Tues. PM TNT News Articles 11-30-21



Iraq.. The dollar is among popular demands to reduce its price and wait for the next government to decide its fate

Popular demands in Iraq are escalating to restore the value of the Iraqi dinar to what it was a year ago, with the rise in oil prices that revived the Iraqi budget treasury for the next year, as the Iraqi authorities’ decision last year to raise the dollar against the dinar sparked great controversy in political circles In addition, the poor and low-income classes were affected by the high prices of consumer goods.

And the Iraqi Ministry of Finance revealed in a statement that “although the devaluation of the currency last year and the restoration of oil prices helped improve the financial situation of Iraq, it is necessary to take into account that the country is still very weak.”

The ministry added in its statement that “the current surpluses could turn into deficits with the return of oil prices to normal in the medium term, and another contraction in the oil market could easily lead the country back to the brink of crisis, in order for the Iraqi economy to regain its full strength and be sustainable. That economic policies be geared towards improving resilience in the face of oil price fluctuations through building fiscal buffers and diversifying the economy.

The ministry stressed that “the revaluation of the dinar will have the opposite effect. There are good reasons for the scarcity of revaluation of fixed exchange rates. For example, in 2005 China revalued its currency in response to intense pressure from the United States, which threatened to impose tariffs on imports.”

A huge controversy continues to this day

The writer specializing in political and economic affairs, Saleh pointed out that there were “many countries that preceded Iraq and floated their currency according to supply and demand, removing the hand from direct control of the currency exchange rate or devaluing the currency relative to other currencies, although they did not face economic crises such as China and Japan

But the decision to reduce the value of the Iraqi dinar is still causing a great controversy going on so far, and the question raised by the objectors is about the economic feasibility of devaluing the currency in a rich country like Iraq, and the usefulness of this step, which recalls the years of international economic sanctions that caused a major collapse in According to his gesture, the national currency has depreciated and its purchasing value has plummeted, and markets have become hyperinflated, famine and widespread poverty.

He added, “Voices have increased demanding the return of the currency exchange rate to what it was before the Corona crisis, especially after the rise in international oil prices and Iraq’s overcoming the fear of the lack of large cash liquidity, and the increase in the exchange rate of the dollar against the dinar is one of the measures taken by the government to achieve economic reforms Or what is known as the White Paper, the aim of which is to address the imbalance in the Iraqi economy, which led to the decline in services provided and the rise in the state’s public debt, due to the total dependence on oil as a main source in the budget, and it is subject to the direct management of the Iraqi government represented by the Ministry of Finance and also the Central Bank, and they stated On more than one occasion, “the dinar exchange rate will not change at the present or near, and therefore the rise in oil prices will not affect the current monetary policy.”

Lafteh believes that “if the necessary measures are taken to protect the poorest classes, improve their living conditions and not increase their suffering, and food prices are within reach and there is no inflation in their prices, and new job opportunities are offered that the poor can easily obtain, the rise in the dollar exchange rate will be Its benefits outweigh its harms, and the country will gradually be freed from fluctuating oil prices.”

Lafta believes that “there are other benefits to devaluing the dinar in the long run, to reform the trade balance and reduce the deficit, encourage local industry and demand it and reduce imports, thus preventing the escape of money from the country and the entry of investors to the markets, as well as to increase economic growth.”

As for the researcher in economic and political affairs, Nabil Jabbar Al-Ali, he stressed that “in light of the current conditions and oil prices that have witnessed a recovery during the past months, Iraq was able to secure good revenues equivalent to the expenditures it approved in its last annual budget for the year 2021, in which the amount of the deficit was close to 20 billion dollars.” 

Adding, “This was followed by another frightening deficit of approximately 10 billion that was supposed to be covered by expanding the circle of non-oil revenue collection, of which no more than 25 percent of what was planned in the last budget was achieved, bringing the total budget deficit to approximately $30 billion. (45 trillion Iraqi dinars), high oil prices were able to cover it during the last period.

He adds, “But if we assume the oil market will continue to rise or the optimistic stability in oil prices for the coming year, which is very likely, and the extent of its impact on the Iraqi dinar exchange rate, the answer is that monetary policy in Iraq and the exchange rate policy can be greatly affected by the economic shocks resulting from the decline State revenues, as happened in 2020, and the value of the dinar has become a victim of the state’s failure to hedge and protect its economy, but the exchange rate may not be among the state’s priorities in the years of prosperity and prosperity.

He continued, “This is due to the fact that the Iraqi state, with its successive governments, has adopted high spending policies for political reasons primarily without paying attention to investment development spending, and has exhausted itself with internal and external debts and obligations related to the implementation of stalled service projects

Which may require spending $100 billion to complete them, which requires it to continue. With the current exchange policy, which enables it to secure additional amounts of approximately 25 percent additional to its revenues, but from a political point of view, the victory of some political forces (the forces of the state of law and the forces of the coordination framework) that raised the slogan of rejection of the recent exchange rate change policy may be the beginning of work on adopting measures To change the exchange rate towards raising the value of the dinar against the dollar

If it manages to control the joints of the next government that we are experiencing the throes of its establishment these days, in implementation of part of its government program and electoral slogans, and also to fix the effects of this policy, which was one of the reasons for the increasing rates of poverty in Iraq.

Monetary policy and exchange rate policy remain primarily a political decision before it is an economic decision.  link

Source: Dinar Recaps


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