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Cablegate: Currency in the City - a Diyala Banking Update

VZCZCXRO1000
RR RUEHBC RUEHDA RUEHDE RUEHIHL RUEHKUK
DE RUEHGB #4056/01 3471504
ZNR UUUUU ZZH
R 131504Z DEC 07
FM AMEMBASSY BAGHDAD
TO RUEHC/SECSTATE WASHDC 4831
INFO RUCNRAQ/IRAQ COLLECTIVE

UNCLAS SECTION 01 OF 02 BAGHDAD 004056

SIPDIS

SIPDIS
SENSITIVE

E.O. 12958: N/A
TAGS: ECON ETRD EAID EFIN IZ
SUBJECT: Currency in the city - A Diyala Banking Update

1. (U) This is a PRT Diyala reporting cable.

SUMMARY
--------

2. (SBU) Despite various setbacks in September, October was a very
successful month for banking in Diyala. Most significantly,
Ministry of Finance contracted money trucks are now being used to
transport funds from Baghdad to Baqubah essentially eliminating
theft by Iraqi Army security forces. Although assurances of 100
Billion ID shipments have been provided, this has yet to happen
necessitating multiple money runs per month to obtain adequate
currency supplies.

September marked by currency shortages
---------------------------------------

3. (SBU) Banking in Diyala suffered several setbacks in September.
First, the amount of currency released by the Central Bank of Iraq
was less than in previous months, and far less than the amount
promised and required. The provincial bankers and PRT had received
word from multiple Government of Iraq (GOI) and US sources that the
shipment would consist of $75 billion Iraqi Dinar (ID). $50 billion
would be for the monthly government salary and pension requirements,
and an additional $25 billion would be sent as the first installment
of the GOI reconstruction funds. Unfortunately, only $37 Billion ID
was actually released, with no explanation as to the reduction. This
reduced shipment of money will cause widespread liquidity problems
within the province as bankers tap into shallow cash reserves and
what is left of customer savings accounts to make up the shortfall.


4. (SBU) The second setback was in the capacity of the Iraqi Army to
successfully move the monthly currency shipment from Baghdad to
Baqubah. In July and August, no money was lost in transit. In
September, however, $317 million ID (approximately $254,000 USD) was
stolen. After being briefly searched by Coalition Forces (CF), the
Iraqi Army soldiers who were on the movement were turned over to the
Iraqi major crimes unit (MCU) police. It is unclear whether they
are being detained or were merely questioned.

5. (SBU) After the PRT's bank reconstruction projects came
temporarily to a standstill in September, due to QRF funding delays
and the end of the U.S. fiscal-year affecting CERP, they are back on
track in October. Battle damage assessments have been completed on
all of the banks in Baqubah, the scopes of work (SOW) are completed,
and contractors have begun reconstruction of the primary bank in the
province, Rafadain 14.

October Currency Movements Improve
----------------------------------

6. (SBU) October saw significant movement toward Iraqi self-reliance
in successfully organizing and executing currency shipments from
Baghdad to Diyala. Despite the failure of Baghdad to release the
full amount of currency requested in October, the currency shipment
that was executed on 22 October represents a significant step
forward since the mission was completed entirely by the coordinated
efforts of the Iraqi banking system and IA forces - and all funds
arrived safely. An initial money movement was scheduled for Sunday,
21 October. However, this movement failed because the IA did not
properly coordinate movement through the various IA battle spaces.
The Diyala Acting DG of Banking and the IA returned to Baqubah and
on their own initiative made arrangements to try again the following
day.

7. (SBU) At approximately 1330 on Monday, 22 Oct, five Rafadain
contracted trucks transporting 50.4B ID arrived in Baqubah from
Baghdad. Security for these trucks was provided by the IA, but for
the first time since March of 2006 Rafidain fulfilled its transport
obligations and provided five contracted vehicles to handle the
actual currency. These trucks were not filled to capacity and had
they been, no more than three would have been required. The use of
Rafidain trucks dramatically decreased the threat of theft by the IA
escorts and as a result 100% of the currency released, arrived in
Baqubah. The movement was hit by one IED during the return trip,
but it detonated between vehicles and only one IA soldier suffered a
dislocated shoulder.

8. (SBU) Repeating a pattern that has established itself over the
last year, prior to the October currency shipment, assurances were
given that 100 Billion ID would be sent to Diyala, but only half of
this amount was released. The projected fiscal requirement for
Diyala for the month of October is 129B ID. The 50.4B ID received
amounts to 39% of the month's requirement and 50% of the amount
requested by the Governor, necessitating bi-weekly money movements
to acquire the remaining needed provincial operating funds.

COMMENT
--------

9. (SBU) The viability of the banking system in Diyala has improved

BAGHDAD 00004056 002 OF 002


significantly. Of note was the appointment of a Deputy General for
Banking for Diyala. This office is responsible for overseeing all
banking operations in Diyala including the planning, coordination
and execution of money runs to obtain the currency necessary to
conduct provincial business matters.

BUTENIS

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