Iraq Targets 5% Inflation 2012

UPDATE 1-Iraq targets 5 pct inflation in 2012
Published: Wednesday, 7 Sep 2011 | 10:16 AM ET Text Size By Martina Fuchs ABU DHABI, Sept 7 (Reuters) - Iraq will aim to keep inflation at 5 percent in 2012, helped by central bank policies to control price growth, the country's finance minister said on Wednesday, and hopes to redenominate the dinar currency by 2013. "I hope that in 2012, with some of the policies of the central bank, to control it (inflation) again to around 5 percent. For 2012, the target is 5 percent," Finance Minister Rafie al-Esawi told Reuters at a gathering of Arab finance ministers in United Arab Emirates capital Abu Dhabi. Iraq's core annual inflation rate quickened to 7.1 percent in July from 6.4 percent in June, driven mainly by higher housing rental prices. "I don't think that inflation will increase ... It increased in the last few months to more than 6 percent. The central bank tried to move its policies, tried to control it back again," Esawi said. Core annual inflation was not expected to exceed 7 percent in 2011 as the economy remained relatively stable, with a steady flow of goods and no unexpected government expenditure, an official said in June. In August, Iraq said it planned to redenominate its dinar currency by knocking three zeros off its nominal value to simplify financial transactions. "The central bank prepared its study to present to the cabinet, which was not yet received, so it's still in the hands of the government," Esawi said, adding he hoped this would be done by 2013. Iraq's central bank began discussing the redenomination of the dinar last year aiming to help ease financial transactions. In Iraq many payments are still carried out in cash because of the underdeveloped banking system. The Iraqi dinar is traded in auction at a fixed rate of 1,170 per dollar. Iraq is recovering after years of war and sanctions and oil still dominates the economy, accounting for 95 percent of government revenues. The minister also said he expected the unemployment rate in the country to range between 15 to 23 percent this year. Investors complain Iraq's still heavily centralised economy is mired in red tape and bureaucracy, and transactions are still often carried out in cash. "Iraq, being in a transitional period, it will take a long time for reforming its financial and monetary policies," Esawi said.