The government of Iraq should use sovereign credits to unlock potential sources of finance for electricity and other energy projects, the MEED Iraq Energy Projects 2013 conference was told on 26 March.
“With a sovereign credit and access to export credit finance, we feel Iraq could get lending terms of seven to 10 years that would permit the government to build more power stations faster,” said Dennis Flannery Citibank Iraq country head. “The cost of the project could also go down and … be more efficient, financially and technically. A by-product of that would be that Iraq would establish itself in international financial markets and announce the return of Iraq to those markets.”
Flannery said there was no legislation that allows the government to issue a sovereign credit.
“Iraq hasn’t used an obligation for sovereign purposes. Part of the reason is that there’s been a question about the right path to secure approval,” he said. “There needs to be consensus between the government, the ministers and elected representatives about financing projects on a case-by-case basis.
“We would recommend one project should be identified that could benefit from a sovereign credit, develop a financing plan for that project, present the financing plan to the council ministers and then select committee chairs of the council of representatives for provisional approval of a sovereign credit. Then negotiate terms of financing with investors and creditors. This would allow final terms and conditions of the financing to be presented to the council of ministers and council of representatives,” said Flannery.
“If that works, and if the experience is considered to be successful, then repeat that process. Eventually, [Iraq could] adopt legislation governing a process for the establishment of sovereign credit on a routine basis for future infrastructure projects.”