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Iraqi economy beginning to thrive

"The economy is beginning to work and thrive again and grow," the department's undersecretary for international affairs, John Taylor, said in a conference call during a visit to Baghdad.

"There is a lot that needs to be done though."

Iraqi oil exports should rake in $13.5 billion this year, $1.5 billion more than first thought, Taylor said. Last month, the bipartisan Congressional Budget Office said Iraq's oil would likely bring in $12 billion in 2004 and a total $69 billion over 2004-2007 as the infrastructure was patched up.

In the broader economy, since the war Iraq had imported an estimated one million cars, and at least half a million satellites dishes, the Treasury official said.

Outside of the oil sector, production of cement, asphalt and production materials was doing "quite well," he said. "If you go down boulevards, the streets, shops are open, there is an enormous number of products being sold on the street. It is really a thriving market place already."

On the monetary side, the country was expected to pass a central bank law soon. "I think the progress, though, is very good and by the time of the transition there will be up and running a finance ministry, central bank and a lot of these other banks as well."

US Secretary of State Colin Powell confirmed on Tuesday US plans to return Iraq's sovereignty to its people by June 30.

The treasury official attended a task force meeting with the central bank governor and deputy governors. The task force is the precursor of the central bank decision-making body, which still needs the authority of a central bank law before coming into force.

Taylor also joined in a meeting of private bankers, including foreign banks Standard Chartered and National Bank of Kuwait, who were grappling with regulatory issues of opening business in Iraq.

They were undeterred by the unrest in Iraq.

"The security problems are a problem they have to deal with and will deal with but in the mean time they see the opportunities," Taylor said.

The new Iraqi dinar had been launched successfully, he said.

Demand for the currency was so hot that central bank reserves had grown by one billion dollars, Taylor said. And a new trade bank had already issued more than 200 million dollars in letters of credit, he said.

Some reforms would be left to a new Iraqi government. Others could be passed now. For example, the US administration had already promulgated a decision to completely free up the determination of interest rates charged for loans or offered on deposits from March 1.

But more politically charged issues, such as removing price controls on gasoline, would have to be decided by a new government, Taylor said.