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Mon 3 Nov 2008 12:14 PM

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Iraq cuts interest rates in bid to fight global crisis

Central bank reduces rates by 1% to 15% in effort to stave off economic impact.

Iraq's central bank cut interest rates by 1 percentage point to 15 percent on Monday, aiming to help to insulate the economy from the global financial crisis, the bank said in statement.

"Due to the global financial crisis and seeking to prevent any potential consequences for the Iraqi economy ... the Iraqi central bank reaffirms the importance of boosting bank credit activity to support real growth in Iraq," it said.

"To achieve the finance needed to push forward economic growth ... the Iraqi central bank decided to cut rates to 15 percent from 16 percent, starting from November 3rd."

Central bank governor Sinan al-Shibibi told Reuters in an interview on Saturday that slowing economic growth caused by lower oil revenues was a bigger concern for the bank than high inflation, and that monetary policy was leaning towards easing.

In September, the International Monetary Fund forecast the Iraq would grow 9 percent in 2008, but as gloom gathers over the global economy, this could be harder for the country's heavily oil-dependent economy to meet.

Falling oil prices have already prompted the government to slash its planned budget for 2009 from $80 billion to $67 billion. (Reuters)

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