Banking in Iraq in relation to economic development

Abstract

The main object of this study is to explore and examine some of the ways which might enable the banking institutions in underdeveloped countries in general, and in Iraq in particular, to play a more effective part in the promotion of economic development. In the first chapter some important economic and social aspects of Iraq are displayed. In the second chapter some examination of the experiences of the Iraqi monetary authorities is made. The banking institutions in Iraq, i.e., the commercial and specialised banks, together with the central bank are discussed in chapter three. In this chapter, the possible contribution of the commercial banks in the promotion of economic development by providing medium and long-term loans to agriculture and industry is discussed. In addition, the possible ways in which some of the specialised banks might increase and improve their services are presented. In chapter four the device of deficit financing is applied to a model which represents underdeveloped countries in general. Chapter five offers an application of the device of deficit financing as shown in the model, adjusted to suit the circumstances prevailing in Iraq. Chapter six presents a consideration of the balance of advantage and disadvantage which may be thought to apply to the use of the device of deficit financing, especially when it is agreed that one of the possible outcomes is inflation. This is followed by chapter seven where the conclusions and recommendations reached in the light of the study are set out. We then have six appendices, including a statistical one. The main conclusions are: 1. It may be worthwhile for monetary authorities to consider, very carefully, the possibility of using the device of deficit financing, under certain conditions and within specified limits.2. In calculating changes in prices the categories of the Quantity Theory of the Value of Money can be usefully employed, particularly if an attempt is made to introduce dynamic elements into the Fisher framework, as is done in this study.3. It need not be held that moderate inflation must, necessarily, turn into high and hyper-inflation.4. The commercial banks in under developed countries should give favourable consideration to the making of medium and long-term loans to agriculture and industry.5. Under normal conditions, particularly of international trading, Iraq may be thought to be in a more favoured position to adopt the suggestions set out in (1) and (4) above, than most other underdeveloped countries. These are perhaps all the more significant for Iraq in that the natural resource, oil, which provides opportunity, is a diminishing or wasting asset.