Iraq Economic News and Points To Ponder Saturday Afternoon 1-31-26

 An Economic Expert Reveals A Roadmap For Freeing Iraqi Funds From The Grip Of The US Federal Reserve.

Money and Business    Economy News – Baghdad   On Friday, economist Nabil Al-Marousmi revealed several solutions and proposals to free Iraqi funds from the control of the US Federal Reserve. 

 Al-Marsoumi said in a post followed by “Al-Ahd News”: “The United States has effectively controlled Iraqi oil revenues since 2003 through its management via the Federal Reserve. The United Nations had provided legal protection for these funds under Resolution 1483, until it was terminated in 2011, following the implementation of Security Council Resolution 1956.”

He added that "the US president issued Executive Order 13303 to protect Iraqi funds, an order that remains in effect today despite some amendments." He explained that "the objectives of US protection of Iraqi funds are to safeguard them from compensation claims by companies and individuals, as well as to prevent the seizure of Iraqi assets in cases filed since the 1990s.

" He emphasized that "despite the expiration of many of the legal reasons that necessitated this financial arrangement, Iraq remains subject to strict financial oversight by Washington, which differs from the usual procedures in the international banking system."

 Al-Marsoumi pointed out that “most oil-producing countries deposit their money in the US Federal Reserve because oil is sold in dollars, but Iraq suffers from complete dependence on oil revenues without alternative resources,” explaining that “this means that the problem is not in depositing money with the US Federal Reserve, but rather in the restrictions imposed on the ability to dispose of it freely, unlike what other countries enjoy.”

 He continued: “It is known that there are cases filed against Iraq by dozens or hundreds of companies that were harmed by Iraq’s invasion of Kuwait, and representatives of Iraq did not attend the court sessions at the time to defend or reduce the compensations, and therefore the courts issued default judgments for very high amounts.”

 He noted that “linking the issue of protecting Iraqi funds from prosecution to America gives Washington great influence over Baghdad, and resolving the crisis requires a political decision, as happened with Greece and Argentina, by employing a reputable law firm that is given full powers, whose task will be to accurately inventory the cases filed against Iraq and how much money has been awarded in judgments.”

 Al-Marsoumi concluded that “Iraq is unable to resort to the courts because the judgments have become final, so a deal can be reached with the beneficiaries to drop the lawsuits in exchange for giving them a percentage of the money, which is called buying the debts, and most likely they will accept because they will get money instead of waiting and possibly not getting anything.”     https://economy-news.net/content.php?id=65137

Why Is Gold Jumping To Record Levels As The US Dollar Falls?

Money and Business   Economy News - Follow-up   Gold prices recorded a sharp and unprecedented jump, exceeding the level of $5,600 per ounce, after a daily rise of more than $300, in one of the most violent price movements in global markets, coinciding with the decline of the US dollar to its lowest levels in about 4 years.

This remarkable rise came after statements by US President Donald Trump in which he expressed his satisfaction with the decline in the value of the dollar, which the markets interpreted as a clear indication that the current US administration prefers the currency to remain weak, prompting investors to intensify their bets on gold as a safe haven.

Historical Inverse Relationship Between Gold And The Dollar

Historical data shows a clear inverse relationship between gold and the US dollar, as the precious metal is priced globally in dollars. This means that a decline in the value of the US currency against major currencies makes gold less expensive for holders of other currencies, which leads to an increase in global demand for it, and consequently, higher prices.

 According to market traders, the recent upward surge was not solely due to technical factors, but was driven by a change in political and monetary expectations regarding the future of the dollar.

 Political Messages Reshape Market Expectations

Analysts believe that Trump’s statements carried indirect messages to the markets, indicating that the White House does not see a strong dollar as a priority at the present stage, but rather believes that a weak currency may serve economic and trade objectives, especially in light of the escalating competition with China.

Trump had indicated in his statements that rival countries, especially China, deliberately devalue their currencies, making trade competition unfair, which was understood as an indication that Washington would accept policies that contribute to weakening the dollar in order to enhance the competitiveness of American exports in global markets.

 A Weak Dollar: Trade Gains And Monetary Risks

A weaker dollar usually makes U.S. exports more attractive in terms of price, which supports the manufacturing sector and reduces the trade deficit. However, this policy carries risks related to the erosion of the currency's purchasing power, which prompts investors to seek safer hedging instruments.

In this context, investors have begun to redirect an increasing portion of their investment portfolios towards gold, amid expectations that pressure on the dollar will continue in the coming period.

Silver Enters The Spotlight

The momentum was not limited to gold alone, as silver prices recorded a remarkable rise of nearly 60% since the beginning of this year, in a performance that is considered one of the strongest among the different asset classes.

Analysts attribute this rise to the return of what is known in the markets as "Debasement Trade," that is, betting on the erosion of the value of paper currencies, and the trend towards precious metals as a store of value and a means of hedging against monetary risks.

Are We Witnessing A Shift In Investor Behavior?

Recent developments are raising increasing questions about whether markets are entering a new phase, in which confidence in paper currencies is declining in favor of gold and silver, especially in light of escalating trade tensions and the increasing use of monetary policies as an economic tool.

Observers believe that what is happening in the precious metals markets may not be a temporary wave, but rather a reflection of a deeper shift in investors' expectations regarding the future of the dollar and the global monetary system.   https://economy-news.net/content.php?id=65141 

Fiscal And Monetary Policies: Between Divergence And Unified Vision

Economy News – Baghdad   Economic expert Dr. Haitham Hamid Mutlaq Al-Mansour                                                  

An analysis of the Iraqi economy at the macro level clearly reveals that the failure to coordinate government and monetary policy, in terms of both objectives and tools, only confirms its persistent structural crises stemming from weak governance. It is evident that the deep imbalances in the macroeconomy are an inevitable consequence of the divergence and absence of a unified strategic vision.

The two policies operate in isolation, and the dominant fiscal policy tools, centered on oil revenues and their consumption, taxes, deficits, and public debt, undermine the effectiveness of monetary policy. This over-reliance has contributed to weakening economic diversification, exacerbating financial fragility, and linking economic stability to the volatility of global markets.

This rentier model has led to a decline in the effectiveness of monetary policy, liquidity management, inflation control, and exchange rate stability, thus transforming monetary policy into a defensive rather than a proactive one. Furthermore, budget instability inevitably leads to liquidity volatility, weakened monetary planning, and a loss of forecasting tools.

Consequently, the central bank becomes subservient to public finances instead of leading them, forcing it to finance deficits and prop up the exchange rate to fund salaries, thereby jeopardizing its independence. In this scenario, monetary policy becomes subordinate to public finances.

 As specialists know, the expansion of salaries and subsidies, weak tax collection, chronic budget deficits, and rentierism compel the central bank to constantly intervene to protect the dinar rather than manage growth. In such cases, monetary policy becomes reactive rather than developmental. Alternatively, inaction would lead to increased inflation, exchange rate volatility, declining confidence in the Iraqi dinar, capital flight, and the erosion of savings.

Therefore, we see that most government spending methods for fiscal policy are economically inefficient, as they rely on current spending represented by salaries, government subsidies, fluctuating revenues, and recurring government fiscal deficits, which generates conflicting objectives and continuous pressure on monetary policy.

Unified Vision Of The Two Policies

Hence the importance and necessity of building a unified vision that ensures coordination in objectives and tools, and strategic harmony between fiscal and monetary policy in setting economic priorities and selecting implementation methods. This guarantees that public resources are directed towards achieving stability, growth, and sustainable development, avoiding conflicting and fragmented decisions.

The unified vision derives its importance from its ability to enhance macroeconomic stability, reduce the risks of inflation and monetary imbalances, increase the efficiency of public resource utilization, and bolster investor and market confidence. It also ensures the sustainability of medium- and long-term policies.

One of the manifestations of the lack of a unified vision, clearly evident in the reality of the Iraqi economy, is the existence of fiscal expansion coupled with monetary tightening.

This is further compounded by short-term spending objectives at the expense of long-term monetary goals, and a conflict between stimulating demand, controlling liquidity, and curbing inflation. Additionally, there is a duplication of economic decisions, which weakens the effectiveness of public policies.

 Foundations for building a unified vision

To unify strategic objectives, the two policies should agree on a set of central goals, including:

Price stability, fiscal sustainability, support for real growth, and enhancement of employment and purchasing power.

Linking oil spending to clear development plans.

Coordinating reserve management with fiscal policy.

Directing spending towards productive sectors.

Aligning the exchange rate with development goals.

This transforms economic policy from crisis management to development management.

Obstacles to achieving coordination between the two policies

Iraq suffers from fundamental obstacles that hinder coordination between the two policies and reinforce the divergence between them, which together constitute real challenges for the decision-maker, the most important of which are:

The fragility of the financial and banking system, the weakness of financial inclusion, the limited productive credit, and the control of government banks over employment levels will all lead to disruption of monetary policy transmission channels.

The absence of a national strategic framework and the lack of a comprehensive economic vision linking the budget, monetary policy, development plans, and public debt management result in fragmented policies and conflicting priorities.

The imbalance in the structure of public spending, the volatility of public revenues, and the reliance on fluctuating sources, especially oil revenues, lead to instability in the general budget and make it difficult for the central bank to build long-term monetary policies under the dominance of public finances.

Weak institutional coordination between the Ministry of Finance, the Central Bank and other relevant ministries.

The cumulative interaction of obstacles means that these obstacles do not operate in isolation, but rather interact with each other, such that: rent-seeking + financial dominance + weak institutions + political pressures = a chronic structural imbalance in economic coordination. This renders partial reforms insufficient without a comprehensive and fundamental overhaul.

Corruption and systematic waste have deepened in the allocation of resources and their deviation from their true economic course.

Thus, economic policy in Iraq is regressing from being a long-term strategy and using the rentier tool for spending to ensure short-term stability, which is reflected socially in the management of poverty as temporary solutions such as the food ration card, government employment and social welfare, and the end result is the sustainability of structural poverty and the growth of consumer culture.

All the above points pose real challenges to government policy towards transforming it from a state of divergence to a state of coordination.

Effective economic policy comes as a long-term strategy aimed at achieving diversification of income and exports through coordination between fiscal and monetary policies, to address the imbalance in priorities through an economic government that rebuilds long-term policies that support the rentier economy with more diversification, deepen development, achieve stable and diversified growth, and create job opportunities, through the development of non-oil sectors to build a productive and diversified economy that reduces corruption and raises productivity. https://economy-news.net/content.php?id=65170