With a dysfunctional financial system featuring a poorly organized regulatory framework and ineffective institutions, the task of rebuilding a sound and safe modern financial sector in Iraq is daunting. It should start with the banking sector, which is currently the essential component of the financial system and should cover the sector's legal and regulatory aspects as well as its main institutions. This would be a long term process that will require significant resources, technical as well as financial. To gauge the progress made to date in laying the foundation for the country's economic recovery, the sections below examine the main developments in the Iraqi financial system in the past year. In particular: (a) What was the condition of the banking system before March 2003? (b) What are the key institutional structures that have been put in place over the last year? and, finally (c) What are the key indicators to watch in assessing progress made at various points in the future? In this regard, because of the financial sector's links to the real economy, its success will stimulate economic growth, while in turn developments while in turn the progress made by the economy will largely determine the sector's viability-monitoring its progress will also provides a glimpse as to the state of the overall economy.
Naval Postgraduate School, Center for Contemporary Conflict: http://www.ccc.nps.navy.mil
Strategic Insights (May 2004), v.3 no.5