Warning .. hefty price tag waits for Iraq, which appeal to investors to buy its bonds

September 16, 2015 19:43

Baghdad / follow-up Zora:
warned a report by the Reuters news agency from the deterioration of the financial problems of Iraq in the long term, following the presentation of sovereign bonds in dollar in the international bond market at high interest rates to cover the deficit in the budget because of the war against Daash.

Reuters said in its report it seems to Iraq on his way to return successful international bond market after an absence of nine years to collect billions of dollars at high interest rates may lead to a deterioration of the financial problems in the long term.

Organized Baghdad a promotion to investors last week for a series of sovereign bond issues dollar, which hopes through which you can measure up to six billion dollars.

exposed Iraq financial pressure because of the war on the militants to organize the Islamic state and the tensions between the central government and the Kurdistan region in addition to the drop in oil prices.

When allocated Standard & Poor's rating (B-) credit for Iraq this month, no fewer than six degrees from investment grade Enterprise said that the risks related to security and institutions in Iraq among the highest level between all the countries that institution shall be classified and on a par with Egypt and never the two Greece.

It maximizes internal risk instability to begin to raise US interest rates global market environment and the trend is expected perhaps as of month this.

And approached return swaps commitment against the Iraqi ensure the five-year used in the insurance on sovereign debt from default of its highest level in almost six years risks if 77 basis points increased to 576 basis points.

However, reducing the risk of oil industry possibilities unit in Iraq's second-largest oil producer in OPEC.

The lifting of Iraq's crude oil production to 3.8 million barrels a day in June from 3.05 million barrels per day a year earlier.

The Baghdad It is aimed at raising production capacity total to between 8.5 million and nine million barrels per day by the year 2020.

Among the factors that work to slow down the increase in oil production, bureaucratic hurdles and security concerns and inadequate pipes and capacity storage lines.

But fields in the south where most of the production survived the violence is expected to enable Iraq to pay its debts with satisfaction if achieved aside at least petroleum his plans.

He said Ram Mohan, director at Abu Dhabi Investment Authority, which holds the review of the bond issue prospectus before deciding on the decision to invest in this version, "Iraq now has foreign exchange reserves approaching $ 65 billion and certainly contribute to higher output in increased more .

"So fund managers say that Iraq will not find buyers for its bonds only if you pay very high returns.

has claimed Baghdad size first issued or for the entitlement But bankers expect to be in the range of two billion dollars and have him from five to seven years.

jumped return on bonds Iraqi dollar maturing in 2028 to all-time highs of up to 10.80 percent last week from 8.3 percent at the end of 2014 partly due to expectations of an increase of supply in the market.

He said Raza Agha sovereign bonds of emerging markets analyst at VTB Capital " in light of the Iraqi bonds that mature in 2028 exchange rates and the level of the standard price it would have to be a coupon for a new version of Iraq for a decade 10.75 percent in line with bonds that are "in the market.

He added that the version pricing in those limits mean that Iraq will become the highest versions bond returns between oil-exporting countries in the Middle East and Africa.

The systems Iraq encounters promotion for investors in London on Thursday and Friday is due to this activity moves to New York, Boston and Los Angeles this week.

focus on the Western financial centers and indicates that Iraq might be targeting sale of a large part from bonds to hedge funds and professional investors willing to accept the level of risk is high not to Gulf banks, which tend to buy high-yield issued by the region's bonds.

Said Xuan Ibrahim Taha, founder of Spring Securities Company in Baghdad, said the bond issue came at the wrong time due to low oil prices and increased Baghdad spending the battles in the war on the organization of the Islamic state.
"It's the first you turn a huge surplus into a huge deficit. But the impact on the spot is the direction to severe reservation does not borrow money to fiscal policy.

"But if the issue is part of a coordinated program to strengthen the financial position of Baghdad may be investors reacted positively. According to the prospectus that it might as well be as stating that Iraq will use a range of options such as domestic bonds and loans in addition to the Special Drawing Rights of the International Monetary Fund.

In early June, the IMF agreed to lend Iraq $ 833 million and is expected to submit World Bank $ 1.7 billion for Baghdad.
Taha said the positive is the first time that people are thinking about all that and thinking about what happened and how to correct economic path.

It is believed some fund managers that bonds issued by Iraq quoted as seductive as compared pricing Egypt bonds that mature in a year 2020, and the highest ranked one degree of Iraq as that Egypt faces major political and security problems.
and those bonds are trading at a price of 4.68 percent.
(Source economic dinars)