Iraq Economic News and Points To Ponder Saturday Morning 1-10-26

Gold Prices Fell as the Market Awaited US Data and the Dollar Strengthened.

Money and Business  Economy News - Gold prices fell on Friday, pressured by adjustments to a commodity index, anticipation of US jobs data, and a stronger dollar which added downward pressure on prices in the near term.

 Gold fell 0.4 percent to $4,458.10 an ounce in spot trading by 0126 GMT. The precious metal had hit a record high of $4,549.71 on December 26. 

The dollar rose in early Asian trading, as traders awaited the latest U.S. jobs report and a Supreme Court decision on President Donald Trump's use of extraordinary powers to impose tariffs.

 This week marks the start of the annual rebalancing of the Bloomberg Commodity Index, a periodic adjustment of commodity weights to keep the index in line with market conditions, and this is expected to continue to put pressure on the precious metals market.

 According to FedWatch, investors currently expect the Federal Reserve (the US central bank) to cut interest rates at least twice this year. Investors are awaiting non-farm payroll data for clues about the future path of monetary policy.

 Non-yielding assets such as gold typically tend to rise during times of low interest rates and geopolitical or economic turmoil.

 As for other precious metals, silver fell 1.5 percent in spot trading to $75.71 an ounce after hitting an all-time high of $83.62 on December 29.

 Platinum fell 2.9 percent in spot trading to $2,202.50 an ounce after hitting an all-time high of $2,478.50 last Monday.

Palladium fell 2.1 percent to $1,749.25 an ounce   https://economy-news.net/content.php?id=64332

The Dollar Rose Amid Anticipation Of US Data And A Supreme Court Ruling.

Money and Business   Economy News - The dollar rose at the start of Asian trading on Friday as traders awaited a U.S. jobs report and a Supreme Court decision on President Donald Trump’s use of extraordinary powers to impose tariffs.

The dollar index, which measures the performance of the US currency against a basket of six currencies, rose 0.2% to 98.883 and continued its rise for the third day in a row.

The upcoming U.S. non-farm payrolls report for December is expected to clear up much of the data uncertainty that has persisted during the government shutdown, but analysts say the data may not provide enough clues to clarify the future path of interest rates, according to Reuters.

 Weekly unemployment benefit claims data released on Thursday showed a slight increase in claims.

According to the CME FedWatch tool, there is an 89% expectation that the Federal Reserve (the US central bank) will keep interest rates unchanged at its next meeting on January 27 and 28, compared to a 68% expectation a month ago.

The U.S. Supreme Court could issue a ruling later today that would determine whether Trump can invoke the International Emergency Economic Powers Act to impose tariffs without congressional approval, a move that could drastically alter U.S. trade policy and throw into chaos after months of negotiations.

The dollar reached 156.885 yen, little changed after data showed that Japanese household spending unexpectedly increased in November compared to the same month last year, indicating that consumption is accelerating ahead of the Bank of Japan raising interest rates to a 30-year high in December.

The euro held steady at $1.1657 ahead of German trade data and eurozone retail sales figures due later today.

The British pound fell 0.1% to $1.3436, the Australian dollar was steady at $0.6698, and the New Zealand dollar fell 0.1% to $0.5749.    Bitcoin fell 0.2% to $91,002.39, and Ether dropped 0.4% to $3,104.38.  https://economy-news.net/content.php?id=64334

Sudanese Advisor: The Financial Deficit Is Short-Term And Will Not Hinder The Development Process.

Money and Business   Economy News – Baghdad  The Prime Minister's financial advisor, Mazhar Muhammad Salih, confirmed on Saturday that the financial deficit is short-term and will not hinder the development process.

Saleh said, according to the official agency, that “the financial deficit in Iraq is mostly linked to fluctuations in oil prices,” explaining that “investors realize that this deficit does not necessarily reflect institutional weakness, as much as it reflects global market fluctuations beyond national control.”

He added that "this perception becomes more firmly established when the deficit is accompanied by disciplined financing tools, such as issuing domestic bonds and sound management of public spending, which sends a clear message of confidence that the government is able to control the course of public finances and not slide into chronic imbalances."

He explained that “the presence of strong financial institutions, foremost among them the Central Bank of Iraq with its independence under Law No. 56 of 2004, constitutes an important reassuring factor for investors, as it reflects the state’s ability to absorb external financial shocks and maintain monetary stability.”

He pointed out that “despite the financial deficit, a number of investment attractions stand out that enhance investor confidence, foremost among them the low external public debt, which is a rare strength in the surrounding regional countries, as it means that Iraq is not burdened with stifling international obligations, which opens up a wider field for financing investment and future growth.”

He noted that “the relative weight of foreign reserves provides a solid cover for the national currency and gives investors high confidence that financial transfers and capital movements will not face severe restrictions or sudden disruptions,” explaining that “the stability of the exchange rate, even in the presence of a financial deficit, creates a predictable economic environment, which is one of the most important criteria that foreign investors look for when making their long-term decisions.”

He stressed that “the government’s commitment to major strategic projects in the fields of energy and infrastructure, such as the Development Road project, sends a clear positive signal to the investment community that the short-term fiscal deficit will not hinder the development process, nor limit Iraq’s ambitions to achieve sustainable economic growth and prosperity .” https://economy-news.net/content.php?id=64368

Exchange Rates Have Decreased In Local Markets.

Money and Business     Economy News – Baghdad  The markets of the capital Baghdad and the city of Erbil witnessed a decrease in the exchange rate of the US dollar against the Iraqi dinar on Saturday morning, in a decline that is considered the most prominent in recent days.

The Al-Kifah and Al-Harithiya exchanges in Baghdad recorded an exchange rate of 146,800 dinars per 100 dollars, compared to a previous rate of 147,800 dinars last Thursday.

Exchange rates also decreased in local money exchange shops, with the selling price reaching 147,250 dinars, while the buying price reached 146,250 dinars per 100 dollars.   https://economy-news.net/content.php?id=64369

The Iraqi Economy And The Impact Of Oil Rent Shocks And Financial Imbalances On The Sustainability Of Stability And Growth Policies

Dr. Haitham Hamid Mutlaq Al-Mansour    As the new year 2026 begins, the Iraqi economy continues to suffer from accumulated financial imbalances, linked to its chronic structural deficiencies. These imbalances act as a chain reaction, weakening the state's ability to achieve stability and growth.

The financial sector is subject to the same rentier nature each year, which fuels budget allocations and expenditure items. This dependence makes public finances vulnerable to any price decreases or declines in exports, leading to sudden revenue shortfalls that quickly translate into spending pressures.

These pressures can result in delayed payments, project reductions, or increased borrowing. This volatility makes long-term planning difficult and undermines the capacity to develop policies that support stability and growth.

While diversifying income sources beyond oil is a strategic option for mitigating risks, the reality of tax revenues remains far below potential. The tax system does not reflect the size of the economy, the volume of consumption, or imports. It also faces fundamental challenges, primarily the absence of a comprehensive GDP (industrial, agricultural, and tourism), resulting in tax revenue being concentrated on unproductive activities.

While a stable revenue base is not established to ensure the regular funding of essential services and provide the budget with the flexibility to withstand shocks through tax revenues, the state's management has become captive to a single source of rent.

On the expenditure side, the imbalance between current and investment spending is evident, with a large share of the budget allocated to consumption, while investment remains less stable and more susceptible to reduction during any crisis.

The danger of this pattern lies in its consumption of resources without building productive assets and infrastructure that enhance long-term economic capacity.   Furthermore, the inflated size of operational spending has created substantial obligations, reducing the effectiveness of fiscal policy.

When revenues decline, the state cannot reduce operational spending and often resorts to postponing investment, increasing borrowing, or accumulating arrears, which weakens growth and increases economic fragility.

When deficit financing is employed, the problem is exacerbated by the financing mechanisms. While domestic or external borrowing may be necessary in some years to bridge temporary gaps, it raises the cost of debt servicing, squeezes out future budget resources, and may reduce the available space for investment spending and services.

Similarly, the accumulation of arrears, such as contractors' dues or inter-institutional debts, leads to a partial paralysis of the economic cycle.

This is because it delays payments owed to companies, which in turn delays wage payments, purchase payments, or business expansion. The crisis then spills from the state's records into the market and employment.

These imbalances are exacerbated by the inefficiency of public investment management and projects. Problems such as inaccurate planning, inflated costs, delayed implementation, and declining quality all reduce the "productivity of expenditure." This means the state may spend heavily without achieving commensurate results in infrastructure projects like roads, electricity, hospitals, or schools.

When project management is weak, public investment becomes less capable of generating growth and employment, and the perception that spending does not translate into services becomes entrenched. This, in turn, increases political pressure to boost current spending rather than restructuring it to enhance investment.

Therefore, financial imbalances cannot be discussed without addressing the contradictions between the overall economic objectives, the policies adopted, and the implementation procedures, on the one hand, and the external shocks that affect the ability of economic policy to achieve its goals, on the other.

For example, in a fixed exchange rate system, the effectiveness of sterilizing the money supply to stabilize the real exchange rate around its target value has diminished in terms of absorbing the impact of rising inflation and limiting the decline in the real value of the dinar and the purchasing power of individuals.

Inflation has begun to erode welfare, as the impact of the instability of the foreign exchange gap has not been limited to financial activities but has extended to basic consumer sectors, which represent a net import balance. This necessitates monetary policy intervention to achieve the goal of dinar stability.

Since the general budget is financed by the movement of global oil prices and their shocks that reduce oil revenues, the effectiveness of economic policy has also become affected by these fluctuations and shocks. Hence, coordination between the objectives of monetary and fiscal policy is necessary to ensure the sustainability of government support for inflation targeting and maintaining the stability of the dinar's value.

Therefore, any disruption in the dollar market or in financial transfer and compliance channels is reflected in prices and inflation, impacting purchasing power and social stability. When inflation rises or prices fluctuate, demands for salary increases or expanded subsidies intensify, placing renewed pressure on the budget.

The imbalance in the banking system is evident in the large size of the public sector in financial operations. Banking activity plays a limited role in financing the real economy, and due to weak financial intermediation, long-term financing for industrial, agricultural, and service projects remains limited.

This is accompanied by weak financial inclusion and the prevalence of cash transactions, which reduces the effectiveness of fiscal and monetary policies, as well as oversight and collection processes.  This, in turn, weakens the decision-maker's ability to build an economic database that supports planning and revenue collection.

In such an environment, the private sector becomes more fragile, while government activity continues as the largest financier and operator of the banking sector, increasing pressure on the budget instead of alleviating it through diversification by the private sector.

   Not far removed from this situation are corruption, the squandering of public funds, and tax evasion, representing a continuous leakage of resources and a weakening of trust and commitment. Corruption increases contract costs, distorts spending priorities, and reduces the quality of implementation. Tax evasion and manipulation at various stages of collection or in certain commercial outlets lead to direct revenue losses.

When trust in institutions declines, society's willingness to accept necessary reforms, such as broadening the tax base, restructuring subsidies, or improving tax collection, weakens. This traps the state in a vicious cycle of incomplete reforms, limited results, and increased resistance to reform.

In conclusion, Iraq's financial imbalances stem from the rentier nature and volatility of its revenues, the inflation of current spending compared to weak and ineffective investment, and the lack of sustainable economic stability due to its dependence on and vulnerability to fluctuations in oil production.

 Furthermore, the banking system's limited role in financing private sector activity and the economy's sensitivity to foreign exchange rate volatility exacerbate these problems.

Therefore, crucial financial solutions include administrative reforms to consumer and investment spending, linking employment to productivity, improving project management through transparent contracting, oversight, and evaluation standards, and restructuring the banking sector, promoting financial inclusion, and linking it to productive financing.

Additionally, reforming service sectors such as electricity, water, and telecommunications, reorganizing revenue collection, and reducing leakage are essential.

This comprehensive package can transform public funds from a tool for crisis management into a tool for building a more diversified economy.

Therefore, in short, it is impossible to achieve financial and economic stability and growth without addressing aggregate supply imbalances, sustaining government support for the fixed exchange rate system, stimulating the market, and reducing dependence on imports by diversifying non-oil GDP sources.

 In reality, these are policies that are still within the scope of long-term planning and the challenges of the chronic structural imbalance of the Iraqi economy, which require well-established structural policies and treatments.  https://economy-news.net/content.php?id=64293