Iraq Economic News and Points to Ponder Monday AM 9-25-23

Iraq Economic News and Points to Ponder Monday AM 9-22-23

Baghdad And Washington Are Negotiating About Linking The Iraqi Market And Currency To The Dollar

Posted On2023-09-25 By Sotaliraq    Baghdad and Washington are negotiating about linking the Iraqi market and currency to the dollar 20230924152721_original_45The Iraqi Foreign Minister, Dr. Fouad Hussein, confirmed that the provisions of the security agreement recently signed between Iraq and Iran have been fully implemented by the Iraqi side.

Hussein explained that the terms of the agreement were fully implemented by the Iraqi side, with regard to the return of militants present on the border between the two countries in the Kurdistan Region to refugee camps.

Regarding the political and security importance of this agreement, Hussein stressed that Iran’s cessation of bombing areas in the Kurdistan Region was a condition of the agreement, in exchange for removing militants from the border, which the federal government did in cooperation with the Kurdistan Regional Government, in an “important and successful” process for both sides. .

Regarding the possibility of signing a similar agreement with Turkey regarding the presence of Kurdistan Workers’ Party (PKK) militants, whom Ankara demands to be removed from the border, Hussein stated that Baghdad has always been in favor of dialogue, hoping for “intensive dialogue by the same means” with the Turkish side.

The Iraqi diplomat says that Ankara has not yet made room to discuss solutions to this problem in another way, far from the use of weapons and violence.

The Iraqi minister denied the existence of any agreement with Turkey to allow it to carry out repeated strikes on PKK militants in northern Iraq.

Regarding relations with the United States, Hussein said that the recent Iraqi-American discussions focused on bilateral relations and joint work in the fields of economy, energy, health and security, noting that the American-Iraqi relations are distinguished and have expanded to include various fields, after they were based on security and military cooperation, pointing out that Washington's support for the Iraqi position in the international arena, and for economic reform and development in the country.

The Iraqi official revealed that among the important files raised at the level of dialogue with Washington is “the issue of linking the Iraqi market and currency to the dollar and the flows of American currency into the country,” noting that it is “a financial and banking issue related to the financial and economic situation of Iraq.”

Regarding whether security issues related to armed groups affiliated with Iran were among the files discussed, he said, “We did not discuss this issue, and all groups are subject to the Commander-in-Chief of the Armed Forces, that is, to the orders of the Iraqi Prime Minister.”

 Regarding the relations between Saudi Arabia and Iran, the spokesman indicated that the two countries have declared and strong relations, after the exchange of ambassadors and visits by the two foreign ministers, indicating that Baghdad played a role in the restoration of their relations, but the discussions between them are now direct.

Regarding relations with Kuwait, the spokesman explained that the Iraqi Prime Minister held an “important meeting” with his Kuwaiti counterpart, during which he stressed “Iraq’s full commitment to all Security Council resolutions, bilateral agreements, and respect for Kuwait’s sovereignty.” LINK

Dollar Exchange Rates During Monday's Transactions In Iraqi Markets

Economy   09-25-2023 | 6,121 views   Alsumaria News – Economy  Alsumaria News publishes the exchange rates of the dollar against the Iraqi dinar in Iraqi local markets for Monday, September 25, 2023.

Exchange rates decreased in banking shops in local markets in Baghdad, as the selling price reached 154,500 Iraqi dinars, while the purchasing price reached 154,000 dinars for every 100 dollars.

For more than 7 months, and specifically since the Central Bank began operating the electronic platform and the international financial transfer system ““SWIFT,” the dollar exchange rates in Iraq have not witnessed stability despite the attempts of the government and the Central Bank to control the exchange rate in the parallel (black) markets

The  Central Bank of Iraq decided earlier to adjust the exchange rate of the dollar against the Iraqi dinar, as the price of buying the dollar from the Ministry of Finance  reached 1,300 dinars per dollar and selling it at (1,310) dinars per dollar to banks through the electronic platform, and it is sold for (1,320) dinars per dollar. Dollars from banks and non-banking financial institutions to the final beneficiary.  LINK

The Salary Crisis Raises Rates Of Domestic Violence In Kurdistan By 13 Percent

Posted On2023-09-25 By Sotaliraq   The researcher in social and academic affairs at Sulaymaniyah University, Rikut Abdul Rahman, said yesterday, Sunday, that the economic crisis has greatly affected the situation in the region. The Federal Council of Ministers decided during its thirty-eighth regular session, headed by Muhammad Shiaa Al-Sudani, on Sunday (September 17, 2023),

Lending the Kurdistan Regional Government more than two trillion dinars, provided that it is repaid in three installments of (700) billion dinars before taking its entitlement from the budget for the year 2024. Abdul Rahman says, “The economic crisis affected the cohesion of Kurdish society, led to an increase in divorce cases and increased rates of domestic violence.”

He believes that “due to the delay in disbursing salaries and the economic crisis, divorce cases have increased by 13% over previous years, and the rates of domestic violence have increased according to the statistics of various organizations, in addition to the presence of a reluctance to marry among Kurdish youth, since the requirements of life are high, and there is no financial liquidity.” Because of the salary crisis.”

The delay in salaries in the Kurdistan region and the strike of health personnel there caused the death of two people yesterday, Saturday (September 23, 2023), including a child no more than two months old. According to a local source, “A person named (K, M, A), whose profession is a worker, lives in the Shahrazur district of the Sulaymaniyah Governorate. He was involved in a traffic accident on the Sulaymaniyah-Zaryan road, and after suffering serious injuries, he was transferred to (Martyr Raouf Bek) Hospital in the Shahrazur district.”

He added: “But due to the strike of doctors and nurses from working hours in the aforementioned hospital, he was transported by a regular car to Shar Hospital in Sulaymaniyah, but he died on the way.”

He pointed out that “also due to the strike of health personnel from work in Sayed Sadiq district, a two-month-old child died.”

On Wednesday (September 20, 2023), the Prime Minister of the Kurdistan Region, Masrour Barzani, directed the distribution of July salaries without delay upon the arrival of the first batch of Baghdad’s loan amounting to 700 billion dinars.

On Monday (September 18, 2023), a source in the Ministry of Finance of the Kurdistan Regional Government revealed the mechanism for distributing employee salaries in the region.

The source said, “The federal government will finance the salaries of employees in the Kurdistan region in three installments in the amount of two trillion and 100 billion dinars, and in the amount of 700 billion dinars for each month.”

He added, "The federal government will send the salaries for September after releasing the salaries of employees in other Iraqi provinces, but employees in the region have not received their salaries for July and August yet."

The source indicated, “After receiving the amount of 700 billion dinars, the Ministry of Finance will distribute one salary, which is for the month of July, and next month it will distribute the salary for the month of August, and then the process will continue successively.” LINK

Despite The Abundance Of Cash Reserves, Why Does The Iraqi Government Not Pay Its Internal Debts?

Posted On2023-09-25 By Sotaliraq   [size=45]Iraq has huge cash reserves from oil revenues exceeding 113 billion dollars, at a time when it suffers from internal debts estimated at 70 trillion, which raises many questions about the reasons for the government not paying these debts, getting rid of the interest burdens owed on them, and investing the money to provide new resources.

Last July, Deputy Governor of the Central Bank of Iraq, Ammar Khalaf, announced that foreign exchange reserves had risen to 113 billion dollars, benefiting from the improvement in the price of oil, which constitutes 96% of the total national product, while he confirmed that the volume of internal debt had increased to 70 trillion Iraqi dinars (about 47 trillion Iraqi dinars). Billion dollar).

For his part, the Governor of the Central Bank of Iraq, Ali Al-Alaq, revealed last August that the government owes an amount of 46 trillion Iraqi dinars ($34.6 billion), as debts owed to the Central Bank.

As oil revenues rise and fall according to market prices, current government spending includes $47.6 billion annually in salaries for about 12 million employees, while defense, security, and service spending consumes about $60 billion, out of a total revenue of about $120 billion annually.

In this context, economic academic Ali Daadoush explains, “The public debt is divided into two external parts amounting to approximately 13 billion dollars until the beginning of 2023, and these are paid on an ongoing basis and deducted from the oil revenues achieved as a result of the rise in oil prices above the price of a barrel of oil specified in the general budget.”

Daadoush added in a press statement followed by Al Mada: “In addition to the presence of an external debt amounting to $5.8 billion, pre-2003 debt, and unaddressed debts outside the Paris Club amounting to about $40 billion, which have not been claimed by the Gulf states.”

He continued, saying, “As for the internal debt, it has reached about 70 trillion dinars, of which 50 trillion are for the benefit of the Central Bank of Iraq, and these are rescheduled from time to time, with an interest determined by the government.”

He believes that “the government’s hesitation not to pay the internal debt is a result of its many obligations towards investment and service projects within the government curriculum, especially since the size of the planned deficit in the general budget for the year 2023 amounted to about 64 trillion dinars, and this also prevents the government from paying the internal debt, which portends the existence of “Financial and economic problems facing the current government in the near future.”

He pointed out that “an opportunity was available to pay off the internal debt before the Corona crisis, specifically during the period (2017-2019), during the achievement of financial abundance, but it was not paid as a result of the lack of a clear-cut plan, in addition to the failure of private banks and some parties that financed the internal debt to demand their debts.” Because it has high liquidity through which it can confront banking risks, if any.”

Daadoush concluded by saying, “In general, the external debt is paid with continuous debt service, while the internal debt is paid only from time to time in very small amounts.”

The economic and financial expert, Mahmoud Dagher, agrees with what Ali Daadoush said regarding the continuation of external debt payments and the size of internal and outstanding debts, stressing that “there is nothing preventing the payment of internal debt, most of which is to the Central Bank.”

In turn, the financial advisor to the Prime Minister, Mazhar Muhammad Salih, says, “The issue of Iraq’s debts for its loans granted to other countries that were previously provided by the Iraqi Fund for External Development between the mid-seventies of the last century and the beginning of the eighties is raised from time to time, which stopped following the outbreak of the Iran-Iraq war.”

Saleh explains, “Most of these loans were granted to developing countries in Africa, Asia, and Latin America, and claims are still outstanding on the remains of those loans that have not been repaid and are pending repayment and are estimated at less than two billion dollars.” He adds, “It is believed that part of it has been subject to those countries’ agreements with the Paris Club, as they are sovereign debts and belong to groups of poor countries. Despite this, efforts are being made to restore the country’s rights through diplomatic means and methods.”

Nabil Al-Marsoumi, professor of economics at Basra University, said in a blog post that “the public debt in Iraq at the end of 2022 amounted to 94.94 trillion dinars ($63.3 billion), of which 70.5 trillion dinars ($47 billion) were internal debts.”

The internal and external (debt service) (installment + interest) in the current year’s budget amounts to 18.96 trillion dinars ($12.6 billion) annually.”

Al-Marsoumi adds, “Perhaps the most dangerous thing about the budget is that it is tripartite and not annual, which means continuing disbursement in the next year and not On the basis of 1/12 of actual spending, but rather on the basis of what was allocated in the budget in the previous year, and this may lead to the government having a free hand in internal and external borrowing, especially with the disappearance of the cash surplus that will be used in this year’s budget, in addition to the fact that it is possible that it will continue.

The budget is in its current form without amendment in the next two years and without Parliament having the legal powers to reject or amend it, which will drown the country in a sea of ​​debt.”

Al-Marsoumi continues, “The legislation of the tripartite budget will give the government full legal powers to borrow 41.5 trillion dinars not in 2023, but also in 2024 and 2025, which means that the government can borrow internally and externally without referring to Parliament, an amount of 121.5 trillion dinars during the tripartite budget and for the years.” “The three 2023, 2024 and 2025.”[/size]

It is noteworthy that the World Bank described the Iraqi economy as “fragile,” and stated that the country’s debts had increased to about 152 billion dollars.

He said in a report issued last August, “The annual budget approved by the government authorities witnesses a significant increase in the volume of public expenditures by 59% over the previous year, which represents 74.3% of total spending, which will lead to a large financial deficit of 51.6 trillion dinars.”

“Iraqi - equivalent to 39.7 billion dollars - which represents 14.3% of the volume of general imports, that is, more than half of the recent record reserves that were accumulated in the wake of the boom in oil prices.”

According to the World Bank, “Iraq’s lack of diversification of sources of income due to the chaotic policies of successive governments led to a contraction of the gross domestic product by 1.1% in 2023 and an increase in the country’s public debt to reach 58.3% after it was 53.8% in the previous year, meaning it will reach 152 billion dollars.” ,

 an increase of 10 billion dollars, while the total external debt reached 50 billion dollars, and the internal debts amounted to 102 billion dollars, which means that the government authorities borrowed in the previous three years internally about 60 billion dollars, at a rate of 15 billion annually, with annual interest on internal debts amounting to 16 to 17 % of the amount of debt.

According to the bank, “Iraq’s economic future prospects are still exposed to great risks. “Because of excessive dependence on oil, which makes it vulnerable to shocks in oil markets and global demand, as evidenced by the recent decline in oil prices, in addition to the factors driving fragility that pose fundamental challenges to the economy, such as widespread corruption, poor service provision, infrastructure development, and security risks.”

The World Bank added, “The governmental authorities’ continuation of following these policies will make the country’s budget in favor of the political parties that have delayed the wheel of development and caused it to suffer from major imbalances despite the passage of two decades since the war was claimed to have ended.    LINK

Points to Ponder on Disappointment:

Disappointment -- too many people miss the silver lining because they are expecting gold -- Maurice Seltter

Fortunes made in no time are like shirts made in no time; its ten to one if they hang long together -- Douglas Jerrold

Disappointment to a noble soul is what cold water is to burning metal; it strengthens, tempers, intensifies, but never destroys it -- Eliza Tabor