Iraq plans first bond sale since 2006

Iraq plans first bond sale since 2006
Borrowing costs drop due to country's rising oil revenue and increased stability



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• Stock data on an electronic board is explained at the Iraq Stock Exchange in Baghdad. The country’s gross debt as a percentage of gross domestic product will fall to 39 per cent this year from 352 per cent in 2005, the IMF predicts.

Baghdad: Iraq, recovering from decades of war and sanctions, may sell its first bonds since 2006 next year as rising oil revenue and increased stability help push borrowing costs lower.

"Iraqi bonds have been performing well, so the central bank may issue new ones early next year," Waleed Eedi, a director general at the Central Bank of Iraq, said in a telephone interview from Baghdad on Monday. "The performance of the bonds has improved because Iraq's economy is getting stronger."

The extra yield investors demand to hold Iraq's international bonds rather than US Treasuries has plunged 358 basis points, or 3.58 percentage points, in the past two years to 341 on July 5, according to JPMorgan Chase & Co.'s EMBI Global indexes. Middle Eastern bonds yield an average 334 basis points more than Treasuries, JPMorgan data show.

Iraq will use the money to refinance international debt, which has dropped to about $40 billion (Dh146.8 billion) from $135 billion in 2003, Eedi said.


Growth
Eight years after a US-led invasion toppled Saddam Hussain, Iraq's economy is poised to grow 9.6 per cent this year, second only to Qatar in the Middle East and North Africa, according to International Monetary Fund forecasts. The yield on Iraq's 5.8 per cent dollar bond maturing in January 2028 dropped to 6.699 per cent this week from this year's high of 7.117 per cent reached on March 2, according to data compiled by Bloomberg. The notes have yielded an average 9.257 per cent since they were sold in January 2006.

Iraq was largely untouched by the so-called Arab Spring, which saw uprisings topple leaders in Egypt and Tunisia and threaten regimes in Syria, Libya and Yemen. Protests were limited to the country's Kurdish north and the civil strife that has plagued Iraq since Hussain's was ousted has subsided. Violent civilian deaths fell to 4,038 last year from as high as 28,018 in 2006, according to iraqbodycount.org.

The country's gross debt as a percentage of gross domestic product will fall to 39 per cent this year from 352 per cent in 2005, the IMF predicts. "Iraq's cash position is going to improve dramatically," said Farouk Soussa, chief economist for the Middle East at Citigroup Inc. in Dubai.

The cost of insuring Iraqi debt against default has declined 59 basis points this year to a 2011 low of 302 on July 5, according to data on five-year credit-default swaps provided by CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market

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