The two state-owned businesses have had to be completely overhauled to write off billions of dollars in bad debts from loans granted to people close to Saddam Hussein. The process should be completed by July 2008.

“Our primary efforts [in the financial sector] have been on the restructuring of Rashid and Rafadain,” says Todd Schwartz, councillor for economic affairs at the US embassy in Baghdad.

“The banks are just operating as cash transfer mechanisms, not as banks. Traders have got to have access to credit. A memorandum of understanding has been concluded between the central bank and Rashid and Rafadain. The bad assets have to be rolled up, taken over by the government and recapitalised.”