Iraq Economic News and Points to Ponder Sunday AM 9-24-23

The Dollar Crisis May Break The Framework's Back, And The Coalition Has Stopped Criticizing Washington

Posted On09-24-2023 By Sotaliraq   Baghdad/ Tamim Al-Hassan   October is approaching, the fourth anniversary of the largest protests in the country after 2003, at a time when the coordinating framework that runs the government is facing the nightmare of the dollar exchange rate.[

Instead of the value of the dinar increasing as expected, the currency began to decline, before and after the return of Prime Minister Muhammad al-Sudani from the New York meetings.

The same expectations were made at the time of approving the budget and after its implementation, but the crisis has not ended and the “framework” no longer burdens Washington with the problem as it did in the past.

One dollar has sometimes approached 1,600 dinars or more, since Iraq decided to adhere to American conditions and transfer money through a global platform monitored by Washington.

This commitment has limited impact on the money smuggling trade, most of which is believed to go to Iran, which faces Western sanctions.

Behind the scenes, informed sources inform Al-Mada that parties in the coordination framework have stopped linking the dollar crisis to the United States.

These sources say that there is a fear of expanding sanctions on “banks that are affiliated with Shiite parties, as happened previously.”

14 banks were punished in July and the value of the dinar recorded a historic deterioration, before the Central Bank and Washington announced that the matter had been settled.

At that time, leaks indicated that the banks that were punished were affiliated with political figures and parties, and that the sanctions may not stop.

Fears of “new sanctions” were renewed with a visit by Elizabeth Rosenberg, Assistant Secretary of the US Treasury, to Baghdad before the Sudanese traveled to attend UN meetings.

Experts in the economic field considered that Rosenberg's visit was not to help the Central Bank - as stated in the official story - but rather to threaten new sanctions if smuggling continues.

Before that, Qais Khazali, the leader of Asaib Ahl al-Haq and one of the most prominent leaders of the “Frameworks,” described Washington’s imposition of conditions on the transfer of the dollar in Iraq as an “economic war.”

The Shiite coalition held its breath when the Prime Minister left for New York (the visit ended yesterday), and the dollar issue was at the top of the files.

Instead of expectations of a rise in the dinar, the currency collapsed again after the Sudanese met with US Treasury officials on the sidelines of the United Nations meetings.

Nabil Al-Marsoumi, professor of economics at Al-Maqal University in Basra, believes that the continued decline in the value of the dinar means the failure of negotiations to replace the dollar with other currencies in dealings with Tehran.

Al-Marsoumi says that the United States appears to have refused to use “the euro, the Chinese yuan, and the UAE dirham” in exchanges between Iraq and Iran.

The economics professor believes that Washington may have considered this measure a violation of US sanctions on Iran.

Before going to New York, Al-Sudani announced new steps in the issue of the dollar exchange rate crisis, and said that these steps would “break down” the parallel market.

The Prime Minister confirmed that “the Iranian side informed the government in the last meeting to stop dealing in the dollar, and to replace it with the euro, the yuan, the dirham, the Iraqi dinar, or the Iranian toman.”

Al-Sudani also said that the new mechanism with Iran “will break the back of the parallel market.”

Yesterday, Al-Sudani's office announced that the latter had concluded his visit to the United States, while he did not meet President Joe Biden as expected.

Leaks indicate that the visit may have been postponed to another time, expected to be at the end of this year, for reasons that may be related to Washington not being convinced of the government’s steps regarding the issue of the relationship with Tehran and the “dollar.”

The results of the visit seem uncomfortable for the coordination framework, despite government assurances, as the former fears a wave of protests over the issue of the dollar price as the anniversary of the October demonstrations approaches.

According to what the sources said, it was expected that Baghdad would receive “clearer signals on the issue of Iran, the dollar, and energy during the officials’ meetings in New York.”

Contrary to expectations, attempts in Parliament were made to demand the dismissal of the Governor of the Central Bank, Ali Al-Alaq, against the backdrop of the dollar crisis.

Muhammad Nouri, a member of the Finance Committee in Parliament, previously criticized Al-Alaq as not having any clear strategic solutions “to get out of the crisis.”

In a conference inside the House of Representatives, Representatives Hadi Al-Salami and Ahmed Majeed demanded the dismissal of the Central Bank Governor due to his inability to control “the rise in the dollar exchange rate.”

Al-Salami said that Al-Alaq did not take measures “against the banks that were subject to US sanctions,” and refrains from announcing the daily sales bulletin.

As for Representative Majeed, he confirmed that there is forgery in the receipts that are submitted to the Central Bank through the currency selling window to buy dollars to import goods, and it is in fact “a currency smuggling operation.”

He added that these banks - which buy the dollar - “are the economic arms of political parties.” LINK

Issuing “Treasury Bonds” In Dollars To Finance Development

Money  and business  Economy News _ Baghdad   A number of specialists in the financial and economic fields proposed the idea that Iraqi capital from inside and outside would contribute to building the giant “development road” project, by issuing treasury bonds in dollars, such that the value of one bond was one hundred dollars or one thousand dollars, and these bonds were purchased in dinars. It is calculated at the official rate of the dollar (1320) dinars per dollar, and at a remunerative interest rate such as 5 percent, while allowing foreign capital to buy these bonds in Iraqi dinars.

Rapporteur of the Parliamentary Finance Committee for the fourth session, Dr. Ahmed Al-Saffar, stated in an interview with “Al-Sabah” followed by “Al-Iqtisad News” that “issuing treasury bonds in dollars to finance (the development road) is a good proposal and has positive effects on the movement of the existing monetary mass, by withdrawing The money hoarded outside the banks, which is estimated at about 75 percent of the total monetary mass, is hoarded by citizens because they do not trust the banking sector, so issuing these bonds will lead to the withdrawal of that money and the introduction of a stream of monetary circulation.”

He pointed out that “the base for participation in financing the project will expand and the burden on the government will be reduced in terms of funds allocated for this large project. This will have an impact - albeit indirect - on the exchange rate of the dollar in the market, and thus the amount of demand for the dollar will decrease and the use of the Iraqi dinar will increase.

” The purchase process, and the participation of external capital is beneficial, provided that it is purely Iraqi money and not the result of a foreign partnership.”

Al-Saffar explained, “If the government is able to implement this project; “It will have an economic impact in all agricultural, industrial,

commercial and even tourism sectors.”

For his part, the expert in economic affairs, Dr. Nabil Jaafar Al-Marsoumi, pointed out that “the (development road) project needs very large investments.

The first five-year phase needs 17 billion dollars, and therefore we need 3 and a half billion dollars annually to finance the project.” .

He pointed out that “there are difficulties in attracting foreign investments to implement the (development road) due to the challenges that it will face, including logistical and security ones. Therefore, the financing of the first phase must be Iraqi, and when we put the basic foundations in the first phase and through it we can build or pass loads estimated at 3. 5 million containers annually, after which foreign investment can be introduced.”

Al-Marsoumi explained that “internal financing for the project is done in two ways: Either by providing funds through the general budget, which is very difficult, especially since the estimated three-year deficit is 63 trillion dinars annually, or by issuing treasury bonds, which is one of the proposals that must be looked at seriously, especially since it contributes to withdrawing part of the bloc. Cash and reduces the total demand for the dollar, we need new Iraqi financing for (the development path).”

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Issuing {Treasury Bonds} In Dollars To Finance The {Development Road}

Iraq  09/24/2023    Baghdad: Hoda Al-Azzawi  A number of specialists in the financial and economic fields put forward the idea that Iraqi capital from inside and outside would contribute to building the giant “development road” project, by issuing treasury bonds in dollars, such as if the value of one bond was one hundred dollars or one thousand dollars.

Purchasing these bonds in Iraqi dinars, provided that they are calculated at the official dollar rate (1320 dinars per dollar), and at a remunerative interest rate such as 5 percent, while allowing external capital to purchase these bonds in Iraqi dinars.

Rapporteur of the Parliamentary Finance Committee for the fourth session, Dr. Ahmed Al-Saffar, stated in an interview with “Al-Sabah”: “Issuing treasury bonds in dollars to finance (the development road) is a good proposal and has positive effects on the movement of the existing monetary mass, by withdrawing the hoarded funds outside the banks that...

It is estimated at about 75 percent of the total monetary mass, and it is hoarded by citizens because they do not trust the banking sector, so issuing these bonds will lead to withdrawing that money and introducing a stream of cash circulation.”

He pointed out that “the base for participation in financing the project will expand and the burden on the government will be reduced in terms of funds allocated for this large project.

This will have an impact - albeit indirect - on the exchange rate of the dollar in the market, and thus the amount of demand for the dollar will decrease and the use of the Iraqi dinar will increase.

” The purchase process, and the participation of external capital is beneficial, provided that it is purely Iraqi money and not the result of a foreign partnership.”

Al-Saffar explained, “If the government is able to implement this project; “It will have an economic impact in all agricultural, industrial, commercial and even tourism sectors.”

For his part, the expert in economic affairs, Dr. Nabil Jaafar Al-Marsoumi, indicated in an interview with “Al-Sabah” that “the (Development Road) project needs very large investments. The first five-year phase needs 17 billion dollars, and therefore we need 3 One and a half billion annually to finance the project.”

He pointed out that “there are difficulties in attracting foreign investments to implement the (development road) due to the challenges that it will face, including logistical and security ones. Therefore, the financing of the first phase must be Iraqi, and when we put the basic foundations in the first phase and through it we can build or pass loads estimated at 3. 5 million containers annually, after which foreign investment can be introduced.”

Al-Marsoumi explained that “internal financing for the project is done in two ways: Either by providing funds through the general budget, which is very difficult, especially since the estimated three-year deficit is 63 trillion dinars annually, or by issuing treasury bonds, which is one of the proposals that must be looked at seriously, especially since it contributes to withdrawing part of the bloc. Cash and reduces the total demand for the dollar, we need new Iraqi financing for (the development path).”

Edited by: Muhammad Al-Ansari   https://alsabaah.iq/84540-.html

Points to Ponder of Hope:

Beware how you take away hope from another human being. -- Oliver Wendell Holmes

Hope arouses, as nothing else can arouse, a passion for the possible. -- William Sloane Coffin Jr

In prosperity prepare for a change; in adversity hope for one. -- James Burgh

For he who has health has hope; and he who has hope, has everything. -- Owen Arthur

Hope is like the sun, which, as we journey toward it, casts the shadow of our burden behind us.-- Samuel Smiles

Hope... is the companion of power, and the mother of success; for who so hopes has within him the gift of miracles.  -- Samuel Smiles

I want to help people with depression understand that there is hope, so that they can get the help they need to live rich, fulfilling lives. -- Tom Bosley