Present economic position and creditworthiness of Iraq

 '. ,--~, f.<~ No. E-64A RESTRICTED 66971 This report is restricted to use within the Bank INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT PRESENT ECONOMIC POSITION AND CREDITWORTHINESS OF IRAQ September, 1949 Economic Department Prepared by: William G. We1k  IRAQ TURKEY PERSIA SYRIA SAUDI ARABIA MILES i ; o 100 200 M-26  CONTENTS Pa€e No.,_ 1. Iraq as a Credit Il.isk -- Summary and Conclusions • . . ., 1 II. The Bases of Economio Development •• . • • • • • ? 1. 2' .. Land and ivater • • • • • • Oil., . " . . ._.. • .' .. ,. ... ~... . .. 13 7 . . . .. .,. e,", ... • 3. Industry and Transport 19 III. Present Financial. Post tian • • 23 1. Currency •. Credit and Prices 0 ,. ", . .. 23 2. Budget . . . . . '. . . .,'.. ".' . • • . 29 3. Publio Debt • • • • • . • • • • e, ., ., 38 4. Foreign Trade and Balance of Payments 0 39 5" Jroreign Exchange Pod tion • • • • • • • • • 47 ~ndixes I. Social smd Political Background • .55 Physical Characterhtios • •• • • • 55 Population and Social Structure • 55 Government and Politics •• 56 I!. Development Plans . 57 Introduction . • • • . • • . .. 57 Flood Control and Irrigation 58 Transport Development . . • . o· • 0 61 Agrlcul tural i<1echanization 63 Domestic Oil Refining • • • • .• 64 Statistical Tables • • • ~. • • . . • • . . • . . . • • . 65  t. IRAQ. AS A CREDIT R±:-=SK==--_-.....;;;Sm.;;;:..;:.ill,~.1AR::;;;.;:.r:...;AND=:;;;...;..CO;:;.;l;;;.;TC;o:;L:.;:;U.;;::.S::.;IO::.;:N;;.:;::.:rS 1. Iraq is t potentially. one of the 'Neal thiest countries in the Middle East: it has more cultivable land thaJl its people can till, more "Jater than they can effectively use, and royalties from its oil resources "'hich may gro'" from a post\',ar peak of 2.5 million pounds sterling in 1947 to 28.9 million in 1954.11 2. The country is still, predominantly, an agrieultural one. Over 80 per cent of its population of less thaJl 5 million are engaged in agriculture -- yet only one-fifth of its total cultivable area is, at present, under cul- tivation; cultivable land is, therefore, plentiful and the possibilities for further agricultural production and exports are considerable. The main Obstacles to immediate development are lack of irrigation and drainage facilities and a tn~eatening shortage of farm labor. 3. The full development of Iraq's large agricultural potential depends, primarily, upon irrigation. This, in turn, is predicated upon the control of the country's rivers, the Tigris and Euphrates and their tributaries. Al though ,~rater is relatively abundant in Iraq, its proper use has barely begun. Destructive floods still recur every fe\,r years and irrigation, even in the fertile area bet,'reen the t',,!in rivers, is less developed today than i t appears to have been centuries ago. The Iraqi Government estim[~tes that, through its t\,ro main proposed flood control projects alone i t could effect a saving of over half a million dinars a year, the sum no~r spent annually, on the average, for flood control and relief measures. 11 Since oil royalties are payable on a gold basis, the amount of20.1 million pre-devaluation pounds originally anticipated by 1954 is no~r expected to be increased to 28.9 million.  - 2 - 4. The third major natural resource of Iraq is oil. Since the middle 30 1 I'l, \"hen output increased sharply. Iraq has become a substantial oil pro- ducer. The oil field at Kirkuk, l1r here the bulk of the output is obtained, is said to be the largest in the '!!rorld; its production is limited only by the availability of transport (pipeline) facUi ties. 5. At present, bro l2-inch pipel1ne8 extend from the Kirkuk field to the l>iediterranean; one reaches the sea at ::Iaifa, in Israel, the other at Tripoli, in the Lebanon. An additional 16-inchline has been laid along each of these t1,'10 routes; a 30-:lnch line running from Kirkuk to Banias in Syria is expected to be available by the end of 1953. 1)JUh these five lines in full operation, production is expected to increase from 4.7 million tons in 1947 to over 25 million in 1954 and to continue at that rate for at least 40 years before the Klrkuk field is likely to sho,,' signs of exhaustion. 6. Although its natural resources are plentiful and its longer range economic future ls, therefore, promising, IraqIs present economic and finan- cial position is a rather difficult one. The rapid exprulsion of imports during the first post'\l!ar year , a resu! t of the need to replace and modernize capital equipment and to provide consumers 1 goods of \,rhich the country had 'been deprived during the l,\Tar, led to a progressively l:ridening gap in IraqI s trade balance and to a rapid depletion of sterling credits accumulc,ted in London during t'he ,-rar years. In 1947 an exceedin~ly poor harvest due to a very bad drought and locust infestation resulted in a-~ embargo on food exports and in temporary, but costly, imports of grain. The resulting strain upon the country's finances and bala-~ce of payments pod tion l"as intensified when, in the spring of 1948, active hostilities against Israel began, the oil pipeline to Haifa v!as closed by ]1'1'10. and receipts from ~:1l l'oyalt1es "Jere, as a ~esultt cut in half.  - 3 - 7. During the first part of 1949, the beginning of a fall in the prlcee of Iraqi exports and a gradual decline in domestic trade -- said to be in part the result of a number of arrests for pro-Zionist acti~ities among members of the Je1tTish commercial community and of its consequent desire for extreme liquidity -- contributed to inject into Iraqi business sentiment a decided note of caution. ','Then the Bank's mission left Iraq, the country lp1as unc.er- going a recession in business acti~ity, acute credit stringency, and a period of grot,ring difficulty for the government to meet its current obligations. Certain signs of improvement existed, such as the good harvest predicted for 1949, some relaxation in anti-Je1r1ish feeling follollTing the Palestine armistice, and the government1s apparently determined attempts to increase revenues, con- trol expenditures, and limit imports. On the I.Thole, ho"rever, money T!raS ~till tight I sterling balances 1,rere falling, and a general lack of confidence in the immediate future aupeared to perVade the country's business classes. 8. Is lit loan to Iraq, justified under such circumstances? As the detailed analysis presented in this report indicates, a number of the difficulties just described are due principally to lit succession of fortui tous circumstances 1.rh1ch are not likely to be repeated and the effects of "Jh10h \<rill, in all probability, be corrected 1.rithin the next fel" years. The current unbalance in the government's budget, due in large uart to an unfunded debt for capital development Horks tLl1dertaken by the Iraqi railroads, should be eliminated 'Hi thout undue difficulty if appropriate corrective measures of "rhich the Iraqi government is fully a1.oJare. are promptly ac:'opted. Since the general outlook for the country's main exports is favorable, the recent subste.ntial trade deficit, a result mainly of the temporary but con- siderable expansion of iIli1')orts after the l!'ar and of the curtailment of exports as et result of the bad 1947 harvest, should· be narrot"ed dO'.·In to manageable  -4- proportions if the government 1 s present poli~y of controlled imports is pursued 1.,,1th determination and firmness. 9. In essence, Iraq's present economic difficulties are due~ not to inherent eoonomic "Tealmesses. a correction of "lhich mlghtprove to oe long and difficult, but, mainly. to a fortultouscombination of circumstances the effects of 1"rhich can be corrected ,,11th comparative ease provided an in:ormed and determined effort to do so is made. The main remedies are of an admin1s- trative nature: i t is upon the Iraqi Government's ,.rhdom in framing certain remedial policies and upon its determination and courage 'in carrying them through that an early solution of the country I s difficulties mainly d.e-pends.lI 10. The condition of Iraq's domestic finances and of its balances of payments l.'!ill, in all probability. continue to be difficult ::luring the coming year, or possibly - depending upon the speed a..'I'ld effectiveness of the govern- ment I S remedial action ....- during the next t~'IO or three years; the longer range outlook for both is, hONever, decidedly favorable. 11. Even 1d th the pipelines to P"..aifa clo~ed, a grot,ring an.."lual income, greatly augmented, b. terms of.' current I sterling, by the recent de'i,Taluation of the pound. l.rill flOl~r to the Iraqi Government from oil royalties. Although it is impossible. because. of the political difficulties involved, to predict "rith any certainty ,,'hen the piping of oil to Haifa may be reslL'!led. it seems unlikely that the Iraqi Government 1..rill continue to maintain its present costly attitude much beyond the coming year. 'Hth the reopening of Haifa t the availability of neioT pipeline facilities, and the renegotiation, at Although a good start ------.~--------------.---------------~---------- has been made, a definite forecast as to the ulti- mate effectiveness of the government's remedial action is di:ficult at this time. Though Nell. intentioned, the administrative apparatus of the Iraqi Government is !'ltill \"eal,: and in need of mUch expert advice and assistance. The Government is ready to seek and to use both, but only time will tell t..lhether it 1,,111 be able to apply the suggested remedies with the required firmness.  - 5 - materially increased royalty rates, of the concession agreements n01,'T in force, that income is e~ected to be very considerably increased. If, as is likely, the present royalty rate is increased from 4 to 6 sh111!ngs (gold) per tont' as a result of negotiations currently undenif~~ the expected annual income to the Iraqi Government '111111, in 1954 and the years follo~f'lng, exceed the sum of 28.9 million pounds sterling per annum, a sum larger than the Iraqi Government1s total ordinary annual expenditures as reported in its current budget.lI 12. If the oil companies f programs of plant expansion in Iraq proceed according to present plans, and there is no reason to think they should not, their loca.l expenditures, too, are likely to be materially increased, thus contributing an important strengthening element to the Iraqi balance of pay- ments. Noreover, as the country's agricultural production expands as a result of more intensive cultivation and the extension of cultivation to ne'lor!y irri- gated lands, Iraqi exports, for "'hich a continuing demand appears assured, 1;'Jl11 undoubtedly groN, and, in time, gro'" quite significantly. The outlook for Iraqi exports to hard currency areas too 1$ favorable, and pre gent income from them, amounting to about $6 million per annum, is likely to be increased, particularly after the recent deValuations of the pound and the Iraqi dinar. 13. A development loan of moderate size to aid the Iraqi Government in undertaking some of its flood control and irrigation projects, appears, there- fore, possible and advisable at this time. In vie"; of Iraq's present and, possibly, for the next few years, continuing financial difficulties, the effectiveness of the loan and its repayment prospects 'ltTould, hO l •r ever, be 1/ The basic assumption, of course, is full operation of availabl~ pro- duction and transport facilities. Since. at the Kirkuk field, produc- tion takes place under very favorable conditions and at comparativelY 10'," cost, the rate of output is unlikely to be affected by a possible decline in the price of oil.  - 6- greatly enhanced if its amount l;rere such that: (a) Income from oil royalties 1;r ould assure availability of the local currency required for all projects for l,,,hich the loan is made and, ultimately, repayment of the loan itself; (b) Service and repayment of the dollar portion of the loan would be assured either by an understanding as to ster- ling convertibility arrived at ~.rith the U.K. Government or by a firm allocation for repayment purposes of a sufficient share of IraqIs future direct dollar earnings.  - 7 - II. THE :BASES OF. ECO}ror.uo DEVELOPMENT 1. Land and ~{ater M@ificance to the Econo~ 14. Iraq is, predominantly, an agricultural cO'qIltry. OVer four-fifths of its active population are engaged in agriculture: ldth the e~ception of oil, its main exports consist of agrlcul tural products. Yet,. of a total cultivable area of 12,000,000 hectares, only about 2;400,000 or one... :-ifih, are cultivated. IraqIs agrioultural potential Is, therefore, considerable it is, in fact, larger than that of any other Middle Eastern country.}} 15. Although cultivable land is plentiful, several obstacles mu~t be overcome before the country's agricultural potential can be fully developed. Extension of the cultivated area depends mainly upon irrigation ~~ for the e~'"Pansion of ,'Ihieh, in turn, capital for the construction of the nece"sary irrigation 1!10rks is essential. As irrigation and. cultivation are extended, additional labor is required; the count~ls present, incipient shortage of farm labor must therefore be remedied either through immigration or thl'ough In 1948 the distribution of cultivable land in Iraq Nas as fo110 1"8: (in millions of hectares) Rainfall Zone Irrigation Zone Total Oultivable land 4.0 millio~ 8.0 million 12.0 million Not·, cultivated II II 12/ It ~ Includes 1.8 million hectares covered by forests. E./ Includes 0.9 million hectares under lift irrigation for ~."hich pumping macninery is badly needed. §ource: Prepared from data furnished the I:BRJ) lUssion by the Iraqi Directorate General of Agriculture.  - 8 - the progressive mechanization of agricultural processes,1J Finally, for a more effective and intensive utilization of the land generally, the '~!eaknesses inherent in the present, traditional system of land tenure must be corrected. 16. As the follollring discussion "r111 show t a significant beginning has been made in the solution of each of these problems: the Iraqi government appears to be fully a'~'are of their importance and prepared to devote to their solution a. grot-ling measure of administrative effort and f"nancial support. Land Utilization and Irrigation 17. The total cultivable area of Iraq falls into t"10 zones, the rainfall zone and the irrigation zone. The former includes the lands in the countryfs northern mountainous region "There rainfall in an average year is sufficient to yield a single crop ,.r1 thout irrigation. The irrigation zone comprises mainly the southern alluvial plain in the valley o~ the Tigris and Euphrates. Although the land in that valley is verJ fertile, rainfall, averaging only about six inches per year, is inadequate to produce satisfaotory crops. Cul- tivation. therefore, depends mainly upon irrigation. 18. Irrigation is, ho"rever t in turn predicated upon the control of the country's rivers, the Tigris and Euphrates and their tributaries. Although water is relatively abundant in Iraq, its proper use has barely begun. Des- tructive floods still recur every few years, and irrigation, even in the fertile area bet"reen the tl.'rin rivers, is less developed today than it appea.rs 11 ~jhilesteps are currently being taken by the Iraqi Government to encourage mechanized farming, immigration con~titutes, at this moment, a difficult political p~oblem. Prospective immigrants are, at present, largely Palesti~ne refugees to 'trhose admission Arab countries are still generally opposed~  - 9 - to have been centuries ago.lI There are, in fact; at present no comprehensive flood control. or irrigation systems in Iraq. Of the t"rin rivers" each has all irrigation barra.ge. but both barrages are s1 tuated along the river's IOvier course and command a relatively small area of cultivation. Such irTigatlon as exists takes plac~ ma.inlY under the so-called method of "basin irrigation". under ",hieh the land is divided into basins flooded during the annual rhe of the rivers. ~ihen the water recedes the crop is planted on the sediment left. Under this system only one crop a year h obtained Since the land remains fallo,,,, while ;~ra.i ting for the next flood.?:.! 19. Plans for a comprehensive system of flood control and ird.gation have long been studied by the Iraqi Government. As a result of the several years I "'fork of its Irrigat10n Development Commission, I·rhich presented its final report last June, two main projects llave emerged, for the partial financing of ",hien Iraq has applied to the :Bank for assistance. 20. The first. the Habbaniyab. scheme, on "Thieh ,"ork "ras 'begun some years ago, consists mainly of a barrage on and a channel from the Euphrates to Lake Habbaniyah. situated in a natural depression near the upper course of the river During the flood season, the rivert s flood \,laters "'ould be led through the channel to Habbaniyah Lake 1,rhere they could be stored and Nhen needed, used for irrigation. ~MThe:71~';: ~i t~' co~t;r;i ;i;;~';=;;;te~ , == v--:X;=-::idely tht:t;;:-uihe=--- Euphrates from 2500 cubic meters per second during the flood period (December-M~) to 220 cubic meters in the summer; that of the Tigris similarly from ),000 to 300 cubic meters. Cultivation on the fertile lands along the tlfTO rivers is therefore constantly threatened Nith floods in the spring and 1.'11 th drought in the summer. ?J Although both 1,rinter and summer crops are generally gl"o,·rn, the h.nd does not produce t'l"O crops a year but only either a 1rlinter or summer crop. In l?Tinter cultivation, moreover, the practice prevails of letting half the land lie fallo"] each Year. The area actual;ty cultlvatedis, there- fore, only half of that to llThieh 'YJater could be llIade accessible if sufHcient quant:J. ties of ;it 1,'rere available.  - 10 - 21. The second scheme. the "fadi Tharthar project, envisages the construc- tion of a barrage on the Tigris and of a channel through "rhich the flood. ltTaters of the river could be made to flo'll' into the ~'!adi Tharthar. a natural depression not far from the river. The depression "Tould thus be gradually converted into a lake, the '~Tater of ",hich could be used for irrigation l.rhen needed. or returned to the Tigris in periods of low "Tater flo,·,. 22. According to the estimate of the Iraqi Irrigation Commission, these t1;!O projects and several smaller ones described in greater detail in the Appendix to this paper, "fould bring a to tal area of over 9 million acres under adequate irrigation and ,"ould permit the almost total elimination of floods on both of IraqIs main rivers. ~d Tenure 2). Iraqi la1,T8 governing land tenure are extremely complex and trace their origin to the old Ottoman legislative code. Fu..llda'1len t ally , Iraqi la," regards all land as belonging to the state; land held in full private owner- ship, OVer "Thich the State has no proprietary rights, is the exception rather than the rule. Legal o1'.-rnership of the land is generally retained by the State and state lands are then leased to prospective cultivators under a Variety of lease arrangements. In the northern part of the country. smaller lea~e holders predominate, 1}fhile in the central and southern regions large 01lrners (sheilr..hs) O\oJn or leal';l9 from the State vast tracts of land, sub-leasin.g them to share tenants through a series of intermediary leases. The fellah (peasant' who actually cultivates the soil, does so in most cases not as a proprietor, but as a -- generally very poor -- share tenant and has, therefore. little interest or inducement in improving the land. To reme~ the difficulty, the government is no,", endeavouring to encourage small holdings on the ne~'1 lands 1·,hich are gradually being opened to agriculture through irrigation. On the  -11- whole, however. the prevailing system of land tenure constitutes an obstaole to agricultural development and an overhauling and modernization of it giving the small farmer more direot aCcess to the land would undoubtedly contribute significantly to the general effectiveness of Iraqi agriculture • .'l.gricultural. TechniaussanliIechanizatlon 24. Agricultural methods and techniques follo,"red by Iraqi farmers are t on the ",hole, primitive; the most simple farming implements are used ',Tidely and only a beginning has been made in the application of scientific farming method.s. Although ~·ridespread use of agrici.+ltural machinery "'ould increase output and relieve the threatening shortage of farm labor, mecha.~ization of agriculture has barely begun. In 1948 there ':Tere, reportedly t only 450 trac- tors, 150 threshing machines and 100 cultivators in the ,·,hole countrJ. 25. The Iraqi Government is, h01,rever. fully a\·rare of the importance of the 'i,ridespread adoption and use of agricultural machinery and of modern farmin§ methods and its Directorate General of Agriculture is earnestly endeavouring to improve the situation. Recently a ten-year plan for mechanized farming ,'ras devised 'IIlh1ch "!ould entail the importation of 2500 tractors, 1.500 modern plol/,s: 700 disc harrows and several hundred units of other agricultural machiner,y; an ~<\gricultural iVJachinery and Equipment Service Bill, recently approved by the Iraqi Parliament. gives the government a monopoly over the importation, sale and distribution offarm machinery and equipment and provides for the active promotion of mechanization in agriculture through the establishment of train- ing courses, 1"rork shops and spare parts stores throughout the country. 26. In addition to its efforts to increase mechanization, the Directorat General of Agriculture maintains a national agricultural experiment center nea' 3agh,dad in 1,rhioh experimental ",Tork in agronoIDy'. entomology, plant pathology. animal husbandry. etc., is carried on. A number of branch stations and  - 12 - nur~eries are maintained in most of the country's provl11ces l,-ri~h the objective of increasing the knoNledge and use of modern agricultural techniques and methods in rural areaS. Although the government's program for the extension of scientific methods to agriculture is still at its beginning, the personnel in charge of the program is eOillpstent and devoted., Gratifying results have already been achieved and increasing progress is expected as additional numbers of trained young Iraqi agriculturists become available for service at the government 1 s central experiment station and at its branch stations througlwut the country. Agricultural Output 27. The principal crops produced in Iraq are barley, l,,'heat trice, aJ).d dater Crops of lesser importance are maize, millet, cotton and tobacco. During, and immediately after. the "'ar. Iraqi Is agricultural production ~'Tas gre~:ttly encour- aged by the high prices of agricultural products prevailing as a re~ult of "'orld 1,·ride food shortages; in 1946 crops '. rere thus generally above the preTt'a,r level. In 1947, ho'~yever. because of a severe drought and locust infestation, Iraq experienced one of the \'Torst crop failures in its history. and output Of. some of its main crops ,'ras reduced to quantities varying from tl'yo ... thirds to one-half of normal. 28. Generally. average annual production of barley. the countryfs main crop, attains about 600,000 metric tons; that of Nheat about 400,000 tons; that of dates from 2.50,000 to 300,000 tons. '!ith three-quarters of the porld's date palms 1dthin its borders, Iraq is the most important date grol~dng cou.~try in the ;.!orld.. 29. Livestock plays a part of increasing importance in the Iraqi econOmf: ~heep. eoats and cattle are raised in large numbers and their export represents a groNing share of the country's total sales abroad.  - 13 - 30. Normally Iraq is almost fully flelf-sufficient in foodstuffs Nith con- siderable export surpluses of barley, Hheat and dates. In a normal year over 200,000 tons of barley, 50,000 tons of Nheat, and 200,000 tons of dates, are exported. Because of the exceptionally poor harvest in 1947, h0 1!lever, in that and the follo\,ling year, substantial quantities of ,-,heat and rice had to be im- ported, ,·!hile a temporary embargo 1.·ras placed on the exportation of barley and lprheat. As for livestock, in 1947/48, 69,000 sheep, 22,000 goats, and 15,000 head of cattle, ,.rere exported to such neighbouring countries as Syria, the Lebanon and Egypt. 31. On the "'Thole there can be little doubt that, aR irrigation is extended and. the countryl s crop area thus enlarged and yields a.re raised through the more and more 1,.ridespread adoption of improved farming methods, a significant increase 1·,111 occur both in the output of Iraqi agriculture and in the countryl s exports af agricultural products. 2. Oil ReserVes and Production 32. The third major natural resource '·rh1eh Iraq po~sesseSt nesides land and water, 1s oil. The country's proven oil reserves are estimated at 5,000 million barrels or at over 7 per cent of the l.•rarld l s total; potential reserves are considered to be even larger. 33. Since the middle thirties, Fhen output increased sr..arply, Iraq has become a substantial oil producer.~fter the opening of a first pipeline to the Nediterranean in 1934 production increased, from a total of 700,000 tons in that year, to 3.6 million tons in 1935 and to a postt,.rar peal{ of 4.7 million tons in 1947. The country I s current production, the bulk of ','hleh is obtained at the oil field of ICirku.11.:, reputed to be the "'orld l s largest, is limited only by existing transport (pipeline) ca~acity.  ... 14- 34.. At present, tNO l2-inch pipelines, each ltrUh a capacity of 2 million tons per annum, extend from the 'Klrkuk: field to the l\;lediterranean; one reaches the sea at Haifa, in Palestine, the other at Tripoli l in the Lebanon. TI,'TO ad.ditional 16-inch lines, each NUh an annual ca:pac1ty of 4 million tons, have been laid along the same routes; the ne1t1 line to Tripoli has already begun operations. A 30-inch line, "'ith a maximum capacHy of 16 million tons per annum, running from Kirkuk to Banias in Syria, is expected to be available by the end of 1953. 11 ':ith these five lines in full operation, pro:htction is expected to increase from 4.7 million tons in 1947 to over 25 million in 1954 and to continue at that rate for at least 40 years before the Kirkuk field is likely to sholtl signs of exhaustion.Y This rate of production is, moreover, unlikely to be affected by a possible fall in the price of oil, since produc- tion at Kirkult takes place under very favorable condl tiona and at comparatively 35. In addition to the production at Ki rkuk , about 2.5 million tons per annum are expected from the rJlosul and Basrah fields; by 1954 the country's total production should, therefore, exceed 27 million tons a year. 36. The production figures just quoted are, of course, based upon the assumption of fu:11 and uninterrupted operation of all available pipelines. The refusal, since May 1948, of the Iraqi Government to permit the piping of oil to the port of Haifa because of its um111lingness lito aid the Israeli economy through Iraqi oiltf has resulted in the temporary closing of the 12- inch pipeline to Haifa and in the suspension of 1"rork on the l6-1nch pipeline. \.rhich had" h01:Tever, been almost entirely complete~~ Because of the political difficulties involved, it is impossible to predict T,.rith a:trY certainty '·'hen 11 According to information supplied by the IPC asatisfac'tory agreement as to trans! t rights for th1s1ine has already been reached ,,'1 th the Syrian Government. ?J Statement to the IBRD lJiission by the manager 0"£ ,the Kir~ oil fields.  - 15 .... the piping of oil to Haifa may be resumed; it seems unlikely, however, that the Iraqi Government will oontinue to maintain its present oostly attitude muoh beyond the coming year. Concession Agreements 37. There are at present four oil companies operating 'Ul'lder concessions in Iraq~ 38. The Irag Petroleum CO~l (IPC). This firm. the most important oil operator in Iraq, is 01·!ned 'by British, Dutoh, French and American interests. oNnership being divided as follo\<1s: 23.75 per cent -- Anglo-Iranian Oil CompaD¥ 23.75 per cent ~- Royal Dutch Shell 23.75 per cent ~ Compagnie Francaise des Petroles 23.75 per cent -- Near East Development Corporation (in tUrn oNned jointly by the Standard Oil Company of Nel~' Jersey and Sooony-Vaeuum) 5 per cent lvIr. Gulbenkian, the person 1·,ho assisted in securing the original concession. 39. The companyts concession area comprises 35,000 square miles to the east of the Tigris and includes the Kirkuk structure 1,.,hieh furnishes the bulk of Iraqi production. The company is at present engaged in prospecting work to discover new fields, for it is believed that other important structures may exist in the oompany's concession area. 40. In 1948 1ts output 1,ras 3.0 million tons. having declined to that figure (largely as a result of the closing of the Haifa pipeline) from 4.3 million tons in 1947. 41. The Mosul Petroleum Cogrpanil;. This conrpaD¥, previously kno1r~:n as the British Oil Development Company, is no", a subsidiary of the I.P.C. It ',ras granted a concession in 1932 over a..Tl area of 43,000 square miles Nest of the Tigris in the flosul and :Baghdad provinces. The company operates t1,'O small structures in its concession area; the potentiality of both is low and both present rather difficult produetion problem~. Output is therefore limited  - 16 - and is not expected to increase very materially in the foreseeable future. 42. In 1948 production amounted to 9,000 tons, having fallen to that figure from 32.000 tons in 1939. 43. IOlanagin Oil Compan.y. This company 1,<!as formed in 1925 to acquire and operate the concession held by the Anglo-Iranian Oil Company on an area of 750 square miles along the Iranian frontier. The company operates tt·'o small struc- tures ':7i th lim! ted potential! ty in that area; production from them is used entirely by the company's refinery near Y,hanaqin, the entire output of "'hich is sold for local consumption. In 1948 the companyls total production amounted to 367.000 tons. 44. The Basrah Petroleum Compap.y. This company is also a subsidiary of the I.P.C. and has a concession for the exPloitation of all lands south of the province of Baghdad. Recent drilling in the Basrah area has proven the presence of good marketable oil in several structures; the extent of these, hOl·rever. has not yet been determined. }To production has a!'\ yet begun but the compar.y is engaged in drilling and development and plans to 'oegin pro5.1.1c- t.ion before 19.52. " •. Receipts from Oil Royalties 4.5. Under their concession agreements, all four oil companies pay the Ira~.i Government an annual royalty of 4 shillines (gold) per ton on all oil produced. The companies are exempt from all taxes (state or municipal) and customs duties. In return for these exemptions, the companies p~ the govern- ment ~ 60,000 (gold) on the first four million tons of oil e~~orted and ~ 20,000 (gold) on each subsequent million tons.  - 17 - 46. Not having started prod.uction on ~ significant seale, the {·(osul and Basrah Petroleum Companies are still pqing the Iraqi Gov.e:rnment annual sums .of ;365,000 and*' 405,000 respE!ctiv~ly as "dead rent". As output becomes signifi- oant the tt10 companies are toO pay the government. in addition to a royalty 01 4 shillings (gold) per ton on all oil produced, a 20 per cent share of their output in kind, free of aJ'l¥ charge. 47. As the follol.'~ing table 8h01"'8, even ~,li th the pipelines to Haifa closed. a considerable annual income flot.'1s to the Iraqi Government from 011 royalties. "!ith the reopening of Haifa, the availability of ne1l>1 pipeline facilities, and the renegotiation, at materially increased roYalty rates, of the concession agreements nON in foree, that income is expected to be very c.onsiderably in- creased. Annual oil royalties accruing to the Iraqi Government are likely to grow (\'711en the Haifa line is reopened) from a post"ra.r pea.le of 2 •.5 million pounds ~terling in 1947 to over 19.3 million (post devaluation) pounds in 1954. If the present royalty rate is increased from 4 to 6 shillings (gold) per ton, as a result of negotiations currently undeT\"ay, the expected annual income to the government may, in 1954 and the years, foll0 1<ring, exceed the substantial sum .of 28.9 million pounds sterling per annum.  - 18 - Income from Oil ROlalties Expected to Flo", to the Government of I ragll At Bresent rOlaltl rates FrolI!.Pj..:e.e~lnes to From Frodue. From Pipe- Grani Tota.l Year Tripoli Bani as at ~Iosul & Total lines to Grand at Only (30 lt line) Basrah Haifa. Total Increased ( if opened) --- RatesY i' In ":ere devaluationlf Bounds sterll±!l!!: 1949 .9':$ .8 1.7 .411 2.1 3.2 1950 2.4:11 .8 3.2 2.4!:±/ ,.6 8.4 1951 2.7 ~ .8 3.5 2.7 6.2 9.3 1952 2.7 1.8 4., 2.7 7.2 10.8 1953 2.7 2.3 ,.0 2.7 7.7 11.6 195 4 2.7 ,5.2 2.8 10.7 2.7 13.4 20.1 In "East devaluation" l?Qunds sterling 1949 1.'3J./ 1.1 2.4 .Q./ 3.0 4.6 1950 3.5!JJ 1.1 4.6 3.,lJ:J 8.1 12.1 1951 3.9 1.1 5. 0 3.9 8.9 13.4 1952 3.9 2.6 6.,5 3.9 10.'3 1.5.5 1953 3.9 3.3 7.2 3.9 11.1 16.7 1954 '3.9 7.5 4.0 1.5.4 3.9 19.3 28.9 1/ i'Iaximum income antiCipated assUllling full use of production and -'"ransport facilities as stated. gj Assuming an increase in royalty rates of from 4 to 6 shillings (gold) per ton. Ji 12-inch pipeline only. For Haifa estimate is from August to end of the year. 41 ~ 12 and 16 inch lines. Sources: Based on data obtained from the Iraqi Government and checked ,,1ith the Iraq Petroleum Comp~.  - 19 - Domestic Retining Capaei,ty 48. The only refinery of a~ importance no'" existing in Iraq is the Al"rand refinery operated by the lllianaqin Oil Company, 'lrhich has a capaci t~~ of 2 mill10n barrels a. yea.r, equal to about tNo-thirds of the country's total requirement of refined oil produots. A SUbstantial part of the refined prod- uets required for dolIlestio consumption is therefore imported - la,rge.ly from the refinery "'hieh the Anglo-Iranian PetJ'oleUlIl Company operates at Abadan, on Ir3nian territory, close to the Iraqi border. 49. The Iraqi Government has been planning for some time to construct a refinery large enough to provide for the country's total needs. 1.1'1' to no,.,r t ho',rever, the project, for Nhich financial assbtance is also being sought from the Ban1:, has not passed the preliminary planning stage.lI 3. Ind~stry and Transport Industrial Resources 50. Although, as a result of the shortage of manufactures prevailing during the "tar. a number of industrial concerns 1,.rere established in Iraq. the countr.l still has, apart from oil, no industries of much conseauence. Such industrial establishments as do exist are generally small; among the most important are several 1<1001 spinning and 1.• r eav1ng mills. several tanneries, soap factories, bre\.reries, cigarette factories, and flour mills. The erection of a sizeable cotton textile factory, and of a cement plant 1.·rith a 600 ton daily capacity on Nhich T,'rork 1s already Nell advanced, are at present under pay. 11 According to information ju~t received, it appears doubtful that the government ,·rill press its plan for this refinery since the Anglo- Iranian Oil Company, the parent of the IJlanaqin Oil Company, has recently decided to double the capacity of the All!rand refinery and. at a later date, to erect a small refining plant at Basrah. Total invest- ment required to meet Iraq's increasing need for refined oil products in this manner is considerably less than that required for the erection of the projected government refinery at Baghdad.  - 20 - 51. For the rest. local handicraftsmen and artisans still supply the needs not met by imports or the output of domestic manufactures. Ro',rever, as Iraqi agriculture develops and gro\-ring oil royalties make fresh investment funds avail,able, it is likely that a gradual expansion '. lill occur in Iraqi industry - notably that concerned Nlth the processing of agricultural prod-. cuts and of other domestically available materials.li Transport Facilities 52. Despite the construction of roads and railroads by military authori- ties to meet their needs during t,!·o ,.-forid ,.rars, transport facilities in Iraq are still, generally speaking, poor. There are about 1,000 miles of state- 01.·'ned railroads of "'hich over 300 are standard. gauge and the remainder one meter gauge. A meter gauge line extend.s from :Basrah on the Persian Gulf to Baghdad, a second line from Be,ghdad to Kirkuk and Irbil in Forthern Iraq, a total of about 650 miles. After the completion of the combined rail and h1gh- ',ray bridge over the Tigris at Baghdad, nm'l under construction, these t"TO lines NiH form a continuous system linking Basrah in the south 1f'i th Kirkuk in the north. 53. The standard gauge line extends from Baghdad via Mosul in the north to the Turkish frontier. Thus Baghdad is linked \·r1th Turkey and ld th European 54. During the "rar there ,.ras a heavy freight traffic o~·'ing to the move- ment of troops and stores, and of lend-lease supplies to Rus!'!ia. In 19L~L:.. freight traffic reached a peak of 567 million ton miles, compared l .• rith 188 million in 1938. In 1946 traffic l~Tas still t"Tice that of nrel. rar years. -,---::-------:----'------:----_ J} .. Besides oil, no mineral products of any - .----.-~~...-.~-.,.-. ..--~ importance have, as yet, been found in Iraq. Asphalt, ~alt and coal are produced in small quantities; recently t iron and copper ores '!;orere discovered in the northern pa.rt of the country, but although the deposits appear promising, their full ex- tent has not yet been determined.  - 21 - 55. To repla.ee outlJ,orn equipment and to improve and expand theirfaell1- ties generally, the Iraqi State Rail,·rays have, during the past· severa.l years, pursued a rather ambitiQus program of rehaQilltatlon and development described more fully in the Appendix to this paper. At the present moment, hOl'rever, continuation of that program is threatened by an acute shortage of funds; to meet past obligations and the cost of completing the program private London banking interests and IBRD have both been approached for financial assistance. 56. There are fe1fll permanent hard-topped all-,.;eather roads in Iraq. H01,r- ever, o~·Ting to the climate of the country, most roads and tracks are useable during the greater part of the year. The main motor roads connect Baghdad l"ith Ivlosul, Kirkuk and Irbil in the north and "'1th Basrah in the south. There are about 1,700 miles of improved roads and aboUt 5,000 miles of earth roads. In 1947 there "Tere registered in Iraq, 7400 cars. 5100 trucks and 1000 motor- cycles, a very considerable increase over 1942 ",hen the corresponding figures '~1ere 4500. 1900 and 80. 57.. The main development project in road tran'Sport is the construction of modern hight·rays to Un..~ the eap1 tal "rl th the country's more important e1 ties In addition to the construction of na'" roads, an important problem is the main- tenance of those already in use. Paved roads are badly in need of strengthen1r: and resurfacing to meet the requirements of present ... da;y traffic; ot,ring to the shortage of funds in the past fefjr years. t"rork has t ho~'rever ~ on the ,·rhole t been extremely limited.1f S~~ine and Ports 58. ':!atsT\.rays form an important part of the Iraqi transportation system. Basran. the only Eieaport, Ues 85 miles north of the Persian Gulf and is ]j Iraq 1 s pa.ved roads are largely mn! tary roads origin'ally bull t to' sub- standard specifications; they are therefore badly in need of strengthening and rebuilding.  - 22 - reached by large ocean-going vessels through the Shatt-EI-Arab river formed by the junction of the Euphrates and Tigris. The Shatt-EI-Arab and Tigris provide an all season navigable lfTateI"l.,,~ from Basrah to Baghdad for vessels of 4 foot draught. Q\.ring to the considerable dispersion of its 'lt1aters, the Euphrates does not afford a comparable through route, although it is navigable in many sections. Basrah, the only Iraqi port for sea-golng vessels, handles about 90 per cent of Iraqi foreign trade (exclusive of all). In 1947-48, 275 vessels entered the port Tdth a gross tonnage of 1,600,000 tons. Air Tralls:Rotl 59. Since the T,'ar air transport in and through Iraq has increased con- siderably. Iraqi Ai~rays t government oT,.med, and operated through the Iraqi Raihlays Administration, are serving a grm·!ing traffia amon,'S I!'aqi f s principal ci ties and ,·Ti th some of the neighbouring countries. A number of foreign air lines have freq.uent scheduled flights through the 13eghdad and :Basrah airports to almost every part of the 1,.rorld.  - 23 - . III. PRESENT FINAlTCIAL POSITION . 1. Currency. Credit and Prices Currency 60. . The currency unit of Iraq is the Iraqi Dinar. Introd.uced in 1932, after the termination of the British mandate. it replaced the Indian curren'cy which had. been in circulation since the first T10rld \lar. Indian currency . . 'a8 repatriated and 'the sterling thus acquired kept as a cover for the new Iraqi currency. From 1932 until July 1, 1949, 1<>rhen control of the 'currency passed to the ne'~rly established National Bank, the country's currenc;y '''as managed by the Iraqi CUrrency Board in London. According to the provisions of the Iraqi currenc;y la.~.I1J the Board ""as obliged to redeem Iraqi Dinars on demand at the rate of one .1, sterling for each dinar and to issue dinars against receipt of sterling in London at the same rate plus a commission charge of 1/8 of one per cent. The Board consisted of five members of ,·,hich t"ro ",rere appointed by the government of Iraq, t~'fO '·rere elected by the three British Banks 1,ri th branches in Iraq,Y and one "ras appointed by the governor of the Bank of England. The Chairman was appointed by the Iraqi Government from among the five members. 61. On July 1. 1949 control of the currency passed trom the Currency Board to the National Bank of Iraq, "'hioh had been established. in 1947. At that time t a 1a1>' amending the Iraqi Currenoy La~'T of 1931 ~'Tas passed Tlroviding that the Hational Bank ",ould. be required. to maintain a currency reserve Ifcomposed of' gold and foreign currencies and securities at a ratio of not less than 70 per cent an4 of Iraqi government securities at a ratio not exceeding 30 per cent." 11 The Eastern and Otto~ Banks and the Imperial Bank of Iran~ (The Ottoman :Bank is an Anglo-French institution Illhose Baghda4 branch is managed by British Offioials.)  - 24 ... 62. It is thus posstble for the National !ank ctlraq to dep~rt from the 100 per cent currenoy reserve system under which the Currenoy Board has ; • I "., operated and to substitute short term government paper up to :30 peT oent of the total note issue. Although the po~,rer exists,t"he National Bank is t ho',r- ever, at present unlikely to use it to any very significant extent for the tradition of a 100 per oent ourrency baoking is still strong "dthin the country and a material departure :from :it ',rould, in all probability. call forth considerable criticism at this time.Y 63.. At the end of April 1949, the latest date for ,.rhlch detailed data are available, the Currency Board's reserves compared "'ith the total volume of currency in circulation as gpo'·m in the table on the fol101·dng page. 64. As these figures indicate, if the vaiue of silver in Iraqi coins is cOUL~ted as a reserve, there ~ras still, on Anril 30, 1949, a 100 per cent reserve ava.ilable sgainst IraqIs total currency in oirculation. Ever since the purchase, in 1948, by the Currency Board of IP 4.8 million Ira.qi Treasury bills, however, it has been barely possible for the Board to maintain the required 100 per cent cover; in 1947, before that purchase, the Board's reserves in long term sterling securities alone had exceeded by over ID 2 million the total needed to provide the required 100 per cent reserve. 11 It is expected that i t 1/r ill take a number of months to effect the transfer of all accounts and assets from the Currency Board to the J:.Tational Bank and that a Bank: of England expert "lill come to Iraq this fall to advise in the organization of the :Bank's functions in the currency field.  - 25 - IraQi Currencl in Circulation and Curreney Board Assets, 1947-49 (In thousand Iraqi Dinars) December 31, De cember :n t April 30, 124 7 1948 ,1949 Total Currency Circulation: 35.247 34,725 34.57711 !:Jotea 33,963 33,541 33,389 Coin 1,284 1,184 1,188 Currency Board Assets Sterling long term securities~ At face value 37,694 32,739 32 .. 739 At mean market price 38,103 3;3,529 33,441 At cost 37,986 32,974 32,974 Current and fixed deposits 971 935 726 Accrued interest 80 85 30 Value of silver in coins in stock (less 10%) 109 140 139 Value of silver in coins in circulation (less 10~&) 542 537 Iraqi securities: Face value 4,870 4,870 11 Total currency in circulation amounted to ID 34.6 million at the end of rJiay, and to 35.5 million at the end of June. 1949. Source: Prepared from data furnished the IBRD Nission by the National Bank of Iraq. Figure for J'll-l'le, 1949 from the International Monetary Fund's International Financial Statistics. 65. Since practically all of Iraqis currency reserve is held in sterling secu.ri ties Iraq had virtually no choice but to follo", the Un! ted Kingdom in the recent devaluation of the pound. Iraqi s announcement to that effect ~"as, in fact. almost simultaneouB l,rith that of Britain. Devaluation of the pO'll-'1.d has thus oaused no change in the formal relationship bet,·reen the t~·ro curren- cies: Iraq dinars are eo~vertible into British pounds at par. and vice versa, as Nas the ease before the devaluation.  - 26- Credit 66. As it extends its operations, and as soon as the neTJr la",. for i;he control of banking \<]hlch gives it important ne\-! powers is. passed 'by the Parliament, the National Bank of Iraq will be the center of the country1s banking and credit system. Although important, its function ,'rill, ho"rever, on the ~'lhole be comparatively simple for the financial system of Iraq is still, in the main, an uncomplicated one. There are no organl~ed securi~y or commercial paper markets in Iraq -- the investment and credit needs of the bUsiness community are met by three government banks, the Rafidain. the Agricultural and the Industrial Banks, serving Commerce, agrlcultpre and industry, respectively, by three British cowmercial b~~s (the Ottomanll and Eastern Banks and the Imperial Bank of Iran) and by three relatively small Iraqi Banks. In addition there is the "Bazaar ll -- the still flollr- ishing business of individual money lenders tlTho make funds available to small borr01,'!ers at high rates. British banks are mainly concerned ""ith the financing of foreign trade. They usually keep their reserves and investments in foreign -- mainly sterling -- securities an~ have thus far ShO"tolU little interest in financing local agricultural or industrial develop- manto 67. It is mainly to bring about the investment of a larger proportion of Iraqi funds l-Tithin Iraq, that the nel'J la'" for the ItControl of Bankingll no\,r before the Parliament, l!Tas drafted. The draft limits the proportion of Bank deposita to be invested abroad to 50 per cent of the total, prohibita investments by banks in foreign equities, and stipulates that from 10 to 15 per cent of all deposits must be kept on reserv'e at the National Bank, thus 11 Although under British management in Iraq, the OttolUan Bank is an Anglo-French institution.  - 27 - making of that bank the country's Central Reserve Bank and enabling it, by appropriate changes in the reserve ratio, to exeroise a certain meaS1~e of control over the total volume of bank credit. 68. In April 1949 total deposits in all banks in Iraq amounted to ID 16.3 million; of these, 12.7 million were demand deposits, 1.4 million time deposits and 2.3 million savings deposits. As these figures indicate. the volume of saving via bank deposits is comparatively small in Iraq; hoarding of gold and of currency is still, especially in rural areas, the favorite method. of keeping idle funds.Y Prices 69. As in most countries, the ~"Tar caused significant changet'l in the Iraq.i price level. During the first year and a half of it, the ri~e in dom- setio prices l~ras limited and Iraqi exports ~.rent mainly to their prs"rar markets; follo'~ring the collapse of France. Italy's entry into the Mar, and the conse- quent closing of the eastern Hedi terra.."1ean, hOT,rever. severe lim! tations came to be placed upon the country's foreign trade '!Thieh soon resulted in a sharp increase in the prices of imported goods. Tot1ard the end of 1941 the arrival of British troops occasioned a sharp reduction of domestic supplie~ and a further price rise. In subsequent months the inflationary trend ,-rae accel- erated by the increasingly large expenditures of the British Arrow in Iraq (financed by the issue of Iraqi dinars against ~ sterling credits in london), the growing scarcity of imported commodities, and the high prices obtainable 11 A-~interesting indication of the propensity of the Iraqi public to hoard currency is given by the figures for note circulation by types of notes outstanding. These figures shot,r that l!lhile during the past t1~ro years the circulation of notes in smaller d.enominations and the total currency in circulation declined (the latter from 39.8 million ID in January 1947 to 34.6 million in Ivlay 1949), the volume of 100 dinar notes rose from 8.1 to 9.0 million during the same period.  - 28- for IraqI s exports of gra:tri~. To check inflation,. the Iraqi Government passed certain anti-hoarding 1a"1s and fixed the prices of important staple commodi- ties. Ho'~rever, since no measureawere taken to dra,·r off surplus purchasing pO~Jer through taxation, the floating of loans,. or' the encouragement of savings, the Government1s anti;..inflationaryefforts had only a very limited effect. TO\'lard the end of 1943 '!Tholesale prices and the ~ost of living stood at 6 times their pre"far level and a corresponding rise had occurred in currency circulation and bank depOsits. In 1944, because of a good harvest, a decrease in the eJ..."Port price of grain, and a. determined effort on the part of the Govern.... ment to cheek speculation, inflationary trends fell off slightly~ 1.'Then the 'l>Tar euded in 1945 the ,,,holesale price index stood at 503 and that of the coat of living at 584 (1939= 100). Although both inde::tes declined in 1946 they rose again in 1947 and 1948, mainly because of a very bad harvest in the former year and the outbreak of \<!aT in Palestine in the latter, attaining peaks of 657 and 763 respectively in April 1948. 70. Since then the beginning of a fall in the prices of Iraqi exports -- a part of the general postTJ'ar price recession - ... an increasing eredH strin-- geney and a consequent gradual slackening of domestic trade have produced material declines in both prices and the cost of living; the· index of the .J..9. former stood at 487 in April,. and that of the latter, at 559 in l1a;'y', 1'91 After reaching a peak of 56.) mUl10n dinars in 1944, the country's total media of payment (currency in circulation and demand depOSits), declined to 47.3 million at the end of April of thh year.· As in other countries, post .... 1.,rar inflation has thus given place, in Iraq also, to post"rar deflation and business reeession~ 71. The recent devaluation of the Iraqi dinar I·rill very probably halt ~ further price decline and lead, instead. to a gradual price increase.  - 29 - Prices of goode imported from hard curreney countries Nill be immediately affected: the action of other prices \'r111 depend, in large measure, upon the course of prices on British market~ and on those of the sterling area generally. Since no price contr()1s of any consequence exist in Iraq, it is not unlikely that a general price rise of from 10 to 20 per cent on the average Nill take place during. the months to come. 2. Buq.get General Financial Position t ; 72. Before the '\Tar Iraq's financial position I,'ras, on the "'hole, sound: the government's ordinary budget sho'~red small surpluses, the public debt Nas small and increasing oil royalties, generally credited to a separate nubIlc "rorks budget, made possible the financing of such projects as raihray improve- ments and the beginning of certain flood control and irrigation scnemes. In 1938, to meet part of the cost of these "rorks, a loan for 3: 1 million. the first foreign loan to be floated by the· Iraqi Government, Nas successfully plaCed, the proceeds being used mainly for railroad modernization. and expan- sion. In 1939, again to meet the costs of the capital 1,'orks program, a further loan of ~ 1 million ~Jas o't)tained frol!l the Iraq Petroleum Oompany as a non..... interest bearing advance against .oil royalties. 73. During the "Tar years, graa tly1ncreased revenues and 10':'91'. expendi- turea, mainly because of the .enforced limitations on its capital 1.rorks program, enabled the Iraqi Government to .,Sho1tra series of budget surpluses; by the end of the conflict a surplus of over 4 million dinars had been accumulated.lI 1/ '.Ihile during the 11Tar years the government's fina.'lcialaccounh sho'l/ed SUbstantial. surpluses and its: first foreign loan qf b 1 million 'i."as paid off, ncn... ;interest bearing advances ·for b 3.5 mf;tlion ,.rere, ho,·rever, .ob- tained against oil royalties to meet the government's current requirements. As the discussion of the Iraqi public 1ebt "'hioh fo11o',-18 "'ill ShO~'!, a large part of thi$ indebtedness is still outstanding.  - )0 - 7.4. During the first poet:\[nr y.r;rrt tho ~vorn:,,_entLs "ccfuunts _ \.t0l'{'c in balance. In 1947-48 and the tt,ro years follOl.<fing, hONever. deficits occurred, resulting in a generally embarrassed financial position and in a {;ro1'l1ng difficulty for the government to obtain the funds required for its opera.tions. Although the ordinary government bt:dget for the current financie,l year (April 1, 1949 to I'larch 31. 1950) ia balanced. the govern.'llent's total expenditures (including those for capital 1!]orks and state-ot·med enterprises accounted for in separate budgets) a.re expected to exceed revenues by a, su'b- sta..'1tial margin; as a result. at the present moment governmental funa,s are scarce and the government is force,1, by its Ovm admission, to enge-ge in a rather precarious financial "hand to mouth" exi stence)} Structure of the Iraqi :Budget 75. For an informed evaluation of Iraq's present financial position and an estimate of its probable future a clear understand:I.!lg of the structure of tile country's budget and of the main typea of income and outgo is essential-. 76. The Iraqi Government's total expenditures end. revenues include three main categories: ( 1) Those of the ordinary budget: (2) Those of the se:oarate capital t"orks budget; (3) Those of four government-ONued enterprises: the !!'aqi State Raih'ays, the Port of 3asrah, the Fao Bar Dredging Scheme, and the Iraqi Currency Board. 77. The first category, the government's ordinary budget, includes ordinary gover~mental revenUes and e~~enditures: on the revenue side, custom} 1) For a detailed statistical accoun'c of the course of Iraqi finanCes before, during and after the last \<far, see Tables 12 to 22 in the Statistical Appendix to this report. The tables shavr annual revenues and expenditures of the Iraqi Government by principal categories for the financial years from 1935-36 to 1949-50.  - 31 receipts, ~'rhich amount to the unusually large s:lare of from 30 to 40 per cent of the total, the prooeeds of a tu.rnover tax on agricultural produce and revenues from the tobacco monopoly, and the proceeds of the income tax, paid by members of the professions and of commerc.e and industI"J. but not by land o1!mers, the country's V'realthiest group. On the expenditure side, the mORt important single item is that of lIemergency expenditure", representing over 20 per cent of the total, 11Thich includes mainly cost of living al10Hanees to gov:erIl1!lent employees and. in 1948 and 1949, the extraordinary expenditures resul ting from the ,,'ar in Palestine. O~her large items are the eX).:Jenditures for defense, polj.ee, and education. absorbing 20, 10 and 10 per cent of the total, respectively. 78. The government I s separat~ capital 1'!orks budget includes, on the revenue side. income from oil royal ties and earnings of the I!'aq.i Currency Board, and on the expenditu.re side the cos~ of such public 1rrorks as roads. bridges, telegraph and telephone installations, construction of publi~ buildings and the cost of certain irrigation Norks. 79. Of the budgets of the four government-ol,rned enterprises, by far the most important is that of the Iraqi State Ra:U ,rays. 1 -'hile the raih:ayst operating budget generally sho1>'JS a slight surplUS, expenditures on c£'-('Jita,l acoount "rere, in pos~·rar years, not covered by any budgeted revenue hut constituted a charge \'rhi~h the government 'Ioras forced, in the main, to meet through borroltring. 80. Financial accounts ~or the Iraqi Currency Board, the Port of Basra.~. and the Fao Bar Dredging Scheme sho'" almost uninterrupted surpluses; a slight deficit is, ho"re.ver. fOreseen fo:r both of the latter for the current financial year. Because of the tra~sfer of the Currency Board to the National Bank of Iraq last July, only very limited reyenues appear in the Board t S current  - 32 - budget. 1.'1~11e continuing expenditures, covering the liquidation period, result in a deficit, the first .. to be . , .recorded ,.". during the past ' .,' 15 years. Reasons for Present ,Financial ,Difficulties 81. If the balanceS" of the Iraqi Government's ordinary and. capital Norks budgets and those' of the four government m'Tned and controlled enterprises are combined, the foll011r1ng over-all financial position for the four years 1946-50 h obtained: Budget Position (Balancesl of the Iraoi Government . (In mUlions of Iraqi Dinars) . Ordinary Capital Works Railroad Other Special Total GoV'nt. Year~ Budget Budget pudRet 1/ , Budgets 2£ _3udeet 1946/471./ f .3 .- .7 .~ .6 f1.0 0.0 1947!4@ -1.8 .fl.2 -1.5 f .6 -1.5 1948/49lJJ -1.4 -1.0 -2.4 - .7 .,.5., 1949/50ljj 0.0 - .6 -2.4 -1.3 -4.3 11 Includes both operating and capital l1/orks expenditures, the deficit shot,rn being due to the latter. ~ Fort of Basrah, Fao Bar Dredging Scheme, Iraqi Currency Board. 11 Actual in.comeand expenditure. :JjBudget estimates. Source: Prepared from delta obtained by the 13RD Nission from the Iraqi Hinhtry of Finance. 82. An analysis of these :f:igures indicates clearly the main ca'.1ses for the present state of unhalance in the Iraqi Governmentts finances and the prinoipal reasons for the current lack of readily available fu..'1.o.!:'. 83. As the table sho"Ts, there i.ras a rather sub~tantial deficit in the government's ordinary budget from 1947 to 1949. The main reasons for it irrere the unusually severe crop failure in 1947' 1·,111ch forced the government to :?ur- chase ,·,heat abroad and resell it to domestic consumers at lOi.Ter prices. a concurrent rise in general prices and the cost of living, '·,hieh found expressio:  - 33 - in higber cost of living allo','ances to government employees. and, finally .. the outbreak of the '''ar in Pa.lest:1.ne ",hieh resulted in a material increase in the government's emergencyexpehditures • 84. The main cause for· the recent def'ici t s in the capital works budget lies in the substantial decreEise in incolIle from 011 royalties Nhieh occurred as a result of the closing of the pipeline to Haifa after the beginning of hostilities against Israel; as a result of that closing, income from oil. royalties 1IlaS, in fact, cut in half. 85. The largest single unbalancing element in the Iraqi Government's over~all accounts and the main cause for its current financial ~ifficultiest hONever, is the SUbstantial deficit ,·,hich appears in the accounts of the state-ot·rned Iraqi raihrays. 86. As the detailed data in Appendix Table 15 indicate, i·thUe the rail- road t s operating accounts shoNed small annual surpluses, large de.ficits ',rere caused by the recent t sizeable expenditures on capital l.·'orks for "'hich no adequate income had been provided. In fe.ct t ·,/hi1e plans made for the rail- roads I capital t·/orks expenditures \'Jere Bc'Pproved by the government and the beginning of the t!lorks in question authorized, no special .bu,igetary "rovision Has made to cover their cost. Part of the reSUlting deficits have alrea.:'l.V been met through government borrot,ring; the bulk ·of the outstanding claim\'! , over In 2 million, ho~'rever, still remains uncovered and represe;:ts a debt for ",hich creditors are currently pressing to .be repaid. It is not sur'prising that, under the Circumstances, the Iraqi Government should find itself hard pressed for funds. Outlook for the Fqture 87. ',[hat are the remedies for these difficulties and 1.I1ha,t is the outlook for the country's finanCes? ~ne first $te~ is, obviously, the funding of the  - 34- present floating railroad debt and the reduction of the railroad's capital 1,.rorks program to a sbe eOIllmensurate 1,'11 th th~, funds 'Ithich can. under present circumstances, be provided for the purpose. Since !raqls total public debt is sm~ll, an increase of it for the purpose of funding outstanding railroad obligations and of providing some further funds for capital improvements seems feas! ble. 88. Once the railroad debt is funded the problem arhes of hot., to eli- mlnate the defic! ts in the government's capital ~Torks budget and the aCCOlmts ).< of the other three government o~'1ned agencies. Added income from oil ro;ralties \>1111 eliminate the deficit in the capital "rorks budget if e>""J)endltures are properlY controlled. lI The deficit of the Iraqi Currency Board is clearly a result of the current disestablishment of that BOf),rd and 1,r:lll not recur; deficits shm·rn by the Port of Basrah Authority and the Fao Bar Dred~ing Scheme should be met by usingaecumulated reserves (l.rhich in the case of the Port Authority are kn01·'n to be substantial) or by limiting the scope of the "Jorks to be undertaken until q.dequate funds are available. 89. The paramount problem "'hieh remains is that of the positien of the government's ordinary budget. As Appendix Table 13 sho,",'!.'!, ordinary revelmes and e>..-pend!tures of the Iraqi Government have, on tl:J.e '."hole, been fairly ',rell balanced in the past. Surpluses have alterm:ited ,·!1th deficits, 'Iorhieh have amounted, on the average, to less than 10 per cent O'f total expe:':1ditures. The ordinary budget for the current financial year (April I, 1949 to' lc1arch 31,1950) '·rhlch "las approved by the Iraqi Parliament this spring, shorrTs 1.1 It should be noted, in this connection,.that ']19 :f'or1rr ard coimlnitment~ be- yond the end of the present fiscal year (Harch 31, 1950) exist at this time in Ira.ql s capital "'orks budget~ Oil royalt:y income ls, therefore, availa.ble fer lecal currency 9xpend:l.tut'es on projects "'hleh the Ban..'ll:: might finance and for such. other :purposes a.s the Iraqi Government may determine. ' .  ;.. 3.5 - neither surplus nor deficit but a balance at ID 2.5 million. 90. ~'1111 that balance 'be achieV'ed'l Tl:J.e outlook is not, at present, a promising one., The I13RD mission's stay in Iraq lItes too short to permit a detailed study of the various.categorieB of income and expenditure and the preparation of reliable estimates on the probable future courM of each; sufficient information, hm,rever. "ras obtained to make possible certain gen- eral observations and tentative oonclusions. 91. Budget estimates for this year's incomell are slightly larger than those for last year because of the larger income expected from the increase in customs duties (10 per cent on the average), in the agricultural turnover tax (from 10 to l2t per cent), and in the property, gasoline and stamp taxes. enacted by the Iraqi Parl.1ament last spring. Estimates for current expendi- tures are 10\·,er, mainly because of the savings "'hieh the government hopes to realize through the far-reaching reformaf the Civil Service nOlfr u.nder1.,ay-. 92. On their face the government I s latest figures do not 8:"ppear to 'be out of lin,e ldth similar figures for the recent :past. If hostilities in Palestine are not renel.Ted, the budgeted item of ID 1 million for ''1ar expen..,. ditures in Palestine might even be found to constitute a hidden reS9:n-e ~.rhich m~ neutralize, at least in par.t. the effects of certainover....el"timates in revenue. If the additional tax legislation no',' before Parliament. for the enactment of 1~Thich the government is pressing (ne," death duties and i~creased income. motor car, and radio taxes and court fees) is actually passed, the government's income may be further increased. 93. In a careful appraisal of the government's income estimates. According to a statement made by the Finance Hinister to the Iraqi Parliament. current estilllQ,tes of both income and expenditure l·,ere based upon actual income and outgo during the first ten months of the preced~ng fiscal year.  - 36 - ho\,rever, serious doubts arise in connection '4th the item ~'Thich is by far the most important, i.e. customs revenue. It does. in fact, appear improbable that, although customs duties Nere recently raised, and although the rise in import prices likely to folloTt! upon the recent devaluation of the Iraqi dinar ,dll result in increas~d income from ad valorem duties, customs revenues generally should, a~ the current budget foresees, be larger than those for the preceding year. In 1948 IraqI s imports '.'Tere higher than they had ever been before. This year their volume is likely to be considerably 10"rer, because of the restric- tions currentlY placed upon imports in an attempt to correct the large deficit in the country's trade balance, and also because of the generally reduced volume of business e~ected during the current recession in commercial activity. 94. If, as it is very likely to do, the volume of import~ falls, income from customs revenues h likely to fall ,.rUh it. Any hidden re~erves provided for in. the budget, ,.1ould. under the circulllstances, very probably be ln~ufficient to absorb the effects of the decline and. unless expenditures are drastically . cut. a rene1tred and possibly substantia.l defiCit may ref:1ul.t~ }ITo current ciata on the volume of imports or on customs collections are available: it is not improbable, hQ1tJever, that lagging customs collections Itrhich, in the ourrent budget represent over 40 per cent of total revenues, may be one of the prin- cipal causes for the government's current, apparently acute shortage of tunds~ 95. If. as a result of the anticipated fall in custom collections and of the possible rise in certain expenditures follo~lng upon the recent currency dev~luationt the government's ordinary accounts for the current year should shol'! a deficit. more domestic borro\·ring "rill have to be resorted to. Although Iraq t s total public debt is small and could be further increased ,·ri thou.t undue strain upon the country's economy, domestic flotation of additional bonet issues or sale of additional Treasury bills t· r 111 be found to be difficult in V'iel!T of  - 37 .... the current tight oondition of the lr~q1 ~oney market and the general scarcity of investible funds. Th~ government may therefore be forced to have recourse to the opport'Ul'i1 tie" for eddi tional ftnanoing provided by the nel.·r banking lat."8 \o,hleh require investment "r:l,th~n Iraq of a stated proportion of oommercial bank depoatts and permit the Qentrat bank to l~vest 30 per o,nt of its ourreney re$erves in Iraqi Government obligations. 96, OJ]. the ",hole, although an attempt is being made to eaSe the present finanCial strain througn an increase in taxation and a reduotion in e~penditures, the government1s financial ~osition is likely to remain difficult lxuless large debts, such as that of the railroads, are funded, unless revenUes for the oapi- tal T,>1orks budget are inoreased through increased income from oil royalties, a..'I1d unless a thorough, long overdue reform in thecountryfs tax system and a judi- olous pruning of expenditures are car~led out, TJnder Iraq's rather primitive tax: struotu.re no ta:J:es fii-tf:\ll a:re n~r levied on l.ando"rners, by far the ~.realthiest cJ..as$ ~J'l th~ population. Al though taJCation of land-holders is diffloul t. not only in Iraq but throughout the HiddJ,.e Ea.st., because of the strong political po"rer "Thieh they Nield, i 11 does not seem unlikely that a :really determined effort to make them bear at least some part of the state's expenses might y1eld helpful results. Siml1arly, a, thorough overhauling of the Civil Service and of the costly armed and police forces., incJ,.uding a determined elimination of unneoessary functions and post~.~ "'oul-d, in all :p~obability, yield a saving much larger thanthate~rently ant1eipated. 9? ~ Generally speaklng, the1l'~ h ·nothing \,rh,"ch is technically impossible, or even very difficult, to remedy lJl. Iraq' se'UJ"rent financial malady - 1,rhat is needed i~ determination on the gov~rnmentfs part to study the situation thol'ough~ preferably tlr!th the assistance of ~ll1.Par·Uf,l.lfol'.eign expe:rts, and to apply ~,r1t.h determj.aat1Qn the rather obYio~ remediAJfi: 'frhi.4b are l1kelyto be presoribed.  - 38,- '3. Public Debt 98. IraqIs public debt is comparatively small and its burden on the country's economy is not a material one. As Appendix Table 22 shot"s, it con- , ' slsts of two domestic medium term issues (.5 and 10 years) floated in 1947 and 1948 at :3 and 3i per cent for a total of ID 2 million; of two domestic long term (20 year) issues floated in 194.5 and 1948 at 4 per cent for a total of ID 4 million; and of short term zt per cent Treasury bills issued in 1948 and 1949 for a total of ID .5.1 million of "'hlch .3 million aI'S held by the Iraqi Currency Board and 2 million by the Rafidain and various other Iraqi Banks. In addition, there are: an unfunded non-interest bearing debt of about 2 million pounds sterling ol'Jed to the British Government for ,.rar surplus material against \.rhlch, ho,·rever, Iraq claims an almost equivalent credit for custom duties on ,.rartime imports and for railroad tra..Tlsport services rendered during 'the ,",ar, outstanding non-interest bearing advances of 4.2 million pounds ster- ling 'against oil royalties, repayable at a rate not to exceed!' 900,000 per a1mum. and various debts currently O"red by the Iraqi railroads to suppliers of material for their development program for a total of about ID 2.2 million.ll 99. As the foregoing enumeration sht:H·rs, there is no funded !ratIi external debt represented by bonds quoted on atW' exchange -- no external measure of IratIts credit represented by such bond quotations therefore exists. Last June, Baghdad quotaticms for domestic bonds of ID 100 par value "rere ID 96 for the .5-year, 3per--'cent issue anp; ID'94., f'orthe'longer term~3! per cent issue. " d ' . , ,. ;~ : , ,,';, ~ • ,_,' I , • It is undlC"'stood that in 1948 the British Government. extended to Iraq a non-inte.rest bearing credit of about 2 million ID for the purchase of surplus arms. The precise value of deliveries made has, hOI,rever, not been determined as yet, and no details are known as to conditions of repa;yment.  - 39 - 4. Foreign Trad~ and Balanceef P~vments Total Trade and Balance of Trade ; ¢ q , 100. The outstanding feature in Iraqis foreign trade is the continuing deficit in the countryt s commercial 'balance. As Appendix Ta'ble 23 shot'l's, ever since 'before the "rar Iraq has constantly imported more than it has exported.: imports have consisted largely of manufactured articles, 1,'hiJ..e exports have been confined, in the main, to agricultural products. The trade deficit has, until recently. been made up principally 'by income from oil royal ties and the oil companies' local expenditures; during the last three years, hm·/ever, a greatly enlarged trade deficit had to be met mainly by a decrease in Iraq's credit 'balances abroad. 101. 1lhen the war ended Iraq '!!!as in need of a variety of capital and consumer goods. Its small industrial plant, out'!Torn and, in part, outmod.ed, needed replacement and expansion; its railroads, placed under severe strain and ta4Ced to capacity during the .·rar t required rehabil Hat ion; the need for agricul tura.l eq'Ll:tpment t which .Pad remained unfilled dut"ing the l'Tar, had to be satisfied; a variety of consumer goods, for which the country had, tradi- tionally, relied upon imports. had to be provided. As a conse~uence. Iraqi merchants, impatient to flll the ;Large backlog of orders ,.rhich had accumulated during the "Tar, expanded their foreign purchases rapidly. T:b.e result "'as that the value of IraqI s imports gret·T from ID 18.9 million in 1945 to 28.4 million in 1946 -~ the trade deficit expanding at the same time. from ID 8.9 to 15.3 ml1Uon. In 1947 and 1948 the results of an exceptionally bad harvest ~.rhich made necessary the importation of foreign grain led to a further increase in t.pe adverse trade 'balance ~·!hioh gre~,'r from ID 15.3 million in 1946 to !D 36.9 million in 1948. Because of an embargo placed on grain exports as a result of the poor harvest during the preceding year t exports d.eclined from In 14.7  -40- million in 1947 to the exceptionally lOll! figure of 8.5 mlllion in 1948.11 Composition a.~d Direction of Iragi Trade 102. As Appendix Tables 24 to 27 shot.!, Iraq: s chief imports are cotton and lt100len textiles, machinery and equipment, and chemicals: sugar, tea and soap are also significant. On the export side grains (mainly barley) normally account for nearly one-half, and dates. of ,.,hlch Ira.q is the ~,'Torld' s prinCipal supplier, for abou,t one-tb,ird of the total. Rat,r ool, hides and skins. and 'II J 11ve animals fo 1101'!. generally 1n the order named. 103. Since Iraq eJqlorts mainly cerea.ls and ra'lll materials in ex.change for manufactured goods, the bulk of the country I s trade is Tdth indu,strial co un- tries. Before the ,.rar over 60 per cent of Iraq I s total imports came from four such countries -- the united Kingdom, the United states, Germany and Japan ~~ and over 55 per cent of her exports T,.rent to them. Of the four. the United Kingdom, l·,ith about one-fourth of IraqIs total trade, l,ras by fal" the most . important. . In 1948 almost one-half of Iraqis total imports came from the 11 In considering Iraq's trade statistics, it must be remembered that. since in Iraq oil 1s produced and exported under special concession and royalty a.greements, the proceeds of a.ll oil exports rema.in at the disposal of the exporting 011 companies and only royalty payments agreed upon in the con~ cession agreements are made to the government. Oil exports as such d.D, therefore, yield no income to Iraq apd are, consequentl1, not included in Iraq t s ordinary trade statistics. Imports made by 011 companies, for ;·rhich no p~ente are mad.e by. Iraq are, h01!lever. included in the countrY's ordinary imports, the reason given for thisprocedu,re being that such im~ ports are not large enough to diStort ordinary commercial import figural;'! materially. For completely accurate trade data, adjustments 1,rould also have to be made for the fact that t 'before 1946 11rhen C. i. f. values 'began to be used. import valu,es were computed on the basis of the higher prices "",hicn. imports brought on the local market. Pre-1946 import data I-fould thus have to be adjusted do~m'·'a.rd. possibly in some Cases 'by as much as 20 per cent; export figu,res, on the other hand, 1.·Tould need to be raised some",hat to compensate for exports 'l1Thich failed to be properly recorded. In 1946, hOi-lever. statistical procedures l'Tererevised all.d improved, and for that and the years follo"'ing,. recorded trade data reflect ,dth increasing accuracy the actual course of trade values measu,red 1n conventional terms.  - 41 - United Kingdom lJJhile less than one-sixth of her exports "rent there. In the same year t other leading suppliers 'I;'lere the Un! ted States. Italy, Iran and India; other principal markets \lrere India, the United States, Syria and Lebanon and Egypt. 104. Although not reoorded in Iraqi trade statistics, it is known that before the ".,ar IraqI s oil llTent almost exolusively· to Europe, France being by far the largest market; after the "rar t Iraqi oil ",en't; mainly to the United Kingdom, via the pipeline terminal at Haifa (for details see Appendix ~aole 30). Trade and Tariff Poligy 10.5. During the "'ar imports into Iraq ,.rere controlled by the British Hiddle Ea.st Supply Center and by a system of Iraqi import licenses. ~"hen the "raJ' ended, the Supply Center ,·ras dissolved and the Iraqi licensing sy~tem ,.ras relaxed considerably until the only imports requiring license 'I,rere those from scarce currency countries and the few commodities then still subject to inter- national allocation. ilhen, in August 1947, the Anglo-Iraqi Agreement gOVerning the release of Iraq's accumulated sterling balances ,'Fas concluded, it \A'af;! realized that to prevent too rapid a depletion of these balance~, some control of imports from the sterling area 'Jlould have to be reintroduced. As a result, imports were cl~ssified according to their essentiality and for goods consid- ered to be essential, such as cotton textlle$. building materials, paper, tires, etc .• a system of general import licenses with over.,..all annual alloca- tions of exchange "rae established. For less essential goods such as silk piece goods, cigarettes, alcoholic beVerages, etc. and for all imports from hard currency countries, special licenses \'oTere required. In pra.ctice, "essential" coromod1 ties originating in soft currency countries T"ere ir.1ported. quite freely, the only real restrictions being placed on the importation of luxuries and of goods originating in hard currency countries. The'result of  - 42 - this rather liberal system of import control and of the large imports of grain ,·,hieh fol101:red the bad harvest of 1947 "'as the large expansion of imports and of the trade deficit described above and a progressive depletion of the coun- try's foreign exchange balances. To chRck this trend, in September, 194 8 all imports, including those from non-scarce currency countries, "rere subjected to license, Iraqi authorities refraining, for a time, from issuing any licenses at all except for goods already arrived at Iraqi oustoms and for goods to be paid for 'l;Tith dollar balanoes until then left unused. Although it i$ too early to assess the full result of these measures, a 1m·rering of import totals is knoltm to have taken place during the latter part of 1948 and the first months of 1949 -- a trend which is likely .to continue throughout the current year. 106. '.V'hile the government 1s, 'on the one hand, endeavoring to control imports, 1t is. on the other, seeking to stimulate exports. A particularly: notet.rorthy effort in that direction is the recent endeavor of the Iraqi Date Association to improve the grading and packing, and consequently the foreign, and particularly the U.S., sales of its product. 107. As the earlier discu.ssion of Iraq IS pu.blic finances has sho,m. the main objective of Iraqi tariff policy is that of raising revenue: its most important other goals are the encouragement of domestic production, both agricultural and industrial, and reduction in the consumption of imported luxuries. Originally similar to the old Ottoman tariff l,rhich levied an ad valorem duty of 11 per cent on practically all imports. the Iraqi tariff la1f! "'as completely revised and modernized in 1933. The ne1 .,' lat1 ~!lhieh, though extensh'f;ly amended, is still in force, provides exemption from duty for all kinds of ma(;hi ..~e:.."y used in agriculture. constru.ction ":ork and in many types of industry, and for comparatively high duties on foreign manufactures,  - 43 - dmil-ax in type to goods produced locally.Y Generally, Iraqi duties are 101,,,, on ra'lll materials, so:me;.rhat higher on ~e:mi-manufactured articles and highest on finished goods. Ra\'T "1001, for eXa.41ple, p~s 8 per cent ad valorem, carded or combed "1001 1.5 per cent, and '.,roolen manufactures 25 per cent. ]b:port duties are practically non-existent ,nri th the important exception of dates on "Thich an export duty of 1 per cent ad valorem is levied for revenue purposes. Terms of Trade 108. Although no reliable indexes of export and import prices exist and a precise computation of Iraqr~ terms of trade is th~refore impracticable, an examination of such price data as are available indicates that during :post~·rar years the terms of trade have become gradually more unfavorable to Iraq. Im- port prices, "Thieh rose considerably after the l~rar, have been declining but at a lesser rate than the prices for agricultural products ",hich constitute the bulk of the country's exports. Balance of PtfWments 109. Detailed data on the principal items of the Iraqi balance of pay- menta for the three last pre"!ar years shO',r that before the "!ar the country's considerable trade dRfici t 1,'ae made up, 1.,d thout special difficulty, by income received from oil royalties, expenditures of British forces in Iraq. local expenditures by oil companies and such 'invisibles' as port dues and cowmis- sions, tourist eA~enditures, etc. (See Appendix Table 31) 110. A precise statistical description of Iraqfs bal~~ce of payments position for the war years is difficult because of the lack of a number of significant data for that period. There is, hOlprever, no doubt that during the l,rar Iraq t s international financial po si tion T~!as considerably strengtl~ened. 11 On sweets, for example, an ad valorem duty of 75 per cent is levied, and on imported shoes, a specific duty, corresponding, before the recent currency devaluation, to $2.40 per pair. .  - 44- Although the trade deficit continued and ~}ra.s enlargedto1}rard the end of the "Tar. income from port dues and trans1ttrade. and especial..1.y that from oil royalties and British mil! tary expenditures 1.·ri'thinthe country vTas very con- siderab~ enlarged. The result was, on the one hand, an expansion of domestio currency and bank deposits and a corresponding rise in prices, and on the other, the accumulation of very substantial bank balances abroad. Iraqi sterling deposits in ~ondon, in fact, rose from abou~ ; 7 million before the Nar to 69 million in December 194.5. 111. After the end of the '"Jar Iraq' s ~nternational financial position has been progress! vely and considerably T,reakened. As the table on the tolloT}''':' 1ng page indicates, in 1946 a rapidly grOTJr1ng import surplus \-ras fina!lced. mainly by the foreign exchange provided by British military expenditures in Iraq, receipts from oil royalties, imports ~~d local expenditures by oil companies and such linvis!bles t as tourist expenditures, port dues, etc~ When, during 1947 and 1948, largely because of the bad harvest in the former year and the consequent, substantial importation of foodstuffs and embargo on grain exports, the trade deficit had assumed unprecedented proportions, payment for the excess of imports l}Tas made mai:p.ly by dra'1.nrings against the country's accumulated ster~ing balances abroad~ 112. Because of the large dra~I'ings made against them, Iraq I s sterling balances have, of late. been very materially reduced; it is therefore no\'! becoming imperative for the Iraqi Government to limit imports so as to bring the trade deficit back to manageable proportions. As the preceding discussion has shown, a serious attempt to do this is currently being made through the stringent import license system already described. As a result of the govern~ mentis efforts, during the early part of this year, imports have sho~rn a declining tendency; Iraq t s j.eading export s, on the 0 ther hand ~ mainly barley.  - 4.5 - wheat and dates -- are exp~cted to increase materially both as a result of the recent lifting of the embargo on barley exports, and of the good crops expected during 1949. Summ@rl; of Irag l s ,i.· 13~lance .. 1 i i ' . of P&ments l 1246-48 , 1:/ (In millions of Iraqi Dinars) 1246 124Z 1248 PS¥menta . Receipts Payments Receipts Payments Receipts Imports 28.4 40.1 45.5 Exports 1.3.2 14.7 8 . .5 Net income from; Port dues, etc. 1.1 .8 .8 Emigrants & tourists 1.4 .4 .4 U.K. military expen- ditures 2.7 2.2 .., 5 ~-. Net value of: 011 royal ties 2.2 2~2 L7 Oil company imports 2.0 4.1 8.4 Local oil company expend! tures 2.l 5 •.5 5.0 Decrease in Iraqi balances abroad 1.9 8.3 13.5 Totals 28.4 26.6 --..... 40.1 38.2 -- 45.9 ---.- 40.4 Omitted items, adjustments. errors, etc. 1.8 - ......,........ 2.0 ...........-.,. .;,. 5.5 28.4 28.4 40.1 40.2 45.9 45.9 -.... 11 To achieve clarity in the presentation of essentials. a number of smaller items have been omitted in this table. ~oure~: Prepared from the detailed data on the Iraqi balance of payments, furnished the IBRD IvIission by the Iraqi Goverr.ment, oontained in Appendix Table 31.  - 46- 113. The prospect for the coming year thus looks encouraging. A reduC- tion in the quantity of imports ahd a significant increase in that of exports, might, if no major changes ocOUr in other items of the international balance. materially reduce and possibly eliminate the need for a further drain upon sterling balances held abroad. 114. Although the significant reduction and possible elimination of this drain is a possibility. it is t ho~,'rever, too early to say ,-rUh assurance what effect currency devaluation and the measures undertaken by the Iraqi Government to control imports TII11l actually have upon the country' ~ ,trade balance. Though lITell intentioned, the administrative apparatus of the Iraqi Government is. on the l/,hole. stUl "reak and at the mercy of rather frequent changes in government personalities and poliCies; the possibility therefore al"I8.Ys exists that measures adopted and passed by one cabinet matV' be reversed or materially modified by another. Because of the accompa....'"l;Ying increase in prices. currency devaluation lIrill very probably result in an increase in import values, over those 1,'hich T,\Tould othertoJise have prevailed -..,. but. for the same reason, export values. ,too, 1"rill grOl';. As a result of the cheapening of Iraqi currency. increased sales in hard currency areas may possibly, on balance, contribute to a narro'llring of the trade defioit. 115. Although much improved over 1947~48t during this a~d possibly the coming year, IraqI s balance of payments position is, on the ,·'hole, likel~i to continue to be a rather difficult one. The longer range outlook for the country· s international aocounts does 1 hm·rever, appear to be favorable. The reopening of Haifa and the completion of the ne',', 30-inch pipeline to Banias in 1954 are certain to bring a sub~tantial increase in foreign exchange earnings from oil royalties. Local e:·::penditures of oil companies are also likely to be increased if the companies· programs of plant eA~a~sion proceed  - 47 - according to schedule. Iraqi exports, for which a good demand is likely to continue, Bre expected to grow as agricultural produ.ction is expanded as a result of more intensive and effective cultivation and the extension of cultivation to newly irriga.ted land. If, therefore, present import controls are continued, and imports, especially of non-essentials, ere kept within bounds while a vigorous effort is made to enlarge the market for Iraqi exports, there appears tA bo little reason to believe that over the longer term Iraq should not be able to overcome successfully the difficulties which confront its international payments position at the present time. 5. Foreign E~change Position 116. Before the war, Iraqi dinars were freely convertible into dollars and other currencies. Under legislation passed by the Iraqi Government, exchange control was introduced in November 1941. As a member of the sterling area, Iraq is obliged to surrender to the sterling area pAol all scarce currencies earned; in return the Iraqi Government obtains from the pool the currencies which it requires. 117. Under the original Iraqi exchange control law and its later amendments, foreign exchange transactions may ~e effected finly through the medium of banks licensed by the Iraqi Mini'stry of Finance to deal in foreign exchange under the conditions laid down by the Exchange Contral Committee, established under the Iraqi Exchange Contrf"l Law •. Actual control ~perations are carried out by a Controller ~r Foreign Exchange in accnrdance with authority delegated to him by the Committee. l18~ Iraqi exchanee control regulations apply to all foreign trade and 'invisible' transactions. Fflraign exchange resulting from exports must be surrendered to a licensed dealer under an undertaking previously given by  . ;. 48- the exporter; all imports are subject to licenses granted by the Directorate General of Imports t foreign exchange for them be;lng granted only upon surrender of the exchange control copy of the particular import license. 119. As the discussion in the preceding sections of this report has ahol/Tn, because of the heavy demand for imports after the "rar and the absence of adequate import controls before September 1948, the substantiaifore:tgn exchange balances accumulated by Iraq during the "rar Nere sharply reduced in post"!ar yeare. Their position since 1946 is sho\lrn be10111 (in million pounds sterling) ~ December 31, December 31, December 31, 1946 194 2. 1948 Sterling ol~1Ued by: Currency Board 43~0 39.0 33.9 Private Banks 20.6 18.3 10.4 Government Departments 2.4 1.1 .8 Other foreign currency balances 1~3 .6 .4 Total 67.3 59.0 45.S Reduction from previous year 8.3 13.5 Sourge: Prepared from data obtained by the IBRD Hisdon from the Iraqi Government. 120. Since Iraq is a part of the sterling area the use of her sterling balances is subject to agreement "71 th the United Kingdom. In August, 1947, Iraq and the United Kingdom conclUded a financial agreement for a period of five years (JUly 15, 1947 to July 15, 1952) 1mder 11Thich about one-half of all of Iraq I s official sterling balances (those of the Government, the Cur- rency Board and Iraqi Banks) amounting, at that time, to about 60 million pounds, "rere to be released. ~'Thi1e the other half ,·ras to remain tblocked' in a so-oalled No. 2 Account~ The sterling thus released and any earned in  - 49 - current transactions after July 15. 1947 "rere to be credited to a 1'10. 1 (free) Account at the Bank of England and "lere to be freely useable for payments "in any currency area. II 121. Under the terms of the agreement the ~terling balences to be re~ leased amounted to over 30 million pounds. Of this. 15 million t"9re to be released during the coming five years (19L~7-S2) at the rate of 4 million pounds annually for the first tllro years and at the rate of one-third of the remainder over the next three years. In addition, 2 million 1,rere to be released as a 1I1orking balance for the banks, 5 million as a special providon for the transition period, 5.2 million to cover outstanding contracts, and 4.2 million to cover the repayment of advances mad.e by the Iraq Petroleum COrIq)any to the Government of Iraq ".,hich are still outstanding. 122. O"'ing to the exceptional balance of p~ments difficulties experi- enced by the Iraqi Government last year ",hich cauEed a significant depleUon of Iraqi free balances, discussions are currently taking place Hith the British Government r·d th a vie", to the release of further amounh from Iraqt s blocked balances. 123. As to hard, or scarce currency. during the ,-rar the Un! ted Kingdom undertook through annual agreem.::nts ending in 194LL, to provide Iraq Nith sufficient hard currency to meet its essential requirements in scarce currency areas. During the postwar period a similar procedure i,ras follo~,·Ted. The first post,,'ar agreement, ~oJith its extensions, provided Iraq ",1th scarce currency totalling 036.75 million for the period betNeen January lt 1945 and July 15. 1947. in addition to about $.7 million for commitments entered into before January 1, 1945. 124. As ,"as said above, the Brl Ush-Iraqi agreement on sterling balances stipulated that as from July 15. 1947. sterling accumulated in the No. 1  - so - ACCOll..'lt should be freely available for p~ents in any currency area. EOl.P!ever. the foreigll exchallge difficulties experienced by the Un! ted. Kingdom ,,'hich led to po stponement of sterlillg convertibility, also forced Britain to request postponement of the British-Iraqi agreement providing for free convertibility of :rIo. 1 Account balances. A nell' agreement betlrreen Iraq and. Great Britain had to be entered into to make possible Iraqi payments to scarce currency areas~ A supplementary financial agreement bet"Teen the t',ro countries \-Jas thus concluded in November 1947 IIThich provided that during the period from July 15, 1947 to June 30, 1948, convertibility of free sterling into hard ourrencies should be restricted to a total of 4 million dollars for payments in Belgium and 17.4 million dollars for payments in other scarce currency areas 125. In mid-1948 a neN Anglo-Iraqi fina..'lcial agreement l~Tas reached regarding hard currency releases for the year from July 1, 1948 to June 30, 1949. Through this agreement, $22 million \'rere made available for expendi- tures in scarce currency areas, including Belgium, and about $3 million for expenditures in Sw'eden. A rene1:Ial of this agreement, provisionally extended in the meantime, is nOt" being negotiated. 126. On the l.PThole then. all Iraqi earnings of hard currency must notoT be turned into the sterling area exchange pool; the amount of hard currency to be placed at Iraq I s disposal by that pool is determined annually by e.greement betlrreen the British and Iraqi Governments~ Thus far a larger amount than Iraq herself had earned and. as it turned out, than she 1rras ~"ble to use t ,·ras made available to her. 127. It is not unlikely that SO long as Iraq remains a part of the ste!'ling area she ','ill be provided 1!lith hard currency in amounts not too far belo1'7 those obtained up to no'. '. If she should leave the sterling area, the Iraqi Government could negotiate with the United Kingdom Government to  - .51 - obtain the equivalent of the dollars accruing to the sterling pool from the sale of Iraqi 011 for dollars, as ~Iiell as the dollars accruing as a. result of American investments in Iraqis oil projects which flow mainly through the British controlled but partly American oNned Iraq Petroleum Company. The dollars now received from sales of Iraqi oil and from investments in Iraqi oil companies by their American part oNners, are, in fact, the main rea,l'!on for the generous dollar alloT,rance no,·r made to Iraq by the sterling area pool. In addition to such dollar receipts Iraq '>'lould have her O'.·rn direct earnings of hard currency arising from expor'i;s of her dates, Ilrool, etc. to nard currency countries. 128. The volume and direction of these exports during the last three years are shm·rn in the follo'tIing table (in thousands of Iraqi Dinars); . Iragi Exports to Hard Currency Area l2l§. 1246 1248 U. S.A. 3.54 1,171 1,037 Japan .5.56 :Belgium 122 337 2 Germany 162 40 446 Canada 44 192 . 1.52 62 Total 1,2)8 1,717 1,169 ~~; Based upon data obtained by the IBRD Mission from the Iraqi Government 129. As these figures indicate, in 1948 Iraq earned ID 1 • .5 million or 6 million dollars from her exports to hard currency countries. In actllal fact her exports to suoh countries~ partic;u1arly to the United States, ',rere con- siderably larger than the amounts shown by Iraqi statistics; this is indicated by United States trade data for the same years sho'lftTn in the follo1,r1ng table:  - .52 - United States Imports fro~ Iraq l22.§. !2!±7. 1248 In Thousands of Dollars Fruits. nuts and preparations (mainly dates) 1,496 1,831 2,498 . :Jool and hair 700 2,676 .5,883 IvJeat products .584 617 511 Leather, furs, hides and skins 20.5 .566 .55.5 Petroleum products .. 1.534 Hiscellaneous 210 619 152 Total 3,195 6,309 11,133 Source: U.S. Trade Reports 130. The discrepancy in the trade totals is explained, in part, by the exclusion of petroleum exports from Iraqi trade statistics, and for most of the remainder t in all probaoil! ty, by the flo,,' of Iraqi commodities to the U.S. via certain intermediary Middle Eastern trading centers s1;lch as :Beirut. Unless strieter trade controls are imposed by the Iraq.! Government, enabling Iraqi exchange control authorities to secure the exchange arising from such transactions, a probably important source of additional direct dollar earnings may remain untapped. 131. Since the prospects for Iraqi exports to hard currency COLUltries generally, s.:ppear favorable. espeCially in viellT of the recent curreno:r devalu- atien Nhich Ni11 make Iraqi goods less expensive in the markets of snch countries, sufficient exchange is believed to be available to Iraq for the service of any moderate sized hard currency loan 1rThich the country might receive. Since, hOl"9ver, Iraq.i imports from ha.rd currency countries ha.ve  - 53 - generally exceeded exports to them by a ,,'ide margirJ} -- thus far amply covered by the hard currency allocations made to Iraq by the sterling area pool -- it is suggested that to reduce the risk inherent in a hard currency loan, service of such a loan be assured either by an understanding as to sterling convertibility arrived at ,.r1th the U.K. Government,. or by a firm allocation of a sufficient share of Iraq's future direct dollar earnings to nurposes of debt repayment. The course of Iraqi s trade 1r'1thprincipal hard currency countri;S;;;;-- as follo~"s: (in thousands of Iraqi Dinars) .m.§. 1246 1947 lq48 Iraqi imports from hard currency area 3.407 2,480 4,764 .5,639 Iraqi exports to hard currency area 1.238 1,717 1,169 1.547 Trade deficit 2,169 763 3,595 4,092 Source: Eased upon data obtained by the IBP~ Mission from the Iraqi Governmen t.  - .54 - ~PEIIDIX  ... 55 - 1. SOCIAL AND POLITICAL BACKGROUND Phtsical Ch§racteristics , Iraq lies largely ~.rith1n the valley of the t,·rin l:"ivere, the Euphre-;.tes and Tigris. Its area of 175,000 s(Juare milee is somet.rhat larger than that of the state of California. Geographically it includes highlands to the north and northeas~~ tdth mountain ranges up to 14,000 feet, a central plain, !'epresented largely by the val:j.ey of its tl110 main rivers, and a vast desert area to the south and southeast, almost equal in extent to one-half of the country1s total surface. The Iraqi climate 1a of the eontinental type characterized by a'dde range of temperatures, shortness of the tra."lsitional seasons, scanty rainfall and 10'" humidity. In the mountain regions of the north, summers are hot and dry and "Tinters moist and cold; immediately to the south and 1?rest there is a belt of dry, Hediterranean climate; further south from BEl,ghO.ad to the Persian Gulf and into the Arabian and Syrian deserts, a hot, dry, desert climat~ prevails, with maximum summer tempera- tures frequently exceeding 120 0 F. Population and Social Structure The salient fact about the 11opulation of Iraq is that it is small in relation to the size of the country and the extent of available cultivable land; ~·!hile other IvIiddle Eastern countries, notably Egypt, are OVerl)Opulated, Iraq has a problem of threatening population deficiency. In 1947 the country's total population stood at 4.8 million. t,rith a rate of annual natural increase estimated a'e betNeen 12 and 17 per 1000 or at about one and one-half per cent per annum; average population density was 10.6 persons per square kilometer, and density on the cultivable land, 52 persons per SQuare kilometer - a figure l~'hich is much lO"ler than that for any other settled area in the Hiddle East. The Iraqi population is mainly rural and in part nomadic; the three main cities account for only 15 per cent of the total (Baghdad, 349 thousand, HOl;lul, 203 thousand, :Basrah, 93 thousand inhaM tants) • Ethnically, the population consists mostly of Arabs (over 80 per cent of the total). Kurds (about 15 per cent) and of small groups of Iranians, Turks and others. Of the total population, over 93 per cent are rloslem, about :3 per cent Ohristian and :3 per cent Je1!rs. Arabic is the official and most t.·ridely used language. Kurdish, Turkish, and Persian are employed by the respective minorities; English is the most ",fdely used 1,"estern to::lgue.  - 56 - Government and Politics Iraq is a very young country. Before the first "orld ':iar, it Nas a part of the Ottoman Empire; in 1921 it became an lnde~endent kingdom and in 1922 it "'as recognized by Great Britain, ",hieh assumed a mandate for it on behalf of the League of :l)Tations. On June 30. 1930, the United Kingdom con..... cluded a treaty of alliance T,rith it; the mandate "'as terminated, and on October 3. 1932. Iraq "las admitted to memberahip in the League of lTations as a sovereign state. Today, Iraq is a constitutional. heredity monarchy \·,ith a parliamentary form of government. The King, the supreme head of the state, promulgates all. 1a\"8 and supervises their execution. Legislative pOl<ler is vested in a Parlia- ment composed of t""o houses -- a Senate of 20 members ap:,?ointed by the King. and a Chamber of 115 Deputies elected by electoral votes at the rate of one for every 20, 000 male Iraqi sub.jects. Executive :p0T/rer is e;~ercised by the King through the Cabinet. The King selects ~~d appoints the Prime Minister and on the Prime :Minister I s recommendation, the other members of the Cabinet. The Cabinet is responsible to the Ohamber of Deputies, its life being depen- dent upon a vote of confidence by the Chamber. Largely because of the prevailing high rate of illiteracy and the nomad character of part of the population. there is little direct partici- pation in political activity by the mass of the Iraqi ~eople. There are no strong political parties but, rather, a series of comparatively small poli- tical groups the leacler~ of t.·,hich alternate in pONer as members of the . frequently changing Iraqi cabinets. The (l.dministrative apparatus of the Government, notunaffected by the frequent changes in government persona.lities and ::->011c1e9, is capable of much improvement; the appointment, in gro"'1ng num'oers, of able and \<re11 trained young Iraqis to responsible Government posts is, ho"rever, a hopeful sign tlrhich augurs tllell for the future of Ira'll s Government service.  - 57 - Introduction Iraq has, at this time, no integrated development program. There are, l:01.,rever, a number of individual development projects, in various stages of technical readiness, "Ihich the Iraqi Government' is seeking to undertake or on '/lhich Nork has already begun. These projects fall into four main categoriesf Flood control and irrigation Agricultural mechanization Transport development Domestic oil refining For the most part, plans for individual projects \,rithin each group have been prepared independently by the governmental agencies immediately concerned.: al·though the draft of a la'~l for the establishment of an Iraqi J;)evelopment Board has been submitted to Parliament, no such Board has as yet been formed; there has consequently thus far been no overall ooordination of the various existing development projects \·ri thin the frame~'!Ork of a broader national development pIar The scope of Iraqi development projects as they exist at present, is indicated by the follo . . ring table \,rhich summarhes the estimated costs of the schemes under more or less active consideration at the present time: (at pre- devaluation rates) Flood Control and Irrigation Iragi Dinfl.rs Projects on the Euphrates: nabbaniyah flood control and 11'1ater storage project 3 ;375 , 00011 Hillah irrigation project 11,020,000 Projects on the Tigris and its Tributaries: :;a.di Tharthar flood control, 1~ater storage and hydroelectric projects 16,000,000 Ti~r1s basin irrigation projects 18,315,000 Tigris basin dam construction projects: Gibraltar dam &. p01rrer plant 3,500,500 :Bekhme Dam 12,000,000 Damir Dam 3,500,000 Dokan Dam 3.120,000 22.120.500 Drainage projects on presently irrigated land 8,160,000 Total 78,990,;ooY 11 . Of this amount ID 700,000 have already been expended on the Hork thus far undertaken. Y This total is some'!That smaller than that of ID 85,000,000 arrived at in the recent report of the Iraqi Irrigation Development Dommission because some ·of the mOl'e remote and hypotMtical projects considered by the Com- trLisaion have beenomftted inc.. the feregQing enu.lIIeration.  - 58 - TransPort Development Construction of roads and bridges 15,800,000 Railroad rehabilitation & development 10,178.000 Total 2.5,978,000 ~icul twal Nechanhation Farm machinery project 5,000,000 Grain silo project 1,750,000 Total 6,7.50,000 --- Domestic Oil Refinin~ Oil refinery projeot 5,000,000 Grand Total ID 116,718,500 A more detailed description of the projeots listed in the foregoing table is given in the pages "'hleh foll0,"~ Flood Control and Irrigation As a result of the recommendations made to the Iraqi C~vernment last June in a detailed report prepared by the government-sponsored Irrigation Development Commission, a body ,'Thlch spent over tHO years studying the tech- nical merits of a variety of flood oontrol, "later storage and irrigation projects, the follOl,'ring are no'.\/' under active consideration by the Iraqi Government: y Projects on the Euphrates ~iyah Flood Control. and ~'ater Storage Pro,ject. Stage 1. The Habb~~iyah project is a combined flood control and storage ~cheme on the Eupllrates river ",hich utilizes Habbaniyan Lake. a desert depre~sion near the right bank of the Euphrates, southeast of the to"rn of Ramadi. .f>.. flood. control and storage project using Habbanlyah Lake lrras first l)TOposed in 1911 and l:york 111a6 started by the Turkish Government in 1913. f:'lorld \~Tar I caused suspension of the '"ork; it '/Tas resUIIled in 1939 only to be suspended asain during the last l"rar. l3y 19;9. hONever. a regulator and esca:oe chan..~el from Habbaniyah Lake had been completed. It is the fu.~ction of these to  - .59 - permi t an esca:pe of excess "'aters from Habbaniyah Lake into another depression 30 miles to the south, ",hen, during very high flood periods, the levees of the river are cut to permit the flood "raters to flolll into the lake. Present plans for the Habbanlyah project call for the building of a barrage (diversion dam) on the Euphrates at "Tarrar, permitting diversion of the river' a 1ilater into Habbaniyah Lake through.an inlet channel also to be ne1iTly constructed. The project further provides for an outlet cha..'lnel and regulator from Habbaniyah Lake and for the construction of appropriate levees at 10\" points in the rim of the lake. ~Jork on the inlet and outlet eh~,nl1els a..'ld the regulator is no,,, proceeding; the outlet regulator is practically com- pleted, but 1ifork on the channels is slo~·t because of shortage of funds. On the river barrage or levees no \<Iork has as yet been undertaken. The cost of these "',orks, 1"lhich 1,'ould permit the use of the lake for flood control and storage to a maximum elevation of 49 •.5 meters above sea level and "Thich are described as Habbaniyah Project, stage I, is estimated by the Irrigation Development Commission at ID 2,700,000. Of this, works for ID 2.000,000 still remain to be undertaken. Of the latter surn, the equivalent of ID 300.000 is required in pounds sterling. Habbani~ Project, Stage II. After the completion of the t>rorks described under Stage I, pla-'rl.s con- template the raising of the ma..~imum storage level in Habbaniy~~ lake to an elevation of 51.0 meters above sea level. The cost of the construction of appropriate facilities to achieve this is estimated at an additional ID 6'15,000; the total cost for "forks still to be undertaken is, therefore, ID 2,675,000 for both stages of the Habbaniyah project. '[,Then completed, the project is expected to permit the control of floods on the ::~U'phrates and the extension of irrigation to 2,400,000 masharas of ne", land.1i Hillah Irrigation Project This is a comprehensive plan for irrigation development along the left bank of the Euphrates, as far east as the natural drainage line bet"reen the Euphrates and Tigris. The total cost of the plan is estimated at over ID 11 million; the project is believed to permit the irrigation of about 4 million masharas 0 f net-1 land. The propo sed ,"ork is, hOt-'ever. to be un1ertaken over a series of ;)rears in accordance \<Tith the funds made available for it each year. The first step nOllr proposed is an increase in the capacity of the already existing :qillah canal and the relocation of one of its main branches. The cost of this project is estimated at ID 1,020,000, appro~imately half of "Thich should be available in foreign exchange; of the part supplied in foreign exchange, at least one-third should be in U.S. dollars. Oultivation of 360,000 masharas of new land is to be made possible by this project. 11 1 mashara =0.25 hectare ~ 0.62 acres.  - 60 - Projects on the Tigris ...anUts Tributaries Uadi Tharthar ,Floo£!, Control Pro,ject The ':'Tadi Thartl1ar is a semi-desert 1!Tater course and valley partly belo'" sea level lying be~~reen the Euphr8"tes and Tigris Rivers. The bottom o~ the Tharthar depression, about 60 kIn. northwest of :Baghdad. is about 3 meters be 1o",' aea level. The 'Jadi Tharthar project contemplates the diversion into that depression of the flood. "raters of the Tigris thro'.lgh a diversion dam on the rh'er and a channel leading from the river to the depression.. After com- pletion of the project the flo"r of the Tigris could be maintained. at any desired volume, river floods being thus completely eliminated. Throu&~ an outlet channel, flood "raters stored in the <'Tadi Tharthar could be returned to the Tigris in periods of 10"T I'rater flol.,. The total cost of the project. including provision for the generating of iW'droelectric pO'\fer, is esti~ated at about ID 16 million. Since the execution of the entire project I!Tould require a number of years, only the flood control elements of it are recommended for oonstruotion in the immediate future. The estimated cost of the flood control project as such, consisting mainly of a barrage on the Tigris and an inlet ohannel and regulator into the 'radi Tharthar, is ID 9 million. Although no detailed plans have been prepared as yet. a nu.':llber of irri- gation ','Torks on the Tigris and its prinoipal aff;tuents have been pro~ected by the Irrigation Development Co~~ission. The principal ones and their estimated costs are listed below. Estimated Cost , ID Lesser Zab extension 5,285,000 Ishaqi area 1,020,000 Diala &: lifahr"Tan area 5,595,000 Lo",er Tigris areas 6,415,000 Total 18,:ns.ooo Dam Construction Projects The follo\"ing are the prinCipal projects for the construction of (lams for "'ater storage and possible la.ter iW'droelectric development in the upper valley of the Ti~is considered by the Irrigation Commission: Gibraltar Datn. Construction of this dam Mould permit regulation of the flON of the Dials. River, an affluent of the Tigris, and thus aid materially in controlling floods on that river. It ,.rould also permit u.se of stored 1'!ater for irrigation purposes and for production of hydro-eleotrio po,'rer. The esti- mated cost of the project, excl\lsive of po',rer development, is ID 2,574,000. The proposed pOI.rer installation of 30,000 J:c:t.!s. "'Quld eost an additional ID 926.500; the \>Jater provided would suffice for the irrigation of l,200,OOO masharas of ne", land.  - 61 - The Bekhme Dam. The site of this dam is on the greater Zab, an affluent of the Tigris. Its cost ~'rou1d be about ID 12 million, a figure '·'hich. ho":rever, is tho1.1.ght to be too high for favorable consideration at present. The Damir Dam. The site of this dam is on the Adhim River, an ,'J,ffluent of the Tigris. Its cost is estimated at ID ),500,000. Because of the rather irregular flo~.'r of the Adhim River, the project is, hOl.rever, not one of hi?",h priority. The Dokan Dam, on the lesser Zab River, ~'Tould cost about ID 3.120,000; it is the only one among the dams studied t·!hich is thought to ,,'arrant consider- ation for construction in the near future. The Fatha Dam. The site of this dam is on the Tigris itaelf and "iould permit construction of a very large reservoir. The cost of the project, however, appears excessive at present, making the project ;impracticable in the near future. Drainage Projects Experience has demonstrated that irrigated lands in the t\'rin river valley tend to become '.-rater logged and saline in time. To remedy these condi tions, drainage is necel!!sary. Although no specific drainege projects have been proposed by the Irrigation Commission for execution in the immediate future, it is foreseen that a number of s4ch projects will become necessary in time. Estimated cost of drainage projects on presently irrigated l~~d is ID 8.160,000. Transport Development Road Transport Transport faoUi ties in Iraq are still, generally spea..1dng. poor. Ther. are very fetor modern hard-topped all "teather roads in the country; the main development project in road transport, consequently, is the construction of modern hight. rays to link up the capital ,.ri th the countryl s more important ci tie' Of first importance is the construction of a modern trunk road from 3e.ghdad to Basrab via Kut and Amara~ a project not only required for the development of the rich agricultural area "rhleh lies along this route but also to proville for quick vehicular traffic betr,·reen the capt tal and the port of Basrah. The project aecond in importance is the reconstruction of the Baghdad to Kirimk road to conllect that important industrial city T!'ith the capital and to nrovide. at the same time, a direct line of communication b;)r road bet'.'feen the port of ~asrab in the south and the frontiers of Persia and Syria in the north. In addition to the construction of ne1rT roads, an important problem in Iraq is the satisfactory maintenance of those already in use. Paved roads are badly in need of strengthening and res~facing and in some casas regrading and realigning to meet the requirements of present day traffiC, O~.ring to shortage of funds during the past fe..r years. ,.,rork has been restricted mainly to surface dressing and renetoral of defective culverts.  - 62 - Earth roads. 'IThich form the major part of the high"Tay system of the country, can only be relied upon as a channel of communication as long as the ",eather remainE! dry. During loJet "feather. they become impassable. par- ticularly in the "salt areas" in the south, and therefore disrupt eorr,muni- cations, a case in point being the present road from Baghdad to Basrah via Kut and Amara. Present maintenance allotments are devoted entirely to regrading the surface of these roads from time to time and to the rena':'al of defective culverts, the funds available being generally insufficient for really effective maintenance. The cost of a comprehensive road and bridge building program hrhieh the Iraqi government has prepared has been estimated at ID 15,800,000. Railroad Transport All Iraqi rail111~s are ot-med by the state and operated by the Iraqi RailMay Administration. a semi-autonomous agency of the government under the I:1nistry of Communications and '·'orks. There are about a thousand miles of railroad in the country: of these over 300 are standard gauge and the remain- der one-meter gauge. A meter ga,uge line extends from Basrah to Bag:hdad and a second line from Baghdad to Kirkuk. After the completion of the oombined rail and highN~ bridge over the Tigris at Baghdad, these tl"O lines "Jill form a continuous sy<;tem linking Basrah in the south ~/rith Kirkuk in the north. The standard ~auge line extends from Baghdad via Eosul to the Syrian and Turkish frontier, thus linking Baghdad rdth European rail netl·rorks. Generally speaking. rolling stock, including motive pOHer, :is inade- quate in number of units to meet current requirements. Both cars a~d loco- motives, furthermore, are in poor condition and replacements and additions are needed at an early date. Buildings, too, are mostly inadequate and much replacement is in order. To meet these requirements, the Iraqi state rail- ways have, during the past several years t pursued a rather ambitious program of rehabilitation and development, the main features of Nhich, still to be completed at the present time f are as follo\'Ts: Description Estimated Cost (In Iraq( DinarS) Oompletion of the Tigris bridge required to link the northern and southern meter gauge railroads at Baghdad 1,182,000 Completion of line from Kirkuk to Irbil 1,200,000 lTe," layout and terminal station at Baghdad ,.rest 3,850,000 1Te", locomotives, cars and coaches 1,555,000 Laborers ~~rters at Shalchiyah 396,000 Euphrates river bridge at r"lussayeb 345,000  - 63 - Nachinery and equipment for Shalchlyah shops 244,000 Extension of Shalchlyah shops 115,000 Realignment of 3asrah main Une - Baghdad ,!}Test to Hal' Rijab 250.000 Several net.] station buildings. yard layouts and staff quarters 290,000 Total ·9.427,000 Several smaller, less urgent projects 751,000 Grand Total 10,178,000 Agricultural Mechanization Farm IvIachinerr Pro.ject To relieve an incipient shortage of farm labor and increase efficiency in cultivation, the Directorate General of .Agriculture in the Iraqi ;::inistry of Economy haa recently ~"rorked out a ten-year scheme for the mechanize"tion of farming covering an area of 500,000 hectares. The Dire~torate General e:b.'})ects that as a result of its scheme, the yield of 1;"heat per hectare l.'lill be increased by from 50 to 60 kilos, and the increase in production for the project as a ',Thole 1~'ill therefore be considerable. The requirements of the project over the next ten years are as fo11o\'rs: Total No. Tractol'S 2,500 1,750,000 Ploughs l,500 187,500 Disc harrm,'s 700 52,500 Seed drills 100 15,000 Combines 550 687.500 Threshers 150 900,000 Cultivators 500 32,000 Total 2,820,000 Spare parts - 20% ,64,000 Total 3,384,000 Repair equipment, "rork shops, etc. 300,000 Soil conservation and drainage machinery (tractors, graders, etc.) and spare parts for these 1,000.000 Total cost of entire scheme 4.684,000  - 64 - To finance the project,. the Directorate General of Agriculture plans to seek a 20-year loan of .5 mill10n dinars, a large part of ~'Thich NQuld be required in foreign exchange. Grain Silo Project In the expecta.tion that the early construction of a grain silo at :8asrah· will greatly facilitate the storage, grading, cleaning and handling of bulk grain as well as its transportation by rail, river and sea, the Iraqi Grain Board is studying plans for the erection of a structure of 40,000 tons capacity. Estima.ted cost is r:,s 1,750,000 to be raised through an IBRD or other loan for that amount. Domestic 011 Ref1n1n~ 211 Refinery Project Under its concession agreement Nith the Iraq Petroleum Comp~, the Iraqi Government is entitled to b~ from the comp~ crude oil needed to ~atisfy domestic requirements at the lO~'Test price at Nhich the compa..'V is then selling such oil ~ which, since IPO oil is sold to its constit~ent parent companies, means nearly at cost price. The government's agreements t.rith the Moaul and Basrah Petroleum Com:canies provides that 20~S of their output is to be placed at the disposal of the government free of any charge. The Iraqi government is thus in the posl tion to o1)tain crude oil at very a(lvantageous conditions. In vie,,' of this, the fact that erection of a refinery in Iraq would permit the elimination of imports of petroleum products, Mhich in 19L~8 amounted to ~S 1,643,000, and that petroleum prodUcts could then be sold in the domestic market at l01~rer prices than those no,", prevailing, and the further mechanization of Iraqi agriculture and transport could thus be encouraged, the Iraqi Government is, at present, considering the advisability of the erection of a one million ton domestic refinery. Several preliminary engineering studies for such a plant have been mnde and its total cost is estimated at ~20.130,OOO. Although the project llas been studied for some time and an approach for its financing has been made to the Bank, final plans have, h01rleVer, thus far not been completed.  - 65 - STATISTICAL TABLES  Table 1 Area Average Yield (In hectares>, ~Kilosper ·~ecj;are). ~lheat 490,000 800 Barley 744,000 1,000 Rioe 212,000 1,400 t r~I1.l.1e ~0,000 1,000 Sesame 30,000 500 Maize 20,000 800 Tobacoo 4,000 1,600 Cotton 4,000 . 1,000 Other Crops Vetch 4,000 1,000 Flax 600 800 Mash 5,000 800 Potato 500 8,000 Alfalfa 2.000 32,000 Dates Total number of palms - 35 million Total yield - 270,000 tons (annual average for last 10 years) Sourqe: Based on data furnished the IBRD IVlission by the Iraqi Directorate General of Agrioulture.  Table 2 Irao: ProducjJon qf-.f...:rinc~.ro'Ps, 1918-48 (In metric tons) ;1heat Barley: 1937/38 453,381 764,886 1938/39 482,124 824,908 1939/ 40 491.610 824,187 1940/41 514,568 825,057 1941/42 532,415 858,715 1942/43 479.924 899,000 1943/44 332,284 742,807 1944/ 45 357,579 790,422 1945/46 370,000 895,395 19 46/47 235,454 500,000 1947/48 301,000 570,000 1948/49 450,000 750,000 Rice - unhusked Dates 1938 229,315 260,000 1939 248,423 250,000 1940 215,465 270,000 1941 196,295 265,000 1942 182,167 260,000 1943 241,461 300,000 1944 269,673 1.50,000 1945 328,.523 280,000 1946 356,272 295,000 1947 193,000 301,0001.1 1948 350,000 290,000 1 Note! The 1949 rice crop is expected to be above average as 7,000 hectares have been p1o~,red for planting. (Rice land 1s not usually plowed in Iraq.) Total production of tobacco is around 6 million kilos. 1/ Preliminary estimate. Source: Data f'urnished the IBRD Mission by the Iraqi Directorate General of Agriculture.  Table :3 Oil Production in Irag. b~ OOmPanies and Totala 1924-48 (Thousand Metric Tons) Iraq Ivloeul Kha.naqin ~ Petroleum 00. Petroleum Co. Oil Co. Total 19:34 618 93 712 19:35 3,558 95 :3,653 1936 3,894 99 3,994 1937 4 113 i 118 4,231 1938 4,138 126 4,264 1939 3,788 33 143 3,963 1940 2,325 24 165 2~514 1941 1,362 21 183 1,566 1942 2,267 26 301 2,595 1943 3,321 15 236 : ,572 1944 3,898 6 243 4,146 1945 4,315 12 279 4,607 1946 4,370 14 295 4,680 1947 4,354 9 339 4,702 1948 :3,050 9 :367 :3 .l~26 Source: Prepared from data furnished the IBRD Hisdon by the Iraqi Government.  Table 4 Oil Royalties, Dead Rent and Other Palfments Received A~..E11l by the qpvern211~.....of lr..§S.t-1.2J.1.-!±!3 (Thousand Pounds Sterling) Iraq Khanaq1n Mosul :Basrah Ye~ Petroleum Co. Oil Co. Petroleum Co. - Co. Petroleum ~ Total 1937 1.347 36 300 300 1,983 1938 1,308 41 328 300 1,977 1939 1,263 52 319 300 1,934 1940 824 61 359 354 1 •.598 -1941 712 67 358 397 1,534 1942 712 112 358 397 1,.579 1943 1,016 86 358 397 1,857 1944 1,)81 88 358 397 2,224 1945 1.,451 105 358 397 2,311 1946 1,586 III 367 408 2,1.1-72 1947 1,573 129 367 408 2,477 1948 1,101 140 365 408 2,014 s~! Prepared from data furnished the IBRD Hission by the Iraqi Government.  Table !2 Output of Refined Oil Products in Iraa, 1937-48 11 (rJii1lions of Imperial Gallons) Motor Year Gasoline Kerosene Gas Oil Fuel Oil Tote.1 1937 6.0 5.2 0.1 17.5 28.8 1938 6.4 5.6 0.5 18.3 30.8 1939 6.9 6.5 0.7 19.5 33.6 1940 7.8 6.8 0.8 23.0 38.4 1941 14.1 7.8 0.9 24 •.7 47.5 1942 20.5 10.8 2.6 48.5 82.4 1943 27.8 10.6 3.6 49.5 91.5 1944 14.3 11.3 2.3 42.3 70.2 1945 12.3 13.8 2.8 40.7 69.6 1946 12.4 16.0 1.8 42.5 72.7 1947 16.8 17.2 3.0 52.1 89.1 1948 19.4 19.1 4.4 53.1 96.0 1J Produced at the refinery of the Khane.qin Oil Comyany. Source: Prepared from data furnished the I:BRD IvIission by the Iraqi Gov'ernment.  Table 6 SaJ.es of ~lkE?~oducts in !rag,. 19;7-48 (r4illions of Imperial Gallons) Aviation !viotor Year Gasoline Gasoline Kerosene Fuel Oil Gas Oil Total 1937 1.3 7.4 7.0 34.5 .7 51.0 1938 1.6 7.7 7.7 30.2 .9 48.1 1939 1.8 8.4 8.6 32.0 1.0 51.7 1940 1.2 9.2 8.6 34.5 1..0 54.4 1941 .4 9.1 8.4 :33.4 .7 52.0 1942 .3 5.7 9.7 50.4 .6 69.6 1943 .4 8.5 11.3 57.4 .9 78.3 1944 .6 9.1 13.5 58.9 1.2 83.2 19L}5 1.4 10.3 16.9 61.6 1.7 91.9 1946 1.8 15.3 20.3 61.7 2.4 101.4 1947 2.4 16.8 21.7 74.4 3.7 119.0 1948 3.1 24.6 24.8 77.8 5.9 136.3 Source: Prepared from Data furnished the IBRD ivIission by the Iraqi Government.  Table 7 !tabor Force. Employed by Iraa] ..9.11 Compa..l'li~'3..1. 19:,39-48 Year Iraqis Foreign Total 1939 l},105 259 4,364 1940 3.347 188 3,535 1941 3,137 140 3,277 1942 3,194 165 3.3.59 19/.j,3 3,804 158 3,962 1944 4,311 236 4,547 1945 5,486 256 5,742 1946 12 753 t 500 13,257 1947 13,900 656 +,556 1J 1948 13,463 778 14,241 Sour~: Data furnished the IBRD Mission by the Iraqi GoveTnment.  Table 8 Raihra.y Freight Traffic in Iraq 1937/38 302 1938/39 296 1939/40 n.a. 194J/41 250 1941/42 409 1942/43 814 1943/44 912 1944/45 651 1945/ 46 521 1946/47 600 1947/48 557 Sources! Iraq: Statistical ~bstract, 1939/40, 1944-46; Iraqi State RaihT8¥s, Report on the Administration of the Raihrays. 1947/48.  Table 9 Tonnage of Imports and Exports Flo",ing Through the Port of Basrjl~ 12;;8-L,~8 (In thousand metric tons) ~ Inmorts E;ports 1938 375 444 1939 317 487 1940 294 385 1941 189 203 1942 939 135 1943 961 222 1944 562 633 1945 434 647 1946 438 601 1947 530 682 1948 642 710 Source; Based on data furnished the IBRD r,Iission by the Iraqi Government.  Table 10 Media of p~~t, 12)8-1949 (Millions of Iraqi Dinars) Currency& DemandDeposite~ Total End of 1938 4.6 1.2 ,.8 1939 .5.9 1.2 '7.1 19.40 6•.5 L7 8.2 1941 11.0 6.0 17.0 1942 21.9 6.4 28~3 1943 3.5.4 12.8 48.2 1944 40.8 1.5.5 56.3 1945 41.5 13.3 54.8 1946 39.8 13.6 53~4 1947 35.2 12.'7 47.9 1948 34.7 12~.5 47.2 1949 Ja11Xiar.r 34.5 12.6 4'7.1 Feb:cuary 34.3 12.0 46.3 Harch 34.5 11.9 46.4 AJril 34.6 12.7 47.:3 Hay 34.6 June 35.5 ~ Notes ~d coin in circulation. J1/ Commel-cia1 banks. Source: Based on data furnished the ZBRD Mission by the Iraqi Government.  Table 11 Price and Cost of b..U'Jn,& II}!exes. +3J9-4~ General "';ho1esa1e Cost of Livin~Jb~ Average of Price In.!!ex {Baghdad) for Unskilled I;aborers in Baghdad l.939 100 100 1940 138 1941. 179 1942 383 1943 590 1944 534 1945 503 584 1946 482 567 1947 522 601 1948 5:58 673 1949 January 505 594 February 499 590 March 489 584 April 487 575 May 559 11 Base year~ 1939 (December 1938-August. 1939) Source: Based on data furnished the IBRD r.Iission by the Iraqi Government.  Table 12 Total Revenues a.nd E:ltPendi tures 2! the I.t.~.9.! Go '!;,ernmen t t 1935LJP.J;o 1249(50 TI (Millions of Iraqi Dinars) Year Revenue Expenditure Balance 1935/36 6.,5 6.9 - .4 1936/37 7.3 8.4 -1.1 1937/38 8.5 10.1 -1;6 193 8/39 9.4 10.6· ...1.2 1939/40 10.7 10.6 1 .1 1940/41 11.4 11.5 - .1 1941/42 13.6 11.1 12:5 19L}2j43 19.9 15.3 f4.6 1943/44 25.5 21.0 14.5 1944/45 2.5.1 24.0 fl,l 194.5/46 26.7 26.8 ..,. .1 1946/ 47 31.4 31.4 0 1947/ 48 33.0 34 •.5 -1..5 1948/49Y 35.1 40.6 -5 •.5 19 49/50Y 33.4 37.7 -4.3 11 Including Capital 'lorks Programme, State Railroads t the Port of Basrah, Fao Bar Dredging Scheme and Iraqi Currency Board. 2J Budget estimates. Source! Prepared from data furnished the IBRD Hisdon by the Iraqi Government.  Table 13 (l'1il1ions of Iraqi Dinars) Year Revenue EependiturE;! !3a1ance 1935/36 4.8 4.4 f .4 1936/37 5.4 4.8 f .6 1937/38 6.2 5.1 f 1.1 1938/39 5.8 5.6 f .2 1939/40 6.1 6.4 - .} 1940/41 6.8 7.2 - .4 1941/42 7.0 7.7 - .7 1942/43 11.6 10.6 f 1.0 19 43/ 44 14.4 13.7 f, .7 1944/45 16.1 17.1 -,1.0 1945/ 46 17.3 19.8 - 2.5 1946/47 22.7 22.4 f .3 1947/ 48 21.2 23.0 - 1.8 1948/4c;Y 24.6 26.0 - 1.4 1949!SOY 25.0 25.0 0 11 Exclusive of Cfrpi tal 'Jorks Programme State Railroads t t Port of Easrah, Fao Bar Dredging Scheme and Iraqi Currency Board. . gj Budget e~timates. Source: Prepared from data furnished the IBRD Eission by the Iraqi Government.  Table 14 Rev~nues and Expenditures of the Tragi Government 1 s 'Capital ~lorks Program. 1935/36 to'1949/20 '.. (:Millions of Iraqi Dinars) Year Revenuell Ef,CPenditure Balance + ( 1935/36 .6 1.2 - .6 1936/37 .6 2.4 - 1.8 1937/38 .7 2.4 - 1.7 1938/39 2.0 2., - .5 1939/ 40 3.1 2.2 f .9 1940/41 2.9 2.'7 f .2 1941/42 3.2 1.0 f 2.2 1942/43 2.2 1.0 f 1.2 1943/ 44 3.'7 1.7 f 2.0 1944/ 45 2.2 1.9 f .3 1945/ 46 2.9 1.5 f 1.4 1946/4'7 2.4 3.1 - .7 1947/ 48 4.8 3.6 f 1.2 1948/49Y 3.6 4.6 - l.O 1949/50?:i 2.2 2.8 - .6 11 Largely oil royalties. ?J Budget estimates. Source: Prepared from data furnished the IBB.D Mission by the Iraqi Government.  Table 15 Revenues and Expe]fditures of the Iraqi state Raihr¥s. 19:2 5Q§.,.J..9.JJ.!f9 I. SO (Ivtlllions of Iraqi Dinars) Year Revenue E!Eend.i ture :Balance Ordinary Capital Total 'Iorks 1935/36 0.5 .5 .04 .5 0 1936/37 .6 .5 .02 ., f .1 1937i38 .7 .7 1.1 1.8 - 1.1 1938/39 .7 .8 1.0 1.8 - 1.1 1939/40 .8 .7 .6 1.3 - .5 19lJ.-O/41 1.0 .8 .2 1.0 0 1941/42 2.2 1.4 ,2 1.6 f .6 1942/43 4.3 2.3 .2 2.5 f 1.8 1943/44· 5.1 3.8 .1 3.9 f 1.2 1944/ 45 4.1 3.1 .1 3.2 f .9 1945/ 46 3.8 3.2 .4 3.6 f .2 1946/47 3.4 3.2 .8 4.0 - .6 1947/ 48 3.8 3.5 1.8 ,.3 - 1.5 1948/4911 3.8 3.6 2.6 6.2 - 2.4 1949/5011 3.7 3.6 2., 6.1 - 2.4 11 Budget estimates. Souroe: Prepared from data furnished the TBRD Mission 'by the Iraqi Government.  Table 16 ~y.es and gpet;ldfi¥es r.z!'~J'ort-Sf B~Jl.£.~.92ilJ.§_ts>. f.2.Lt9tSO (1-11111ons of Iraqi Dinars) ~ Revenue' E~enditure :Ba~ Ordinary Capital Total i/orks 1935/36 .29 .27 .12 .39 - .10 193 6/37 .35 .29 .07 .36 ..,. .01 1937/38 .43 .35 .04 .39 f .04 1938/39 .44 .37 .02 .39 .j- .05 1939/40 .42 .37 .02 .39 I- .03 1940 / 41 .39 .36 .02 .38 I- .01 1941/42 .77 .48 .01 .49 f .28 1942/43 1.11 .71 .04 .75 I- .36 1943/ 44 1.19 .90 .03 .93 I- .26 1944/45 1.19 .93 .04 .97 I- .22 1945/ 46 1.15 1.05 .09 1.14 I- .01 1946/47 1.25 1.13 .10 1.23 I- .02 1947/48 1.51 1.27 .22 1.49 I- .02 1948/4911 1.62 1.61 .40 2.01 - .39 1949/5011 1.60 1.54 .60 2.14 - .54 1/ Budget estimates. Source: Prepared from data furnished the IBRD Mission by the Iraqi Government.  Table 17 Revenues andmenditures of the Fao ·Bar Dredging Scheme. 1925/36 . to 1'242[5° (Millions of Iraqi Dinars) Year Revenue E~enditure Balance Ordinal7 Capital Total ~I[orks 1935/36 .20 .19 .03 .22 - .02 1936/37 .23 .14 .08 .22 f .01 1937/38 .29 .17 .13 .30 - .01 1938/39 .25 .21 .04 .25 0 1939/ 40 .24 .10 .14 .24 0 1940/41 .23 .19 .04 .23 0 1941/42 .26 .25 !J .25 I- .01 1942/43 .44 .34 .01 .35 I- .09 1943/44 .51 .39 .01 .40 I- .11 1944/45 .69 .45 W .45 I- .24 1945/ 46 .74 .49 .04 .53 f .21 1946/47 .70 .48 .05 .53 I- .17 1947/48 .76 .55 .07 .62 f .14 1948/491/ .82 .70 .60 1~30 - .48 1949/501/ .82 .67 .48 1.15 - .33 W Less than 10.000 Iraqi dinars. y Budget estimates. Source: Prepared from data furnished the lBRD i··iission by the Iraqi Government.  Table 18 Revenues_!jlPd ,ExPendi tures of the IragLQurrencI Board, 1215/26 to 1242/50 (Millions of Iraqi Dinars) ~ Revenue EJg?endlture Balance 1935/36 .11 .08 I- .03 1936/37 .12 .11 t .01 1937/38 .14 .14 0 1938/39 .16 .09 t .07 1939/40 .13 .07 f .06 1940/41 .16 .08 t ,08 1941/42 ,17 .09 f .08 1942/43 .23 .17 t .06 1943/44 .60 .35 t .25 1944/ 45 .81 .35 t .46 1945/46 .85 .14 f .71 1946/47 .90 .11 t .79 1947/48 .85 ·54 I- .31 194B/49Y .70 .54 I- .16 1949/50Y .04 .52 - .48 11 Budget estimates. Source: Prepared from data furnished the IBRD Hission by the Iraqi Government.  Table 12 Ordinar;y: Revenue~ of the Iragi Government b~ Main Categories. . ... 12;38-29... 1945-46 to 1942-SQ. . , . Turnover Tax Custom on Agricultural Tobacco Income Years and Excise Produce ilonopo1:v: Tax Others Total (Ivlillions of Iragi Dinars) 193 8/39 3.3 .9 ?J .3 1.3 5.8 1945/ 46 4.7 3.8 1.2 1.9 5.7 17.3 194 6/47 7.2 4.4 3.5 1.8 5#9 22.7 194 7/ 48 8.9 3.6 1.9 1.8 5.1 21.2 1948/ 4911 9.6 4.5 3.2 2.0 5.3 24.6 1949/5011 10.5 4.4 2.8 2.1 5.2 25.0 (Per Cent of Total) 1938/39 56.2 15.9 5.4 22.5 100.0 1945/ 46 27.0 21.7 7.1 11.2 33.0 100.0 194 6/47 31.6 19.4 15.4 7.7 25.9 100.0 1947/ 48 41.8 17.0 8.8 8.5 23.9 100.0 1948/49Y 38.9 18.2 13.1 8.1 21.7 100.0 1949/5011 42.0 17.7 11.2 8.4 20.7 100.0 11 Budget estimates. ?J Instituted in 1941. Source: Prepared from data furnished the IBRD H:i.ss1on by the Iraqi Government.  Table 20 ~faln Cate orles, Emergency Years Defense E!pendltures!/ Education Police ,Agriculture Others Total ~Ill!ions of Ir§gi Dinars 1938/39 1.6 .7 .7 .1 2.5 5.6 1945/ 46 5.4 3.8 1.6 2.1 .5 6.4 19,8 1946/47 5.3 4.0 1.7 2.6 .6 8.2 22.4 1947/ 48 4.4 4.2 2.2 2.6 .9 8.8 23~O 1948/4~ 5.5 5.7 2.6 2.0 1.1 9.l 26.0 1949/S0Y 5.6 ,5.8 2.2 2.0 .7 8.6 25.0 Per Cent 9tMTotal 19,8/39 28.6 ... 12.7 11.9 1.1 45.7 100,0 19 45/ 46 27.1 19.0 8.1 10.6 2.6 '2,6 100.0 1946/47 23.5 18.0 7.1 11.5 2,8 36.S 100,0 1947/ 48 19.0 18., 9.4 11.2 318 38.l 100,0 1948/495J 21.2 22.1 9,9 7.7 4~2 34.9 1.00r O 1949/50?J 22.5 23.2 8.9 8.0 3.0 34.4 100.0 l./ Includes, from 1945 to 1947, only the cost of living allo1'ranoes to Government employees; in 1948 also ID 750,000, and in 1949, ID 1,250,000, for extraordinary expenditures in connection l,!i th the l,rar in Palestine. ~ Budget estimates. Sourge: i4 Prepared from data. furnished the !BftD Mission by th, Iraqi Government,  Table 21 Ordinary Budgeted Revenues and E~enditures Of the Iraq,l Go~nment< • .lY De:ear,.~ 194zL4JL to 194,9J.:;.Q Allotments Allotments Allotments i"Iinlstries I 1!" and Departments 1947/48 1948/49 1949/50 ID ID --~ Summary of Expenditures Pensions and grants-in-aid 3.55,300 385.700 388,100 Civil List 90,695 91,290 87,440 Parliament 154,375 105,820 108.980 Comptroller General of Accounts 14,130 14,780 14,630 Council of l.finisters so,664 30,334 32,284 Ministry of Foreign Affairs 891,1.50 71.5 t 740 696,3.50 Ministry of Finance 1,669,661 1,441,366 1,151,960 Customs and Excise 490,480 448,300 468,030 J.linistry of Interior 1,042,90.5 929,82.5 863,200 Police Department 2,302,1.50 1,994 ,1.50 2,000,000 Hinistry of Social Affairs 2,068,080 1,837,97.5 1,900,000 Ministry of Defence .5,332,370 .5,492,900 .5,500,000 Ivlinistry of Justice 32.5 ,600 32.5 t 600 29.5,900 Department of Tapu & Land Settlement 283,600 278,100 223,200 Linistry of Education 2,277,600 2,.567.100 2,164,600 Ivilnistry of Economics 380,200 486,070 329,830 Agriculture & Veterinary Departments 1,0.51,290 1,177.990 826,470 Directorate of Tobacco ii:onopoly 65,200 64,700 46,300 Ninistry of Communications &, ~yorks 214,370 187.810 2.56.980 Public ':lorks Department 642,000 .594.000 593.846 Irrigation Department 273 •.500 293,.50 0 260,000 Posts & Telegraphs Department 657,080 673,450 624,220 Emergency Expenditure 4,000,000 5,732,500 6.067,680 Local Administration in LhTas 400,000 100,000 100,000 Total 2.5,032,400 25,969,000 2.5.000,000 Summary of Revenues Taxation on Agricultural & Natural Produce, Animals & Rents of Government Properties 4,000,000 4,472,100 4,1.1-19,100 Property tax, Income Tax & Stamp Duty 2,76.5,0.50 2,919,0.50 3,183,330 Hisce11aneous Revenues 1,3.58,000 787,600 786,300 Customs and Excise 8,.500,000 9,.562.500 10,500,000 Posts and Telegraphs 872,000 1,077,600 1,084,600 Departmental Beceipts 3,738,850 .5,7 61,720 5,026,670 Supply 't~eceipts 376~000 Total 21,610,000 24,.580 •.570 2.5,000,000 Source: Prepared from data furnished the r:SRD !~Iiss:ton by the Iraqi Government.  Table 22 Public Debt of Iraq. M£>y, 1949 1. +tons: and medium term loans (issued in Iraqi Dinars) Amount Date of Issue Interest ~ Haturi t;'( ID 1,000,000 Jan. 1, 1945 4% 20 yrs. Dec. 31, 1964 1,000,000 Oct. I, 1947 3% Mt 5 yrs. Sept. 30, 1952 1,000,000 Jan. I, 1948 3 't?JiJ 10 yrs. Dec. 31~ 1957 3,000,000 April 1, 1948 ~ 20 yrs. 1-~arch 31 t 1968 ID 6,000,000 2. Treasurr ,Bills (Issued 111 Iraqi Dinars - 1 year maturities) ID 3,000,000 1948-49 Held by Currency Board 1,000,000 1948-49 Held by Rafidain ~ank 1,100.000 1948-49 Held by Eastern, Ottoman, ! ran and Arab Banks ID 5, 100,000 3. Amounts advanced by Oil COIDRanies* ~ 1,000,000 in 1939 ) Of Nhloh repaid: 1,000,000 in 1940 ) 1/1/1946 ; 116,202 1,000,000 in 1941 ) 1/1/1947 ~ 144,060 1,000,000 in 1943 ) 1/1/1948 ~ 126,602 500.000 in 1945 ) :b 4,500,000 Total * Rep~able at a rate not to exceed ~ 900,000 per annum. 4. Debt to Un! ted K1n~dom Government for ;..rar surplus material About ~ 2,000,000 unfunded, non-interest bearing debt. Against this debt, ho"revel", Iraq claims an almost equivalent credit for customs duties on ""artime imports and for railroad transport services rendered during the ','ar. 5. Debts Ollred by Iraqi State Ha11roads to suppliers of materials for their development program About ID 2,200,000 ~ payable partly in ~ sterling. ~: As the foregoing enumeration shm,rs, Iraq has no funded external debt. Source: Prepared from data furnished the IERD Mission by the Iraqi Government.  Table 23 Iraq: Total Foreign Trade. 19l~8EJ (Millions of Iraqi Dinars) Year Imports,Ei Exportssi Balance 1936 7.2 3.5 - :3.7 1937 9.6 5.6 - 4.0 1938 9.4 3.7 - 5.7' 1939 8.2 3.7 - 4.5 1940 8.7 4.1 - 4.6 1941 6.8 4.2 - 2.6 1942 12.2 4.7 - 7.5 1943 15.6 9.4 .,. 6.2 1944 14.3 9.5 - 4.8 1945 18.9 10.0 -8.9 1946 28.4 13.1 -15.3 1947 40.0 14.7 -25.3 1948 45.5 8.6 -36.9 gJ Excluding bullion and coins. ~ For home consumption. £! Excluding exports of 011 by oil companies. Sources: Government of Iraq. Statisticgl Abstract, 1946, and data. furnished the IBRD Nission by the Iraqi Government.  Table 24 Main Iraoi Exports by Value, 1228, 1246-!!§. (In millions of Iraqi Dinars) 19)8 1246 J.2!±Z. 1948 Grains, pulses, flour 1.2 5.7 6.9 0.4 Dates .9 4.4 4.7 4.7 Raw cotton .2 0.4 .1 Ra"7 ~!roo 1 .4 1.0 .4 1.0 Hides and skins .2 .4 .2 0.3 L1ve animals .2 .5 .6 0.2 Other exports .6 1.1 1.5 1.9 TotaW 3.7 13.1 14.7 8.6 sf Excluding exports of oil by oil companies. Source~: Iraqi Statistical Abstract, 1939 and 1946, ~~d data furnished the IBRD Mission by the Iraqi Government.  Table 25 rvIain Iraqi Exports, by: 9,uantLtz. ·19J81~ 1946-48 (Thousands of Metrie Tons) ~ 1946 1:2!±2. 1948 Grains, pulses, flour 259 275 299 13 Dates 186 208 216 214 Ra'" cotton 4 rY 2 1 Ra'" \1001 S 7 3 7 Hides and skins 2 1 1 3 rY Less than 1,000 metric tons. §ources: Iraqi Statistical Abstr~, 1939 and 1946, and data furnished the !BRD IvIission by the Iraqi Government.  Table 26 Main t;rag1.1nmo,rt§.· bZ Value. 1228 , 1246-48 (Millions of Iraqi Dinars) l2J§. 12,46 1947 1948 Cotton piecegoods .8 4.3 6.5 7.3 Rayon & "Toolen pieeegoods ~6 1.3 2.0 1.7 Iron and steel 1.1 2.6 4.8 5.0 Boilers, machinery, etc. 1.0 1.7 2.9 4~1 Electrical machinei,y and apparatus .3 .6 1.2 1.9 Chemical & pharmaceutical products .1 .8 .8 .8 Automotive vehicles & parts .4 .6 1.7 2.2 Tea .3 .4 2.3 2.1 Sugar .5 1.8 1.7 3.7 Clothing .3 1.1 1.3 0.8 Soap .1 .7 '.. 5 .8 Timber .3 .5 1,0 .6 Others 3.6 12.0 13.3 14.5 Total 9~4 28,4 40.0 45.5 Sourqe!!s Ira.gi S.tatist1caJ. Abstract, 1939 and 1946, and data furnished the IBRD Mission by the Iraqi Government.  Table 27 Ivfain Iraai Import.s, by: Quantity, 1928, 1946-48 (Thousands of metric tons) ~ 1946 WZ 1948 Cotton piecegoods (millions sq. meters) 50 42 47 56 Iron and Steel 52 62 119 92 Tea. 3 2 6 6 Sugar 44 37 29 40 Soap 4 3 Source; Iraoi statistical Abstraet, 1939 and 1946, and data furnishedth~ URD Hisdon by the Iraqi Government.  Table 28 Iraq: Expor~s to, Principal I:lemts1 1.9:2 8• 1946-48 (Millions of Iraqi Dinars) mJl 1946 l.9!!2 1948 United Kingdom .9 1.3 2.1 1.3 United States .6 1.2 .6 1.0 Germany .2 .4 Japan .4 India .3 2.6 3.5 1:5 Iran .1 .3 .3 .3 Syria and Lebanon .2'W 1.0 .5 .6 Palestine & Transjordan .2 .6 .7 .4 Egypt '.1 .7 .5 .6 Other Coulltries .7 5.4 6.5 2.5 Tota1sW 3.7 13.1 14.7 8.6 ~ Excluding exports of oil by oil companies. 'EJ Syria only. Sources: Iraqi Statistical Abstract, 1939 and 1946, and data furnished the IBRD Ivlission by the Iraqi Government.  !s:P1e 29 Iraq: I!!morts , from Princi:eal .Suo12lie,rsa 1938 1• 194£:..48 (Millions of Iraqi Dinars) ID§. 1246 12!±Z 1948 United. Kingdom 2.8 12.4 17.5 19.8 United states .8 2.2 3.3 3.6 Germany .7 !i !i 0.3 Japan 1.4 !i France 0.1 0.1 0.6 0.7 Italy 0.4 0.4 0.2 2.9 India .6 4.1 5.1 1.7 Iran .4 2.3 1.7 2.0 Syria & Lebanon .2sY 1.9 2.2 1.7 Palestine & Transjordan !11 0.2 EJ EJ Egypt .1 .2 .2 0.3 Other Countries 1.9 4.6 9.2 12.5 Total 9.4 28.4 40.0 45.5 ~ Syria only. !11 Less than ID 50,000. Sources: Iraqi Statistical Abstract, 1939 and 1946 and data furnished the IERD J1.iis!'!ion by the Iraqi Government.  Table 30 Oil E!ports bX the Iraq ~etro1e~ COffiEany. 1937-48 Va1uesJ Volume 011 Ji'..xports to Nain Markets, by Volume (I4illions (Millions ( Thousan~_~~_ _ ~ of Iraqi of tons) Palestine & \linars) U.K. Italy France Transjordan 1937 10.2 4.1 504 137 3,135 5 1938 10.3 4.2 545 185 3,094 19 1939 9.4 3.8 459 129 2,936 93 1940 5.8 2.4 343 46 1,452 894 1941 3.4 1.4 ,.. 1,192 1942 5.6 2.2 2,056 1943 8.2 3.3 2,224 1944 9.7 3.9 2,869 1945 10.? 4.4 194 3,997 1946 10.8 4.4 1,018 3,170 1947 14.0 4.4 1,072 3,028 1948 11.2 3.1 716 20 882 813 !!I Estimates. Sources: International Monetary Fund, International Fi,nancial Stati~tics, June 1949, and data furnished the IERn Mission by the Iraqi Government.  Iraqi :Balance of Paxments Annual Average for the Financial Years 1,236-:n ~o 19J8-39 Receipts Payments In 000 IJ 000 I. Current Transac~ Goods, including silver 4,360 8,790 Adju£tment for undervaluation of exports 222 Contraoand 74 129 Interest on government loans 81 Currency Board profit 52 Profit on direct capital investment IlS 428 Port dues. cow~ission and transit 527 Telegraph and telephone 31 55 Remittances oy emigrants and pensions 10 124 Tourists 454 274 Students & charitaole & scientific missions 34 56 Diplomatic expenditures 82 63 Military expenditures 605 Oil royalties 1.298 7,864 10,000 II. CaRita! Items Public loans JJJ J7 l.acal expenditures oy oil companies 494 Value of imports by oU companies 682 1,509 37 • III. Gold and Short-Term Capital Movements Gold coin and "bullion 133 43 Increase in short term capital in Iraq 35 Increase in short term capital abroad 117 285 43 IV. Q~r Private Capital Transactions, Errors and Omissions 422 10,080 10,080 Source: Prepared from data f~nished the IERn Mission by the Iraqi Government.  Tgble 32 Iragi Balance of P&m,e~, 1946-48 1946 1947 ____-.x;.'~8 ..... P~ments Receipts Payments Receipts Payments Receipts I. Commodity Trade Trade returns 28,4 13.2 40.1 14.7 45.5 8.5 Adjustments for over- valuation of imports and undervaluation of exports -4.8 1.2 -0.9 1.4 -0.9 0.5 Sale of surplus stores 1.7 2.9 0.6 Contraband 1.3 1.3 1.3 1.0 0.5 1.0 Total 26.6 15.7 43.4 17.1 45.7 10.0 Commodity Trade Def!,ill 10.9 26.3 35.7 II. Qther Current Items Interest-Currency Board 1.0 1.0 0.8 Interest-Private Investment 0.2 0.4 0.2 0.3 0.2 0.3 Profits-Private 0.8 0.1 0.7 0.1 0.7 Port dues, transport, commissions 0.1 1.2 0.4 1.2 0.4 1.2 Telegraph & telephone 0.1 0.1 0.2 0.1 0.2 0.1 Remittances by emigrants, pensions & tourists 3.7 5.1 2.7 ).1 2.01/ 1.611 Cultural, educational & charitable expenditure 0.1 0.3 0.5 0.3 0.5 0.3 Diplomatic expenditure 0.1 0.5 0.2 0.5 0.2 0.5 Military and other government expenditure 0.3 3.0 0.4 2.6 2.sY Oil royalties 2.2 2.2 1~7 Other 0.1 0.6 Total 1 Invisl bles 1 5.5 13.9 5.9 11.4 4.2 9.0 Surplus 8.4 5.5 4.8 Total: Current Transaotions 32.1 29.6 49.) 28.5 49.9 19.0 Deficit 2.5 20.8 30.9  Iraqi Balance of Paype,e.1.W-9.!r6-48 (Continued) 1246 1242 _ _ 19!±!L. , P~mente Receipts P~ente Receipts Payments Receipts III. Capital Transactions Long-term govt. investment 0.3 ... 0.1 .,.. 0.0 Value of oil comp~ imports and reexports 0.4 2.4 2.1 0.9 5.0 0.9 9.&y t; 2 Local expo by oil co.'s 5.5 .." 011 co. advances & repayments 0.5 0.1 0.1 Other direct private investment (1:Jot available) Total Oapital Transactions 0.7 5.0 1.1 10,,5 1.0 14.3 Balance 4.3 9.4 13.3 IV .. J!Ql.danft shQrt-.tertp cap! tal Gold coin and bullion 3~1 1.6 1.2 0.8 Foreign currency notes 3.4 1.9 0.6 0.3 Increase in foreign balances in Iraq 0.2 0.4 0.2 Decrease in Iraqi balances abroad 1.9 8.2 13.5 Total 6.7 5.4 1.8 9.7 0.2 13.5 Balance -1.3 7.9 13.3 ~- V. Summan::: Oommodity Trade -10.9 -26.3 -35.7 , Invisibles I 8.4 5.5 4.8 Total Ourrent Transactions -2.5 ..,.20.8 -30.9 Long term capital investment 4.3 9.4 13.3 Gold and foreign exchange -1.3 7.9 13.3 Direct capital investment, errors and omissions -0.5 3.5 4.3 11 Estimates based on knol"Tn number of tourists in Iraq and Irao,i tourists abroad. gj These figures are rough estimates. Source: Prepared from data. furnished the I::BRD Hission by the Iraqi Government.