Fitll the sections of the tHO unused pipe- lines to Haifa Nhich lie in Iraq, thus permitting utilization of the nel" pipeline at an annual ca"Y)acity of about 6 0 4 million metrio tons.. The Iraqi portion of the :BarJ.as line, Fhich "'ill have an an.'1ual capacity of 13 million tons, is then to be completed by the middle of 1953. :By 1952 the promising oil field at :Basrah ",hioh is 'oeing exploited by an !PC subsidiary, the :Basrah Petroleum Company, should be producing at an annual rate of 2.5 million tons; and the smaller oil field at Hosul, Horked by another IPC subsidiary, the Hosul Petroleum Company, shoUld be producing 1 million tons by 1953. Thus total oil output is expected to rise from about 6 million tons in 1950 to 6.5 million in 1951, 10 million in 19~2, 18 million in 1953 and 20 million in 1954. This increase is, hO,"lever, contingent (1) on the availability of pipe Hhich again depends on the granting of export licenses by the United States, and (2) on the ability to market the expanded output. As to the first, all of the pipe has been ordered and part of it delivered, and the IPC appears confident of obtain- ing the balance. As to the second. marketing prospects annear reasonably good beDQ~se oil consumption is still rl~ing rapidly; all or virtually all of Iraq's output is sold against sterling rather than dollars and therefore has a decided competitive advantage in non-dollar areas; and the output of Iraq is sold in the crude form which gives it an addition- al advantage in European countries which prefer to refine their own oil. 43. The revised oil royalties agreement with the IPC provided at least a temporary settlement of a dispute over the interpretation of the concession contract, which stipulated a royalty payment of 4 shillings gold per metric ton without indicating whether gold was to be valued at the official London rate Or at a free market rate such as the one pre- vailing in Iraq. The new agreement is retroactive to January 1, 1950 and provides that payments until October 24, 1954 are to be made at the rate of 6 shillings gold valued at the London official price; and after that date at the rate of 6 shillings gold, valued at a price set either qy a court decision which may have been made meanwhile or by agreement between the company and the Iraq government. The new agreement does not affect the terms of the concession agreements with the Basrah and Mosu1 Petroleum Companies which are more favorable to Iraq. Nor does it settle the claim of the Iraq government for a 20% capital participation in IPC or for higher minimum production guaranties. 44- The Development Board, which may have its own budget for the first time in the fiscal year 1951/52, should accordingly enjoy rapidly  - 31 - rising revenues, particularly after the first tHO years of operation. Even after a110. .·ring for repayment of 1)revious advances of 011 royal ties and of the Habbaniya loan, and deductions for expenditures on the Wadi Tharthar flood control project (pursuant to the loan agreement l·ri th the nuw) and on the railt'lays, the :Boarel should still have a balance avail- able for other expenditures ,·;hich ,-rill rise from about 4.8 and 7.8 mil- lion dinars in 1951/52 and 1952/53, res:nectlvely, to 12.3 million in 1.orecast of. Development. :Board Revenue and ExnenditureA 1 , 2 J Payment Habbaniya of Oil Loan 4 Wadi C; "' Balance -- 6 Possible Rail't,ray , ...._--2. Balance 011 * OOr.1pany (interest & Tharthar (Col.l less Expendi- (C01.5 less RevenueL AdVances :Er inci:Eal} Pro,ject 001s.2 1 1&42 tures 001.. 6) Fiscal Year 1951/52: 6,444,440 900,000 15,000 100,000 5,429,600 650,000 4,779,600 1952/53: 11~793,680 900,000 140,000 830,000 9,922.300 2,150,000 7,772.300 1953/54: 18~826.720 900,000 136,250 1,750,000 16,040,470 3.750,000 12,290 • 470 1954/55: 20.586,448 611,000 132,500 2.170~OOO 17,672$948 1,350,000 16,322,948 1955/56: 20,586,448 127,500 800,000 19,658,948 750,000 18,908,948 *For a fuller statement of oil revenues, see Table 24, Appendix. 1953/54, 16.3 million in 1954 /55 and 18,,9 million in 1955156~, These amounts compare ',r1 th a capital \.rorks outlay of only 2.7 million in the 1950/51 budget. In fact, the Boardts revenues may in a felt' years rise ~ore rapidly tllan the canacity to plan and carry out we11~conceived de- velopment projects. Agricultural Develonment 45. Development of agricultural resources 1'1i11 undoubtedly be the :Board I s most important task, not Simply because Iraq "ril1 al"Jays be primarily an agricultural country, but especially because the development  - 32 - of the large untapped land and water resources along proper lines can bring about a substantial improvement in the depressed standard of liv- ing of the peasants ar.d thereby provide the country with a more stable economic and social foundation. Hithin this field irrigation, flood control and drainage should have a high priority. The F.aigh Irrigation Commission in the years 1946-48 worked out a long-term program for the development of flood control, irrigation, drainage and hydro-electric power, the ultimate cost of which was estimated in 1946 at B7.B million dinars. Although the program has never been officially adopted by the Iraq government and '.lOuld undoubtedly take many years to carry out, it does provide the Development Board with an excellent foundation on the basis of which it can proceed to determination of priorities and de- tailed planning of individual projects. One of the projects recommended by the Haigh COmmission, namely the Wadi Tharthar flood control project on the Tigris River, should shortly be getting underway with the help of a :~12.8 million loan from the IBRn _ \-Jork has also be:.;un on the P.abbaniya water storage and irriBation scheme in the Euphrates River Valley_ The IBRD has also been asked to finance part of this project, which involves the construction of a barrage across the Euphrates, the enlargement of the Hillah Canal and the extension of the Mussayib Canal at a total cost of 2,170,800 dinars and a foreign exchange cost of 976,800 dinars ($2,734,900). The area under crops would be extended by 248,000 acres as a result of this project. 46. In the past, drainage of irrigated lands has always been neg~ lected in favor of new irrigation projects ,dth the result that vast (but  - JJ - statistically unmeasured) areas of irrigated land have become so salty thro':.lgh the progressive rise of the ,rater table that they have had to be abandoned or productivity has drastically declined. With a relatively small investment in drainage facilities, salted land could be restored ~o productivity and the salting of ne,·]ly irrigated land could be }lrevented t for the salts are of a tyPe 'lilhich can be readily leached. out of the soil. Only in the year 1950/51 was a very modest beginning made ,·rith drainage projects through the provision in the budget of 52.000 dirars for this purpose. In the future 'I>;herever a danger of salinity exists drainage should be given a higher priority and drainage facilities should be made an integral part of any new irrigation scheme~ 41. It is also important to coordinate development of irrigation and land colonization schemes in such a ,-ray as to bring about a substan- tial improvement in the economic condition of the landless agricultural :x;>roletariat \<rho eke out a bare existence on a share-cropTJing basis. In recent years there has been a gro\<Ting realization that the existence of this landless agricultural proletariat rrevents the development of a sound and stable economic and political structuree Under the terms of a precedent-bre~~ing law of 1945, an area of about 86,000 acres in the Dujaila district, \:11ich ,-ras to be nev:ly irrigated, \-,as opened uy; to a co- operative land settlement scheme u.nder ",h1ch each of 1200 settlers ulti- mately received free of charge an allocation of state land amounting to about 61.5 acres", The cultivators ,dl1 obtain title to the land after ten years' probation. after 1:1h1ch they are debarred from alienating their land for another ten years.. They must follow a preseribed system of tillage and join cooperatives \'7hioh provide seeds, market surplus produce and  -34- have also acquired 10 tractors ~nd a number of plo,-rs for common use by their members. Farmers "rere, in add.i tion. enabled to borro'.-T from the Agricultural Batik to pay their initial contribution to the cooneratives and meet other initial exp!"lnses.. The revolution Hhich this scheme has brought about in the life of the settlers is ir~icated by the fact tllat the annual income of farmers in this area is said to be about 300 dinars co~ared ,..i th considerably less than 100 dinars for the share-cro"'pers in the ~~rroundlng area. The success of the Dujaila project encouraged the government in 1950 to apply the provi sions of the lm-1 to five other areas totaling about 105,000 acres. The selection of the settlers for these areas is still in the early stages. 48. The extension of this type of land settlement on a large scale 1.'Tould undoubtedly lead to a great improvement in the standards of living of the entire agricultural population. It Hould not only benefit th9 settlers but ~.'!ouJ.d ultimately force an improvement in the lot of the share-cropper. For thi s reason the large lando\·rners t"ill unquestionably resist its broad ap!'lication. It need not involve. hm-reve!", a direct fronte.l attack on existing private landholdings, for there are large areas of state land l·rhich can be settled in this mB.lmer. Of the total land in Iraq to 1rhich title has been confirmed ... about 31 million acres - 19.,5 mil- lion acres re1Jresent state land much of \·,hieh could be cultivated. (See Table 25, Appendix).. The progressive settlement of this land, cou:oled Fith the organization of cooperatives and the exteT'.sion of educational'. £aei- lities, should make it possible to adont more advaneed agricultural tech- niques and to raise standards of living and education to a level essential to t:ne functioning of a democratic society. Furthermore, the cost of such  - 35 - settlement schemes need not be prohibitive, particularly since those directly benefitted could be required to contribute to the cost in such a wanner as to make the projects self-liquidating. 49. Extension of agricultural mechanization is another subject likely to claim the Board t s attention. The IBRD has already been asked to finance a three-year program costing 750,000 dinars for the acquisition of farm machinery for rental by the government and of equipment for government repair shops, as well as perhaps private imports of agricul- tural rrachinery to the extent of 675,000 dinars. Hitherto mechanization has been on a modest scale, although the value of imports of agricultural machinery has risen from 62,969 dinars in 1946 to 294,696 dinars in 1949. E.."'{psnsion of agricultural credit, however, is necessary to ensure more extensive purchases ~Bchinery by farmers. Moreover, under existing conditions only large or medium landowners can afford to buy or rent agricultural machinery.. The use of rachinery on a large scale is not likely until land colonization schemes give peasants a larger acreage to farm, and until they can simultaneously establish cooperatives for the purpose of buying expensive equipment, among other things. A great improvement in maintenance and repairs is also essential, for the use of machinery tends to be uneconomic when bad upkeep limits the life of tractors, for example, to only fot~r or five years as at present. 50. More adequate grain storage facilities also appear to be needed in Iraq. A 5,OOO-ton silo has recently been completed in Baghdad; and the IB]D has been requested to assist in financing the construction of a 40,000-ton silo at the Port of Basrah at a total cost of 2,145,000 dinars,  .... 36 - of which 1,205,000 dinars ($3,376,000) will be foreign exchange. It is expected that this program Fay have to be supplemented by the erection of FAny small storaae bins throughout the countryside where adequate storage facilities are now wholly lacking. 1ndu~trial Dev~lppmertt 51. In the industrial field the development possibilities are more limited; although there are opportunities for the establishment and expansion of industries working with indigenous rraterials. 14any pro- jects are languishing today for lack of capital. Recent geoiogical in- vestigations have also revealed that, contrary to earlier indications, there may be mineral deposits "'hich could be comn;.ercially exploited. In the mountains of northern Iraq, adjoining Iran and Turkey; promising surface evidence of rather extensive deposits of copper and perhaps also of iron ote and chrcmite have been discovered. Diamond drilling is necessary, however, before conclusions can be reached regarding the com- mercial value of these minerals. {l;np:Ll1ar;v.Expendi tures 52. Investments in irrigation and drainage works, in industry and in other productive facilities are never likely to be fully effec- tiVe, hO\fever, unless progress is made simultaneously on tr.any other fronts.. There is urgent need, for example, to improve the wholly inade- quate methods of collecting, tabulating and making available basic sta'::'" tistical information without which proper economic decisions cannot  - 38 - area pool sufficient dollars to finance the hard currency imports necessitated 'by an expanded development program, Iraq "rill need to ob- tain external financing for at least part of these hard currency im- ports. The additional dollar indebtedness Nhich Iraq could safelY as- sume depends first of allan the development of its overall balance of pa~ents and secondly on the ability to convert current sterling earn- ings into dollars sufficient to service the increased dollar indebted- nesso 54. The future development of the balance of payment S \'Till 'be determined principally by oil revenues. These ~llill probably ri se by about 1505 million dinars from 1950/51 to 1954/55 and Hill presumably stay at least at this level in ensuing years. If the greater pa~t of this additional revenue is spent in Iraq on development projects, it ",ill undoubtedlY have a considerable impact on cash incomes ,·!ithin the country and thus on the propensity to consume and to import. More data on national income and consumption patterns and habits lIould be neces- sary to appraise the approximate magnitude of this im:oact. Ho,·rever, the impact can be significantly influenced by taxation and other fisca~ measures and, in the last analysis, by import curbs o In any event, it is probably safe to assume that an annual aum of up to at least ~ 205 million ($7,000,000) could be set aside for additio~~ debt service. 55. The conversion into dollars of any sum up to this amount Hould pre- samably not be automatic unless the tentative hard currency agreenent'with~the U.K. Treasury referred to earlier could be interpreted to mean that the ser- vicing of additional dollar indebte~~ess constitutes part of Iraq1s essential  - 37 - really be made. At the same time there must be a far greater investment in primary und vocational education vithout ",hieh there is I i ttle hope for the extensive establishment and functioning of much-needed rural. co- oneratives, for the improvement of agricultural techniques or the de- velopment of necessary technical skills in both industry and agriculture. The present inadequate outlays on practicnl agricultural experimentation must also be greatly increased and an adequate agricultural extension service established; and much larger funds must be spent on the procure-. ment of foreign technicians and the education of Iraqis abroad. Finally, a mch greater investment in public health is essential. It is clear that the resources of the government's ordinary budget Nill be insuf- ficient to meet the requirements for additional expenditures in these fields. Yet they are so important to the develo:pment of the country that the Development Board might justifiably devote some of its rapidly in- creasing revenues to vhat are, broadly conceived, real 1nvestnent needs. Role of the Illternati onal :s~ 53. Although in a fevT years. I 1'9.0. t s oil revenues should provide both enour:h local currency funds and sufficient foreign e:x:change to meet the internal and external cost of the capital projects '·rhich the government uill be capable of carrying out. J.1resumably there 1:T111 still remain a need for foreign financin.g. jl/hile enough foreir,n exchange '-ri~l be avnilable from oil revenues, it Hill accrue in the form of sterling, not of dollars. Therefore, as long as sterling is not fully convertible into dollars and Bri te.in \<rill not readily make available from the sterling  -39- requirements for which hard currency would be released from the sterling area pool. In view of the great improvement in the gold and dollar reserves of the sterling area and the United Kingdom's continued interest in large supplies of sterling oil from Iraq, it is reasonable to suppose, however, that the United Kingdom would recognize the servicing of dollar loans, part of Iraq's legiti~Bte hard currency require~ents. In any event it is unlikely that the additional dollar indebtedness Hhich Iraq would need to contract wou.ld require an annual service charge of over $2,000,000, and this amount would represent only about 10% of the norrral dollar allocations received annually from the sterling area pool. 56. It might, of course, be possible to obtain special assurances on the conversion of sterling into dollars required to service loans. In connection with the Uadi Tharthar loan the Government of Iraq agreed that, if it failed to meet y,:a JTIllsnts on this loan and the IERD consequently exercised its right to have the sterling oil royalties ~aid to it directly, the conversion of such sterling wot:.ld be "a first charge on all resources of the currencies required for payments on account of the Loan and the Bonds and on the rights to receive such currencies from any source which are or shall be available to Iraq from time to time". To this end, the Iraqi Government undertook arrangements enabling the lBRD to apply directly to the Bank of England for such currencies "provided that and to the extent that by virtue of any arrangement made between the Government of the United Kingdom and the Government of Iraq, the appropriate currencies may become available to the Goverml1ent of Iraq from sources "Ii thin the control of the Government of the United Kingdom. II  Table 1 AREA AND pr)ODUCTIO::r OF p:m:;CIPAL C~CPS IF IP.AQ , AREA (in 1000 hectares) PRODUCTI::": (in 1000 me ur~"c tons) J,. • 1935-39 19L6-h9 1%9 1950 ~932=39 1945-49 19'-19 1950 Average Avera.ge Ave:;.'age £'i'verage Barley 800 805 953 950 583 647 750 "'''fheat 735 823 623 525 5h1 396 ~50 520 Rice 159 199 222 212 III 8 ,88 212 250 , Corn n.a. 114 ) ) 76.2 ) ) 66 150 33 ) ) 43.2 , ) / 40 Millet n.a. 35 ) ) I n.a. 35 ) ) Grain sorghum n.a. 15 , ) I \ J ) n.a. 15 ) ) \ i ) 1..-' 1 Sesame n.a. .30 Ii) .4- 20.7 n.a. 12 9.rj 12 ..,r' 1C Legumes n.a. ~::> 50.9 ).(6.9 n.a. ..... . / 27.2 31.5 r Tobacco h 0 n.a. n.a. 5 6 7 ~0 ; .D.... n.a. Cotton 21 10 7.5 30 2.5 1 5.7 25 Dates ) 1 .,:, n.a. n.a .. n.a. 300 300 · .... I V 250 ) 250 otl!er fruits n.a. ) n.a. n.a. n.a. n.a. Sources: 1935-39 and 191J5-49 firures from ilffiee of Foreign Agricult,ura1 R.e1ations, U.S. D~partment of Agriculture, based in large part on adjusted official Iraqi statistics~ 19119 and 1950 figures from Department of Agriculture, Iraqi 1dnistry of Economics.  IfhQ GOVERNMENT BUDGETS (in thousands of dinars) £.5..0 /151 A.. ORDINARY ~UDG~ (estiJ:na tea) Revenue Taxation on Agriculture, Animals and Rent of Gon .. Property •••• ~ •••••• 4,088 :3,916 Property, Income & Stamp Taxes •••••••• '. ~ :3;690 :3,480 l1iscellaneO'Us .................. 1p . . . . , ••••• 800 700 Customs and excise ••••••••••••••••••••• 11,:300 11,250 Posts and Telegraph ••••••••••••••.••••• 1,111 1,154 Other Government services & Institutions: Tobacco monopoly •••••••••••••••• Ct;her •• C'¢'O • • • '" "' • ., • • t'.-.·~· .•. '.•-.-•. "'. Total Revenue &J2~ndi t!!r..~ General Civil Administration ••••••••••• 12,:366 11,466 14,415 Defense ••e. • • • • • •_ .- '" . . . . . . . . . . . . . . . . . . . . e- • • 6,746 6,585 6,983 Police .• ...•...••. ,. ....•_ e' • • • • • • • • • • • • • 2,8:36 2,564 2,597 Emergency Expenditures: Cost-or-living Allowances ••••••• 6,086 5,782 ... J/ Other ••••••••••• , • ., *.-. " .••• -.,".- ... -... 40 116 100 Sub-Total 6,126 , '"-'"5,898 100 Total Expenditures 28,074 26,513 24,095 B. . CAPITAL WORKS BUDGEr Revenue . Oil Royalties •••••• n................... 2,015 3,238 3,410 Government Share in National Bank profits 500 500 • ~ Refund of Railway LOO:1_8_ _._._"_ ••_ ......_._ :_._._0,....''_0___ ....... ... " _ _.....,_____............. 6_7___ - U Total Revenue 2,515 :3,805 :3,410 Expenditures Capital Works 2,780 1,555 2,733 • • • tit • • • • • • • • • • • • • • • • ' • • • • • . Army Equipment . ,. "" ..................... . 1,072 718 1,000 Niscellaneous ..... , .....................' . ' ... ., 77 123 150 ---------.--------------------------------~--~----~---,-------- Total Expenditures :3,929 2,396 :3,88:3 C. - TOI'AL BUDGEr Revenues ••••• , •••••••••••••••••.••••••••• 23,722 27,052 27,365 Expenditures , 32,003 28,909 27,978 Balance .. 0 • • • .. • • • • • --~------------~--~----~;--------------~----~~,~,~.--------,---- •• • • • • • •• • • •• ... •• . - 8,281 - 1,857 - 613 JI Distributed among government departments. 2./ Included in ordinary budget under" other gOYernment services and institutions", J/ Transferred to ordinary budget~ Source: Ministry of Finance, lraq Governraent,  I" IEAQ GOVEI1JIvIENT BUDGETS • BHEAKDOPN OF !lGENEFAL CIVIL ADHIlHSTR.iiTIOlJ" :::::XPENDITUHES ~~~~------~------~-----,~,.~ ---------- (in thousands of dinars) Heduction in 1950/:-;1 estimates by C o!l,paris on with actual Actual Actual Estinlates 194o /5 n .,.;.... / ~-.i' e-r _ J .. 1948/49 1949/S0 1950/51 penditures ~/ Pensions and grants-in-aid 384 427 733 Civil List 84 93 91 Parliament 84 99 IS5 Comptroller General of Accounts 13 11: 21 Council of 1.linisters 29 38 39 Ministry of ForeiEn Affairs 527 449 iJ08 51 ..., .... Ministry of Finance 1,329 1,197 1,371 ;:; Customs & Excise 433 530 635 llinistry of Interior 1,007 1,L24 1,305 189 tlinistry of Social Affairs 1,984 1,680 2,298 I.Iinistry of Justice 440 331 1+48 1+9 Dept. of Tapu & Land Settlement 221 180 287 Ministry of Education 2,573 2,565 3,783 Ministry of Economics 196 227 181 66 Agriculture & Veterinary Depts. 1,160 646 533 220 Directorate of Tobacco Honopol~r 54 L~O 73 Ministry of Communications !::..Vrorks 192 202 301 Public Works Department 651 478 5'.(~ ~.j 21 Irrigation Department 259 228 320 Post f.c Telegraph Denartment 804 600 800 Local Administration in Liwas 0 18 100 ;Vlinistry of Supply 41 Total "Civil Administration" 12,,366 11,466 14,415 669 Police Department 2,835 2,564 2,597 670 ~1inistryof Defense , 6,7h6 6,585 6,983 1,298 Grand Total 21,947 20,615 23,995 2,6')7 Y After deducting IIcost-of-living al10'wances H, which in 19$0/51 Vlere distributed over covernment depart:ments for the first time. Source: lIinistry of Finance, Iraq Government.  Table 4 ESTD!ATED 1950/51 BUrGET YIELD INCREAS:::S I I--~----''---- ENACTED Dr 1950 (in thousands of dinars) Increased i~port duties !I Export duty 11 Increased cigarette excise y 400 Increased property tax ?J 80 Increased stamp 3/ . tax -: 270 Mise€: 11aneous 150 Total 2,000 1/ Effective April 26, 1950 2/ Effective October 1, 1950 ~ Effective July 20, 1950 Source: ?1J..Distry of Finance, Irar'! Governnent.  Table" !CTUAL BUDG~ RECEIFTS AND EXPEIIDIT1RES IN .l250{'i1 AS COMPARED. WITH CORRESPONDING PERIOD OF 1%2/50 (in thousands of dinars) Increase (+) or decrease (-) in 1950/51 as comr.ared 1949/1)0 195Q151 with 1249l'50 Seven monthf! Taxes on agriculture and animals and rent on government property 2,272 2,778 + 506 Inoome tax 1;442 1,387 55 Property tax 371 434 + 63 Customs and excise 6,033 7,146 +1,113 Total 10,118 11,745 +1,627 Three montI:!§. Stamp duty 82 109 + 27 Posts and telegraph 213 222 + Q ; Tobacco monopoly 36 36 Other services Niscel1aneous 824 129 684 101 - 140 28 Capital works ·940 1/ - 940 Total 2,224 1,152 -1,072 ~l Receipts; (four months) 6,788 Y 7,395 + 607 Total Expenditures {four months) 8,310 7,496 - 814 11 This receipt should really be discounted, for it represents advance payment on oil royalties which did not actually fall due until Janu- ary 1950. y After deducting advance oil royalty payment in first quarter of fiscal year. Source: lfdnistry of Finance, Iraq Government.  Table 6 --------------- DISTRIBUTIon (IF HOLDDJGS OF IRAQ r:DVERlJI T~IrT !Ii'I'rrILL JEBT ----......: ..... -- ........_ ' - . .. -.....------- (in thousands of dinars) t:iarch 31, 1950 Sept .. 30, 1950 Government Bonds National Bank of Iraq 2,371 2,410 CO!l'lJ:nercial banks 1,927 l,?~l Industrial Bank 22 19 Faa Bar DredginG Scheme llu Sarrafs ) :7 ) 1,636 Public ) J.,571 Total 6,000 6,000 Treasury Bills National Bank of Iraq 3,750 3,750 Commercial banks 500 1,100 Total 4,250 L.,850 Source: Data obtained by Bank I:ission from Iraqi official sources~  Table 7 TOBACCO MONOFOLY ACCOUI.JTS 1~ Amounts credited to Govel'nment Budget from the Tobacco Nonopoly (in thousands of Dinars): 1946/47 3,490* 1947/48 1,861 1948/49 342 1949/50 424 1950/51 (estimate) 1,000 *This amount is large because it is the result of accounting for a period since the inception of the Hcmopoly in 1945. Previously little or nothing had been credited to the budget. 2. Method of calculating amount credited to the Budget from the Tobacco ,Nonopoly (in thousands of dinars): a. Fiscal year 1947/48 Value of stocks 11arch 31, 1947 (sales Drice) 5,026 II " It " "1948 It - II 5.022 Increase (+) or decrease (-) + 7 E.."{cess of Honopo1y's cash receipts ?ver expenditures 1,7~ Sub-total 1,789 Other receipts* 126 Total credited to Budget 1,915 b. Fiscal year , 1948/49 - Value of stocks :M.arch 31, 1948 (sales price) 5,032 II It II II II 1949 " " 3.371 Increase (+) or decrease (-) - 1,661 Excess of Menopo1y f s cash receipts over expenditures + 1,924 Su1>-tota1 + 263 Other receipts* 79 Total credited to Budget 342  Tab~ 7 (Cont'd) -2... c. risQe1 year 19~9150 Value of stocks Narch 31, 1949 (sales price) 3;371 " 11 II " It 1950 (cost price) . 1,476** Increase (.) or decrease (-) - 1,895 Excess of Nonopoly's cash receipts __ _ov_e_r e_xp~._e_nd_1_·t_u_r_e_s~____,~.______~____________._~,1~ Sub·-total • 296 Other receipts* ~ \ 128 Total credited to Budget 429 *Including sales of confiscated tobacco, profltsfrom cig- arette paper, fines and nisce11aneous. **Note that the JvIonopo1y has c'.1anged its system of accou::t- lng and is now car~Jing its stocks at cost price. 3. Stock position of the Tobacco Monopoly Stocks on 31/3/191..7: KilQll Sales V~lue in dira~ Tobacco 8,410,965 4,852,840/805 Tombak 83,:43 136,839/900 Cigarette papers 1,006/250 16,3 05/300 Bounding materials 19,900/000 .It.~25 ,886/~9~ ~s un 31/'3(1948: Ki1.2a Sales Value in d';na-rs To1::acco 8,958,293 4,926,850/500 .. Tombak 148,7'64 42,235/000 Cigarette r~pers 2,228 36,093/600 Bounding materials 19,000/000 Vehicles 8,14-19/551 5,032,598/651 Stocks on 110(191;9: Kilos SaieR Value in dina:ca Tobacco 6,670;674 3,340 ,458/642 Tombak 29,410 8,447/000 Cigarette paper 94 31+9/180 Bounding trBterials 14,000/000 Vehicles 7.963/551 3,371,218/373  Tab1e7 (Co~) -3- Kilos Cost Value in dinars Tobacoo 7,321,965 1,336,816/565 Tombak 49,354 6,115/164 Cigarette paper 13,113 103,946/751 Bounding rna. teria1s 12,000/COO Vehio1es 7,167/196 Building materials for stores _--,1;;;;.;0;...:.% 991/§91 1,476,13'7/4~2 4. Sales and purohases of Tobacco and Tombak by the Tobacco Monopoly* (in kilos): To1":aceo T,orn1":ak fucal vear 19.1r.8/!{1 Purchased + 3,329,812 + 73,C17 Sold - l) ~617 ~{r. .on -122 ,39l Balance - 2,287,619 ~119,374 Eiseal v~~49/50 Purchased + 5,865,639 +168,236 Sold - 4:714:348 -148%291- Palance + 1,151,291 + 19,944 Note: There is no reCOlU of purchases and sales prior to 1948/49. *The· figures on stocks and }:urc!18ses a'1.d sa 1es supp:!.ied by the Monopoly leave the impression that there is absolutely no loss in the ouantity of tobacco o\-ling to dete:-iora tion, fire or other losses, whioh obviousl:;r oannot be true. It is quite possible, therefore, that the figures on total purohases and sales are aotually figures on total amO'l.mt going into the warehouses and total amount going out of vlarehouses. 5. Aotual cash receipts and expenditures of the Nonopo1y (in dinars): '1946L47 1947L48 1948,49 ... 1949L50_ ~ 195C/51* Receipts: 3,183,216/618 .3 ,255,935/.211 2,776,522/530 3,569,044/925 349,975/705 Expendi tures : 3,903,647/063 1,473,559/184 852,217/787 1,377,452/314 3?,855!108 Balance: ... 720,430/445 +1,782,376/027 +1,924,3 04/743 +2,191,592/611 + 310,120/597 *3 months.  !?b1e 8 BUDGETS OF PORT OF BASRAH AND FAD BAR DREDGING ,SCmlE (in thousands of dir~rs) 1949L&)0 Bu!i~et 12~0/Sl..fu:dye~ (actual) (esti:rr.ates Port or.1?a.~:r:{ili Ordinary expenditures 1,429 1,403 Rec~ipts 1,62~ 1,568 Balance "" 191 + 165 Capital expenditures .. ,.... Total balance - 195 4 654 - 489 Fao Ba~ Dredging S~heme Orcl.inar"J expenditures 607 748 Recei:')ts 951 925 Balance +344 + 177 Capital expenditures 187 '59 ., Total balance + 157 - 182 Source: Ministry of Finance, Iraq Government.  Table 9 PORT OFBA2BAH: DISPOSITION OF r,mIULAT~VE SU2?LUSE§ y (in thousands of dinars) April 1, 19L~9 " "1 1 Anrl ";-' 1950 June 1, 1950 Actual Surplus 2,295 2,H16 ~,53a Distribution: Capital assets 970 1,124 1,169 Cash in hand ancl in banks 142 19h 95 Deposits, long-term ~ 190 190 190 Bills receivable (net) 283 336 439 Stores 710 6h2 645 1/ After depreciation allowances. y Includes ID.l10,OOO deposit 'J'lith Iraqi Railways. Source: ~linistry of Finance, Iraq Government.  Table 10 FAO BAR DREDGING SCHT:,,jE: , or CU1\:ULATIVI~ SlJ7PLUSES 1/ mS?OSITI0I'Y (in thousands of dir-ars) . A;eril 1, 1949 ; April 1, 1950 ~une 1, 1950 Actual Surpluses - 2,031 .2,374 2,461 Distribution: Capital assets 659 319 828 Cash in hand and in banks 110 254 27h 2/ Deposits with Rafidain Bank.... 970 926 925 Iraqi GoverTh~ent Bonds 44 40 Bills receivable (net) 245 285 368 Stores 47 47 26 1/ After deureciation allovfances. V Fixed deposits, 6 months, subject to renewal. Source: Ministry of Finance, Iraq C'rovernrnent.  TAble 11 FLL4l:CIAL CO~:DITIOlil'OF IRAQI STAT- E..AILIAYS (in di;~r's) .~46!47 1947/48 194 8/49 1949L~o 19~0/~1 (cst,.) Receipts fromCperati~n Coaching Traffic" 1,039,4L!6 876.534 789,240 832.678 806,000 Goods TraffiC 1,936,065 2,313,265 2.290,127 2,<::26,923 2,526,.000 M.iscellaneous _ ~_.~ __ ~2M..?lL__ --19..!g'.,:::.,6_ __ ..Jl3,18,5 1~821 18,[00 Total 2,998.539 3.22~,925 3.117.552 3.374,422 3.350,000 Total Receipts* 3;436,~,03 3.794 .003 3.633,023 3,991,297 ).949.200 Ordinary Exuenditures ).206,164 3.549,115 3.614,<;69 3,7 0 5,,5 42 4.041.400 Of which Repairs & Maintenance 665,789 779.413 76],569 776.730 Renewals. replacements and betterments (includ- ing de9reciation) 400,000 400.000 250.000 400,000 600,000 ~alance - Ordinary Budge~ f 230,239 f 244,888 f 18.453 -f. 2Q5.755 -92.200 Capital Ex;)endi tures Ordinary Capital Works 56,24-2 371,233 659.178 58.519 183.000 Major Development ScheMes 732.853 1,389,890 2,119.724 1,068.559 1,551,000 --------~---------------- Total 789.09~ 1,761.123 2.778,902 1,127,078 1,7J4~OOO -558.856 -I. <:16.235 .760,449 -841.323 -1.826,200 *Including Ilother" receipts such as those from catering and supply and the Iraqi Airways ... Source: Iraqi State Railway Administrati:)I'.!.  Table 12 IRAQ! STATE RAILWAYS ESTL'lATE O:!? lifEC:SSSA..-::ty i-ROGRJ.J1 FOR RE~-:E';/ALS AND CAPITAL EQUIPHEliT (in thousands of dinars) _J-L 2. 3. h. 5. 6. ,__ 7.: 8. Essential Essential Total Com-ple- Repay- Total Resources Remain- track & locomotive, Essen- ti,Jn of ment of Expendi- available in.<?: other civil ",a.gon and tial ca2Jital British tures fro"). deficit engineering ot!1er rene'l;als wor~<:s & raibray required. railway (Columns rene\,'als mechanical essential loan (Columns operating 6-7) department improve- 3.l.J· & 5) ir.con'3s Ten8ir!als l/ me~ts 2J 1951- uoo 250 650 500 1.150 )00 650 1952-53 500 hOO 900 1.000 750 2.650 500 2,150 1953-53 600 2,000 2.600 1.000 750 4.350 600 3,750 1954-55 400 400 600 500 750 2.050 700 1,350 1955-56 400 400 800 750 1,550 800 750 1956 400 400 800 800 800 Totals: 2.700 3.8.t::0 6,550 ),000 3.000 12,t::50 3~900 8.650 l/ ImTolv~s procurer:lent of 76 locomotives, 1000 Dogie \1)'agons and 10 coaches. This total mi,£"ht be syread over sli~htly longer period. gj Includes ID. 2,500,000 for modified execution of vlest Ba,O'hdad sch'9me, includinfS (1) use of station as terninus for ar.d for metre-[![lUF':6 exce~)t for Basrah throue:h line. (:2) relocation of stan~card-.2;au~e mars:1allino: yard but no rel~cation of metre-f';3ut"e ;rars~e.il yaru8. (3) elirdnation of ne,"! o:oods shed.s and reduction of expencit'Hes 0n platf()r~s, etc. 1'1'0 tote.1 cO'.1lCt prooably be reduced still f'.1rther. Source: Based on information obtained Bank f,rission in I  , ... 'Table 13 "A1f (in thousands of dinars) r SSU3 DJID' ART' . :;'1' 1IA3ILITI~S ASSETS Cl1rre!',cy in In Bankine; Iraq End of Month Circulation Del?artment Total Sterlin2 Silver Sec:nritic Cctober 1949 35.913 570 36,484 34,707 157 1,620 November 19 49 36,145 615 36,760 34 .9P3 157 1,620 December 19 49 36.356 552 36,90Q 35.137 151 1,620 January 1950 36,17P 1,196 37,374 36,353 151 P70 February 1950 36.958 l,27l1 38,231 37. 0 11 151 170 March 1950 38 ,634 1.531 40,165 39, 943 152 170 April 1950 39,065 1,473 40.538 40,217 152 170 ifLay 1950 39,LtJ8 1,136 40.574 4Cl,2ll9 155 170 June 1950 39. 1.903 41,lP5 LJO,P59 155 170 July 1950 39.590 1,4';,2 41.031 LI-O,700 1~1 1?() AUP.:'Ust 1950 .235 1,921 40,156 39,R26 160 170 September 1950 37,813 2,796 40,609 40,278 16: 170 Jctober 1950 :>-Q.Oll 2,5P7 40.59 P 40,269 159 170  Table 1J liB I! I'! 0-;'THLY STAT:g"~"TS OF ~r~ '?,J·"T1In·I~"', .....'i.. 1iAHY _.' .....!".Ll __ .• _ _ _ 0'-' .. _ IRAQ ._._. (i~ thousands of d-1narr-;) EKI ~T t; D:r;::?_A..RT~4T<TrT LIA"JIr.I '1'1"'"JS AS53TS Current Other Iraq SG- Ca'oi tal Acco11.nts Acco'iln~JL., Total curi ti,,"s Advan~~ _. O~h[lr_._9.L Oct. 1949 :2,500 354 1,863 4,716 4,000 55 91 5'70 Hov. 19LJ9 2,500 380 1,881 lI,761 4, 000 . 55 91 615 Dec. 1949 2,500 338 1,891 4,729 4,000 125 53 552 Jan. V50 2,500 2,254 1,936 6,690 5.?50 175 70 1,196 Feb. 1>'50 2,500 3,::'23 1,983 7,506 5.950 225 SP ~ , 1??4 , ~; >!ar. 1950 2,500 3,160 2,109 7,769 5,950 ?25 63 1,531 Apr. 1950 2,500 3,497 1,875 7,872 5.990 353 55 1 ,1~73 f4ay 1950 2,500 3,161 1,869 7,530 5,990 353 51 1,136 June 1950 2,500 3.930 1,371 8,302 5.990 353 56 1,903 July 1950 2.500 3.768 1,867 8,136 5.990 653 51 l,u.!}2 Aug. 1950 2,500 4,265 2,000 8,765 5.990 798 57 1,921 Sept. 1950 2.500 l~, 617 2,520 9,637 5,990 798 53 2,796 Cct. 1950 2.500 4,372 2.583 9.h55 5,990 820 58 ?, 5~\7 lit Incl11.des advance!?, maje to the Industrial Ban.k:, Mortfl'a!:"B 'tla1 lk, Baghdad 1vater :3oarrl. As of Jul~T 1950 a~val1ce of 19h 9 ~overn­ me;1t share of 'rational Bank :,,1rofits al~o inclune~.  Table 14 PRINCIPAL ITEI:S IN ASSETS LiJD LIABILITIES ArCOL"fNTS~jf;-i~01:rrJERCIAL ILIJKS "IN I:1AQ- (thousands of dinars) Current Sav'_ngs Time ':'ot<>l ~/. Accounts Accounts DeDosj.ts Denoslts Disco:.mts . 1;/v8r:~'?s _.--- 19hB I'€cember 12,25h 2,302 1,421 15,977 1949 i{arch 11,250 2,22h 1,378 15,1~52 June 12,G58 2,290 1,336 16,iLC,h September 12,267 2,385 1,176 15,328 December 12,272 2,390 1,322 15,98h 1,149·~Hc t ), n3n~Hc : L1 1950 January 11,991 2,33h 1,313 15,698 February 11,737 2,393 1,197 15,327 813 3,907 Harch 11,:;'88 2,222 919 14,729 April 11,941 2,230 870 15,C1Jl 879 -. (l""~ ),,'" j L!. May 12 ,L~5h 2,252 333 15,539 855 3,989 June 12,777 2,262 339 15,873 903 3,91.5 July 12,926 2,298 899 16,123 921 3,S9S August 12,506 2,335 386 15,727 1,055 l~ ,155 September 12,821 2,238 830 15,289 933 4,180 ~~ Excluding advB.nces to the p-overnment. "" ~n, Prior to December 19h9 there was no obligation to submit bank accounts to the National Bank. Source: National Bank of Iraq.  Table 15 INDEX OF PLICES IN BAGHDAD, IRAQ (1939 = 100) Wholesale Prices Cost of Living December 19u8 558 673 Hareh 19u9 489 584 JUne 19h9 437 538 September 1949 lt21 502 December 19u9 !!69 506 March 1950 452 !~88 April 1950 uu7 lt82 May 1950 457 487 June 1950 478 h84 July 1950 481 491 August 1950 h79 501 September 1950 u92 October 1950 487 ,..  CHANGES IN BALArI9E SHli;!WLQf-£Ql:iMEi1Q;IAL_ BA~lli§. IN IRAQ BETWEEN FEBR.UARY .28 AI~. ~EPT.E! IBE.tt 30, 1920 (In Dinars) ~SSETS 1. Cash on band in Ira~ February 28, 1950: 5,024,317 September 30, 1950: 6,94A.5{J., + 1,920,227 2. DeI?2£iits in Nati)::mal Eank February 28, 1950: 3,271,104 September 30, 1950: ~,l)7?,291 + 2,3('4,187 Of which Govt. Bonds &Treasury Bills: February 28, 19~0: 500,000 September 30, 1950: 1,047,000 + 547,000 3• In:m~men:tfl''\. ad~Q!llL§L 9~SSQl1m in 1m,q FebruarJ 28, 1950: 8,118,500 September 30, 1950: ~,61k,440 + 495,940 Of which Government Loans: February 28, 1950: 2,578,08:3 September 30, 1950: 2,223~916 ... 354,167 4. DeJ2osit!,!_& In"ept~nts Payable AQZ:~ February 28, 1950: 10,921,522 September 30, 1950: 9J092,174 - 1,829,148 LIABIJ,ITIES 1. Current & Fixml DeI?oslts February 28, 1950: 14,5.37,910 September .30, 1950: 15,6'39.362 + 1,101,452 2. Deposjt~ in Foreign Currencie~ Placed as Cover fer ,fredit? Op~ned February 28, 1950: 595,953 September 30, 1950: 536,f17 ... 59,836 3. Debit Ea1an~es Abroad in Foreign Currencies . February 28, 1950: 68,980 September 30, 1950; ;J.k9,107 + 80,12:7  Table 17 PRINCIP~L EZ?OHTS FRO~:; IRAQ, BY VALUE (in thousands of dinars) First half }<'irst half 1948 1949 19h9 1950 Grain, flour and pulses 422 6,115 1,077 6,1..85 Dates h,7h2 2,961 ~_,C21 1,0(16 Hool (raw) 1,027 534 11", OJ.. 536 Livestock 151 359 231 ~J"')r, j/~-j Hides and skins 284 2ho lI.9 119 Cotton (raw) 79 65 120 Casings 8h 63 27 39 Total ~:l789 10,337 2,666 8, 70~~ ~- ~ource: 19h8 figures fro:n Statistical Abstract, Principal Bureau of Statistics, Government of Iraq, Mintstry of Economics, 19h8; 1949 and 1950 data furnished to I!ussion by the G~)Verrunent of Iraq.  Table 18 PRltl./'vIPJlL ToY?OR"'S FD QI'; , lDr'Q _ ~ ... ..."'" ,~\.._, !t.t'.>- . ' BY CUdlTITY ~ t,.,J. ! ~._ (in thousands of metric tons) First half First half 1948 1949 1949 1950 Grain, flour and pulses 12.8 352.1 52.8 285.0 Dates 214.4 131.4 bB.2 43.2 YJool (raw) 7.1 3.7 1.1 2.6 Hides an(~ skins 2.8 2.3 1.1-( 1.1 Source: 1948 ficures from statistical Abstract, Principal Bureau of Statistics, novernment of Iratl, tlinistry of I:conoraics, 1948; 1949 and 1950 data furnished to lBED I!ission by GO"lrerrunent of Iraq.  Table 19 (in thousands of dinars) First half First 1948 1949 1949 1950 Cotton piecegoods 7,296 5,514 2,625 2,561 Rayon, silk and woolen piecegoods 1,671 1,819 896 736 Clothing 755 598 232 539 Tea 2,123 2,837 1,.1Lh l,167 Sugar 3,661 2,227 732 1,811 Coffee 21+5 372 201 ),? -+~ Soap 837 hOI 270 Paper and cardboard .593 315 226 Iron and steel 4,997 2,216 2,13L Cement 1,009 633 292 10.5 Timber 623 350 161 126 Machinery, boilers, etc. !t,111 4,.527 2,376 1,908 Electrical machinery, and anparatus, etc. 1,890 1,967 1,07J 1.,1 I l1 Hotor vehicles and parts 2,176 2,311 1,005 all Chemical and pharmaceutical products 829 7L6 365 )152 ----~--------~~----~~~~--------~~---- Total 32,816 30,188 11..,239 11:,0 7 9 Source: 1948 firures from Statistical AbstrLtct, Princiual Bureau of Statistics, Government of Iraq, Einistry of !~conomics, 1948; 1949 and 1950 data furnished to IBr:m Hission b;r Government of Iraq.  Table 20 PRINCIPAL IMPORTS INTO IRAQ, BY~(;j,IJTITY i (in thousands of metric tons) First half First half 1948 1949 1949 1950 1. Textiles 1milli on square meters) Cotton pieceroods 56.0 51.6 .6 30.8 Silk and. a.rtificial silk piecegoods 1.5 5.0 1.7 )1.8 'floolen piecegoods 2.0 1.6 C.8 0.3 2. Foodstuffs Sugar 85.8 52.0 16.5 36.0 Tea 6.1 5.0 4.0 2.9 Coffee 1.5 1.9 1.0 O.l 3. Capital Goods, Iron and steel 91. 7 80.2 31.8 37.8 Cement 110.4 71.9 35.6 13.1 Source: 191.:.8 fir-ures from Statistical Abstract, "Principal Burp-au of Statistics, t:over!1nent of Jraa, :'Tinistry of r::cononics, 1948; 1949 and 1950 data furnished to IDT!D Eission by Goverm'lent of Iraq.  DISTRIEUTION OF IRAg'S.FOREIG-N TRADE TI"iPORTS AND EXPORTS OF IAAQ BY PRINCIPAL COUNTRIE§. (in thousands of di~Ers) ...,..,_. _ _ ,_ _......-.___..;:;Th:;.;1;P~O;:;.;.R;;;;.T;:;.S_ _ _-.,... •. _Year 1948 1st 11alf 1949 1st half.1'?J.£ 19,790 1,654 1,330 1,945 24 a719 55%... ... HARD P'GRP£NCY ~ U.S.A~ 3,572 1,757 747 Canada 284 66 31 Jallln 28 25 333 Belgium 1,303 379 208 GerIl'.any 281 220 29 Sweden 455 327 322 Swi tzerland 51 28 33 Total 5 9 974 2)802 1,703 Percentage 13% 14% 9% ~ gOyl',rTRI~ Holland 1,039 50S 346 Den:roork 99 24 13 Syria &: Lebanon 1,733 1,581 421 Iran 1,979 542 659 Egypt 295 2~ !t2 -~-~--------------------~.~------------ Total 5,145 2,707 .,. 1,484 ~~rcentage 11% 14% got - -----'.! GrHER COUNTRIES 9,685 4,421 3,207 Percentage 21% 23% 18% - -- Tota 1 Imports 45,523 19,316 18,491 .-. - Percentage , .... , I. 100% 100% 100% Source: 1948 figures from Statistical Abstract, Principal Bureau of Statistics, Govt. of Iraq, Hinistry of EconOmics, 1948; 1949 and 1950 data fUrniShed 1;.0 IBRD l1ission by Government of Iraq.  Taple21 DISTRIBUTION OF IRAQ 1 \ SF'OREIGN : TRADE IMPORTS. ANR EXPOHTS . OF <IW\Q BY; PRINCIPAL COUI;1TRIES (in thousands of dinars) EXPORTS ..,... Year ,194$ .. ' 1st half .1949 1st half 1950 i STERLING. AREA United Kingdom 1,434 403 1,480 Palestine & Transjordan 769 177 India 1,516 776 251 Australia 109 ... Ie Strait settlement 77 30 24 Ceylon 63 21 218 Pakistan ~~ Total 3,968 1 z4 07 2.,055 Percentage 46% 45% 23% HARD CURRENCY AREA. U.S.A. 1;051 86 74 JaFan 874 Belgium 2 45 Canada 64 185 Germany 446 18 72 Sweden· 1/ - 153 2 Total _l z563 257 1 z252 Pe:rce!lta~e i 18% a% 14~ U1'HER COUHTR1liti Holland 7 47 1,883 Dewark 276 757 Syria & Lebanon 872 348 . 377 Iran 451 189 945 Eqpt 592 187 178 Total 1,922 1 z047 4!14~ Percentage 22% 4 33% 45% orHER COUNTRIES 1 2210, 440 It 658 Percentage. 14%· 14% 18% Total Ebtports 8,663 3;151 9,105 i Percentage , 100% 100% 100% . 1I Less than ;00 dinars.  Table 22 FOREIGN EXCH1u~GE HOLDIRGS OF IRAQ STI£RLING HOLDINGS OF BANKS STERLING HOLDINGS FOREIGN EXCHA1~GE (in thousands of dinars) OF GOVEID1MENT HOLDINGS OTH~R THAN NATIONAL BANK COMI~LERC IAL BANKS ALL BAlm:S DFJ'ARTr-.1ENTS ~TERLING - Em! ~ Blocked Total Free Blocked Total Free J31gcked ~ptal (in million of dinars) (in million of dinars) December 1948 2,762 31,146 33,908 2,370 8,014 10,384 5,132 39,160 44,292 0.8 0.4 September 1949 8,079 26.113 34.192 2.169 6,680 8,849 10,246 32,793 43,041 December 1949 8,133 27,003 35,136 2,160 5,861 8,021 10,293 32,864 43,157 0.2 0.3 March 1950 11,669 28,174 39,843 1,641 5,006 6,647 13,310 33,180 46,490 0.4 0.3 June 1950 12,660 28,198 40,858 2.700 5.018 7,718 15,360 33,216 48,576 0.2 September 1950 11,477 28,801 1/ 40,278 2,305 4,968 7,273 13,782 33,769 1/ 47,55 1 0.3 0.3 October 1950 14,271 25,994 40,265 2,777 4,968 7,745 17,048 30,962 481'010 0.3 1./ Increase from September 1949 to September 1950 was due to accuIIiUlated interest on "blocked sterling" accounts. Source: National Bank of Iraq.  IRAQI BALANCE OF INTElli'L';'TIONAL PAYiIENTS (in thousands of dinars) (Tentative) 1948 1949 First half 1950 1950 (estimate) Expendi- Expendi- Expendi- Expendi':"~ ... G"Q..R.rlENT ACCOUNT ReceiDts tures tures Receints Receipts tures ierchandi se l li 1J Imports c.i.f., excluding imports by oil companies 36,870 30,967 14,}88 32,8&0 Exports, excluding oil ~ 10,335 1L~,82~ 11,191 23,900 Non-Monetary gold and coins (net) 7 Foreign Travel 3,005 2,600 2,613 2,457 :1/ J./ JJ JJ Transportation 1,334 131 1,437 lL"J. JJ JJ JJ J) Insurance 50 150 59 144 JJ JJ JJ JJ Oil Royalties, dead-rent and oil com~any payments in lieu of taxes 4,576 1,432 2,181 4,681 Local expenditures of oil com~anies in Ira~ 7,033 6,h67 2,439 5,200 Interest and profits on investments 1,0}2 ~87 793 696 JJ 1/ JJ JJ Expenditures of British forces in Iraq 1,752 1,240 JJ JJ J./ 31 Purchases of surp1~s stores, Ira~i military tures abroad, etc. 1,572 593 J} 3./ JJ JJ Other 1,107 1,929 782 649 },307 2,611 7,000 4,6ce Total Current Account 30,2}1 4],839 29,648 35,657 19,118 16,999 40,781 }7 ,4Q,O CAPIT~ ACCOUNT Changes in balances abroad (net) 13,500 1,785 5,296 4, ~~O Changes in non-resident account in Iraq 306 ,::82 125 2~0 Other 80 50 46 66 2,315 ':±J 2,750 'JJ I Total. Capital Account 13.550 356 1,831 648 2,315' c,421 2, t50 4, 75~ f G.R.A..h"'TI TOTAL 43.811 44,195 Jl,h79 36,}05 21,4)} 22,420 ,531 42,150 Errors and Omissions 51 384 4,826 987 1,381 ____________ -..-.~..,.~....,;.:_,~.1"!r4_.~.-_~~~-~~~ .... ~ ~~ )j Adjusted for contraband t rude and over-valuat ion. y Adjusted for contraband trade and under-valuat ion. J) Included under n Otht3r" • *' !±/ Disbursements of 3,OOO,QOO Raili'lay Loan. 5) Accounted for in part by differences betvleen ,:hysical movement of goods on merchandise . account and actual Dayments aTld receipts 'ource:3as c,d on data S~.::'·'-l ',1.iGd by Naticnal Banl<: of Iraq. .. . . . • CULTIVABLE ~ND.l._CROPPED LtU'DAIID LA:r~ t~TILlZED FOf{ AGRICULTURE IN BAQ (in millions of acres) Qylti va bJ,e a rea 29.7 In irrigated zone 19.8 In rain-fed zone 9.9 !rea actual1.Y in crops 5.9 By ar~ Irrigated zone 4.4 Rain-fed zone 1.5 ~ tvne i of . crop Winter crops 4.3 SUInmer crops 1..0 Orchards 0.6 !.:cea devoted to arrricultural ..,..- '¢se~~ 11.2 *Taking into account that normally almost one-half of the land is left fallow. Production in lvletric Tons 1/ ),9<::0 1.2.5..l ],924. Iraq Petroleum Company 6.000.000 6,500,000 10,000.000 1-':3.000, jO::1 20,000,(,00 Basrah Petroleum Company 2,500,000 2.500,000 2·· .500,000 Moaul Petroleum Company 1,000,000 1, ,u:;O Khanaq,in Oil Compan;y 360,000 370,000 380.000 3.0'0,000 -- . . . . ~,~->-----"".-- -"'_"_-,"- . . -- 385!OOO -"~---- Total t. j ":':000 6,860,000 12.870,000 21,880 C!)O 2/' ;. J35 ,oor) til Revenues a~cruinf" t~ Capital Wcr~s or Developmept 125S2l31. 19'11/,)2 l.2'5 2 / '11 19S11~4 .1qC:/ili Board Bud~et (in dinars) gy- Iraq Petroleum Compan,y 4,730,400 5.124,600 7,834.000 14,191.2!iO J5:7t:8,OCO Basrah Petroleum Company ,000 584,000 3.168,000 3.168,000 ),::.68,COO Mosul Petroleum Company ,600 525,600 525,600 1.24 5,600 1.425.600 Khanaqin Oil Company 204,400 210,240 216,080 221,920 , T:ltal 6,04h,hCO 6,Ll44,h40 11. ,680 18.826,72:} 2(). 586 I .l:a;.v:mout§ in lieu of Taxes accru;)"g to Ordinary Budget JJ Iraq Petroleum Company 292.000 321,200 h08.BOO 992,800 l,llO,96~ Basrah Petroleum Company 2,120 2.920 87.600 87.600 ,600 MosulPetroleum Company 2,920 2,920 2,920 35.04\:1 ,8.!O Total -~-,~-- 297,840 .... --.- -"'--" .. _-----""""--,-------_ ... _----_ ... _. 327. c40 499, 1) r, I:L::\ _. -_.---. - Total Oil Revenues 6,34 2,240 6,771.480 12,293,000 19.9L!2,160 ':)1,828,808 Note: See footnotes on page 2.  Table 2ll (Cont'd) Footnotes: )) i'roduction is forecast on tre basis of Clbility to produce anCJ.. export. In the case of I?C, it is based on the assumptions that (a) b~ the middle of 1952 the pipeline to 3anias, SyriR, viill be linked ",ith the sections of the two pipelines to REdfa 1;;1n<': in Ir8\:., thus tUns E'x)ort to begin to Banias at rate permitted OJ' the Raifa lines. (b) tho Irar:1 section of the 13anias line will be cOIT:Jleted 0: the ~:id6.1<? of 19=-J after "hich i t 1'rHlbe possible to DU:Iln about n,QOO,UQO tons yearly-" througll~ this line, and (c) no further use pill bt') ll'.8de of the '9:eif~ pi ines. In the case ()f the B.2C End ;PC ion is pro,ject"'ct on t:l'2 assum)tion t~~c'.t no 'lore oil will be produced than is rer:,uired u.n~e:t the ,-,0r.ces~"ions. 2-j These revenues include ta) oil ro~ elebs at the rate cf 6 shillin£l's >,:0 Idper ton from I.2C and 4 shillings ,!'Cold per ton fro:rJ .!:3.L~C and, ;{iC, (0) dead-rene arnol.1ntinr.>: to b 200,000 frJm J3?C end ':iPC prior to productiun. and (c) the sales~)roce()ds of zafo of iL'C and '.. PC productLll1 whic~l the Ira';. g"vernment is ent HIed to receive free ~f cost at ,,,ell-head, (the value is <alculated at 4 dinars per ton).. jlfLinimum royalty payments of b 200.000 fSold oJ· ,ire are ass1IDed for 1')53/5 4 ~.n accordaE<::(; vJith the terms of tae concession. J, sold has been calculated as the euiv8lent of 2.92 dinars, .In accordance with agreements bct\teen the'· Ira,:i and Turkish ISOvernments, 10% of the 011 revenues from LPC and ,~~C has been deducted 8.8 tne share of the Turkish iSovc:rn:mel1t. J} Each company is re <.:.uired to pay in lieu of taxes ;6 15,000 gold for 88Ch of the Drst four million tons per year l;Jroduced anti t:~;-:,)ort€d, and b 20, 000 :'r,old for 8f'ch subse :tlent million tons. T11e 3F0 and ,,-I:'G each pay 1:, 1,000 per ,fear ,)rior to )roductiJn • ..  _._-- 25 Table DISTP.IBJTIOl'r OF BY T'CPEJF IN ACCO:2DAFCF, 1'1H PEO}RESS ,:J~rE~ ni 'I'~lE Sf'TTLEME1'1T ('IF T2:~t'1,FG TO 1950 Acres Total land area of Iraq • • • • • • • " . ... 107 _ ' ')!. ,~_),;., 2)\Q ~ u Area to which title has been settled .. . .. . Area to Yfhich title still has to be settled .. .. . .. Area of Hort-hern and Southern deserts which' re:nain lLYlclassified •••••• . . .. Area to 'Thich tit2-e has been settled cla~sified by System3 0: tenu~e: 1. Hulk tenure 93, Land held in absolute uriv&te o'lmership. 2. 1.'Ic:.troukah tenure 1,006, Land reserved for Dublic nurnoses. Land made over or dedicated by persons to religious or c;lar:';. table endow- ments .. 11" :;:iri tapu tenure State land, the 1e("<11 usufructuary Dossession and the rir:ht of c:isposal of ':rhich is [ranted out on rerister- ed tenure to nrivate per.sons; inheritanco is 5.n accord~mce with old 0ttor:1an lac'! snecifying the vari.ous s heirs are to 5. 1,liri lazmah tenur~ State land as under tanH tenure but subject to certain saferuardinp stipula- tions arisinf!, from the fact that tribal lands; e.g. 1;/Omen cannot because otherNise land may DaBS out of the tribe, and  Table 2$ (Cont'd.) -2- t~cres the land may not be or mortgaged without the approval of the :Iinister of Interior. 6. Anti sirf tenure State land, the use of 'uhich can be let on truee-year s1.~sceptible of renewal, to private persons; under special laws such as that pertaining to the Dujaila settlement, sirf land after a ten-3~ar probationary period be registered as tapu._ Source: 1.~inistry of Interior, Iraq r·overm::ent.