Some "Sunday News" Posted by Samson at KTFA 4-3-2022

KTFA:

Samson:  An economic advisor blows up a big surprise: Iraq will get a surplus of 40 billion dollars this year

3rd April, 2022

The economic expert, Nasser Al-Kinani, said that the difference in the financial output, achieved from oil, in light of the current prices in global markets, may bring Iraq more than 40 billion dollars annually.

Al-Kinani said that "it is natural that there will be an increase in revenues resulting from the sale of oil, and a shortage may occur, and all according to the market," noting that "the price of oil in global markets has become volatile on a daily basis, and perhaps even in hours."

Al-Kinani added: "In the past months, we have achieved more sums in each month than the previous month," noting that "the state takes the rate of selling oil, for example, at a price of $65 a barrel, and thus occurs at the end of the year an annual financial abundance than what is decided, and operating expenses are extracted from it. and investment.”

The economist Nasser Al-Kinani noted that "if the budget is approved at a price of 65 dollars per barrel of oil, and now it is sold at an average price of 100 dollars, then we find a big difference, which may reach the limits of 40 billion dollars annually."

It is noteworthy that the Ministry of Oil announced yesterday, Friday (1 April 2022) the preliminary statistics of the exported quantities of crude oil and the revenues achieved for the month of last March, where the highest financial revenues since 1972 amounted to (11.07) billion dollars.  LINK

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Samson:  As A Result Of The Economic Crisis, More Than 20,000 Lebanese Are Looking For Work In Iraq

3rd April, 2022

A report by Agence France-Presse revealed that more than 20,000 Lebanese arrived in Iraq in search of work between June 2021 and February 2022, with the exception of Lebanese visitors to the holy cities of Karbala and Najaf.

The report, which was translated by the agency "Information", stated that "Iraq, which was witnessing waves of conflict and chaos, has now become a land for Lebanese looking for work and fleeing from a deep economic crisis in their country."

Akram Johari, one of thousands who fled the declining Lebanese currency and rising poverty, packed his bags and boarded a plane from Beirut to Baghdad, using social media to search for job opportunities. "I didn't have enough time to look for a job in the Gulf," said the 42-year-old, and with its relative proximity and visas on arrival for the Lebanese, the Iraqi capital seemed a good option. "I had to take action quickly, so I came to Baghdad and started looking for work on Instagram," added El-Gohary, who has been running a restaurant in Baghdad for a month.

The report stated that "according to the United Nations, the minimum monthly wage in Lebanon is now 675,000 pounds, or about 30 dollars, on the black market, and about 80 percent of the population now lives in poverty."

For his part, the Lebanese ambassador to Iraq, Ali Habhab, said that “the movement from Lebanon to Iraq has doubled recently,” adding that “there are more than 900 Lebanese companies operating in Iraq, most of them in the restaurant trade, tourism and health, and there are dozens of Lebanese doctors who They provide their services in Iraqi hospitals.”

And the report indicated that "since the victory over the terrorist organization ISIS, Iraq has slowly begun to restore stability, and now the streets of Baghdad, which once witnessed atrocities, are teeming with shops lining both sides of the main roads and cafes open until late at night."

The report indicated that “according to the Iraqi economist, Ali Al-Rawi, many Lebanese companies came to Iraq “because they know the investment environment well,” while many foreign companies from other countries “are afraid to invest” because of the country’s violent past.   LINK

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Samson:  The Euphrates Center discussed the economic and social repercussions of re-changing the exchange rate

3rd April, 2022

Al-Furat Center for Development and Strategic Studies held its discussion seminar for the month of March, titled (The Economic and Social Repercussions of Re-change of the Exchange Rate) on Saturday 12/3/2022 at 4:30 at the headquarters of Al-Nabaa Foundation for Culture and Media.

In the episode, a research paper was presented by the researcher at the center, Dr. Haider Hussein Ahmed Al Tohme, which stated:

"Why was the exchange rate changed in 2020? In 2020, the Iraqi economy faced a severe financial shock, which differed from the rest of the shocks by virtue of the fact that the global economy entered into a major recession and the demand for oil collapsed very sharply as a result of the great closure, especially with regard to transportation being an engine of demand the global impact on oil, so the shock was not just a drop in oil revenues, but also a decline in future prospects for the return of oil prices to recovery, and this matter put pressure on oil revenues sharply.

In 2020, the government was able to cross the crisis through government borrowing, as the government borrowed 27 trillion dinars to cover salaries and was able to cross the crisis in the hope of improving oil revenues and overcoming the crisis at the lowest possible costs, but what happened is that the pandemic continued to proliferate, and injuries continued to increase and closure restrictions to rise, all of these things Weakened future prospects for the possibility of improving oil revenues in the short term.

Deficit Financing Policies

How does the government finance the 2021 budget deficit?

For the decision-maker in Iraq, he had three options for financing the deficit:

1- Following an austerity financial policy by reducing salaries, lowering incomes and imposing taxes, in addition to lifting subsidies on some commodities and some categories. It is said that there are proposals from some parties to lift subsidies on fuel as well, given that fuel costs the government a large part of the costs. 

This policy was rejected on the grounds that the country was witnessing a wave of protests at the end of 2019 and the beginning of 2020, so reducing the nominal incomes of employees could have weakened the economy further, in addition to that these incomes are a driver of economic activity in Iraq considering that many categories of Non-employees depend on staff spending. Thus, adopting this policy means entering the country into a deep economic recession that was not in everyone's interest.

2- Internal government borrowing, the reality of this policy was adopted in 2014 and 2015, but it did not exceed the value of internal loans (20 trillion at the time). While it reached the danger level in 2021, when the internal debt reached 70 trillion dinars. Although the internal debt was not in foreign currency and some consider it an appropriate policy, but in fact these debts go to the markets and turn into dollars, and as a result it puts pressure on the foreign reserves of the Central Bank, which means that the second policy is a harmful policy at the level of foreign reserve depletion.

3- It is the reduction of the exchange rate as a result of critical financial pressures, and this policy was chosen for two reasons: The first reason, maximizing dollar revenues with the Ministry of Finance on the grounds that it will sell the dollar at a price of 1450 dinars instead of selling it for 1182 dinars, which saved the Ministry of Finance about 23% of the volume revenue no more than 20 trillion shares plug the deficit. The second reason is safety for dollar sales, meaning when the dollar price rises to 1450, the central bank’s sales will decrease when compared when the price is low 1182, due to the inverse relationship between the dollar price and the required quantity, at least for consumers, as the rise in the dollar price means higher commodity prices. denominated in dollars, and this reduces demand and imports, as well as for tourists, their demand for the dollar will decrease when its price rises. Decreased dollar revenue.

The common goal of devaluing the currency represented in financing the budget deficit and maintaining the foreign reserve from declining, in addition to that it is a tool included in the white paper considering that according to the government’s logic that devaluation of the dinar is the first step to start revitalizing the private sector and making the Iraqi product a competitor to its foreign counterpart These are the arguments behind the devaluation.

Arguments for re-change of the exchange rate

Currently, there are calls to re-change the exchange rate. The truth of these calls was based on a set of arguments, namely:

The first argument, the rise in oil prices: In fact, the rise in oil prices cannot be relied upon, given that the current rise in the price of oil is not due to market fundamentals (supply, demand), but rather a political issue, meaning that it is just a negotiation that may collapse prices sharply. Because supply is still greater than demand, and OPEC is still committed to its policy of reducing production until next September, production will be returned to before 2020, so far we are producing less than 2020, and that OPEC did not seek to make the increase in supply sudden, that is, it aims To make the increase in supply gradual even if prices rose to $90, so relying on the price of oil to change the exchange rate is incorrect.

In addition, changing the exchange rate on oil prices means opening a new channel to transfer crises to the Iraqi economy, as global economic shocks in the past were infiltrating the Iraqi economy through the budget, that is, when oil prices drop, oil revenues decrease and the budget becomes austerity, which means a decrease in expenditures as happened in 2014 and 2015, including investment expenditures, and this is what leads to deflation, meaning that the financial channel is the channel linking the global economy and the Iraqi economy.

Linking the exchange rate to oil prices, meaning, when oil prices rise, we raise the value of the dinar, and when oil prices fall, we decrease the value of the dinar, which means adding a new channel, which is a monetary channel in addition to the financial channel, and as a result, the shock becomes a double shock, a financial shock and a monetary shock, and this is very dangerous.

The evidence is that Saudi Arabia has maintained the riyal exchange rate for a long period of 40 years (one dollar equals 3.75 Saudi riyals) despite the crises that occurred in the oil market, meaning that the exchange rate should be far from the fluctuations of the oil price.

The second argument, the high level of prices (inflation): Inflation arises in the economy because of two reasons, either an increase in demand or an increase in costs, this is in the case of closed economies, and in open economies, inflation can arise due to importing inflation from abroad, as is the case in Iraq, so the use of The exchange rate to reduce inflation is not the usual economic policy. It cannot be adopted in Iraq.

Iraq did not face an increase in prices due to the devaluation of the currency, as happened in Lebanon, where the currency was devalued by 22%, but the inflation calculations until June 2021 were at 7%, meaning less than the exchange rate change, and at the end of 2021 the Ministry of Planning conducted a survey of high levels Prices and found that the price levels increased in total by 8%. The reason behind price stability and non-increase is the failure to lift subsidies on oil derivatives prices, which contributed to keeping prices from spiraling out of control.

The question is, did all price levels increase by only 8%? In fact, there are some commodities whose prices have doubled or doubled, but the reason cannot be limited to the exchange rate only, due to the presence of global inflation, which occurred in most countries of the world, and it is an inflation close to inflation in Iraq, and that the cause of global inflation is the supply side constraints represented by the restrictions of the Corona pandemic that It caused the production system to stop and supply chains to stumble, so production in 2020 was less than in 2019.

And in 2021, especially in the second half, when restrictions became less, the global economy began to recover, but it faced a problem, which is that the production apparatus cannot return to the previous production until after a period of time has passed, and due to the increase in demand for labor and raw materials, their prices rose, and the rise in oil prices represents There is also a cost that is added to the cost of production.

This is a limitation on the supply side. In addition to the presence of additional demand, which means the interaction of supply and demand, and the result was a rise in global commodity prices in addition to the transportation problem that faced the global economy, which was a great shock that occurred in the increase in orders, and the marine and even air fleets were unable to deliver these products in time, so there was a significant increase In the international prices of goods, and on this basis, even if the government returns the exchange rate to 1200, the prices will not return to what they were before the change.

The third argument, devaluing the exchange rate in order to support economic growth: This is a strange argument, as all countries or in the economic literature adopt depreciation of the exchange rate to revive the national product, but raising the exchange rate of the national currency will make national products less competitive, and the volume of imports of foreign goods will increase by virtue of the decrease their prices against the revaluation of the national currency.

Finally, the fourth argument, reviving the poor: This matter is very important, and the devaluation of the national currency was supposed to be after fulfilling the prerequisites, which is more priority and is not available in Iraq, but what happened was the devaluation of the national currency and the effects were better than expected if it was expected. That the prices of the main commodities will rise doubly on the level of bread, vegetables and others consumed by the Iraqi family, given that they are imported from abroad, but if we compare the prices of commodities two years ago and now we will not notice a significant change in prices, this does not mean that the exchange rate did not affect the economy, but the reason for the effect is to inflate the price hike under the pretext of the rise in the price of the dollar. Price levels pre-pandemic.

Reservations on exchange rate return

What are the reservations that returning the exchange rate to 1200 instead of 1450 can leave?

First: If the dollar price is reduced, the budget will need an additional 20 trillion, if not more.

Second: It will affect the performance of banks, given that the Iraqi dinar is no longer valid as a store of value due to its fluctuation between rise and fall, and this will lead to a problem in lending and deposit operations, and this affects the performance of the banking system.

Third: The loss of credibility of the Central Bank, as the policy of the Central Bank is supposed to be independent and the exchange rate is changed only for monetary motives and considerations, while changing the exchange rate for political motives is harmful to the reputation of the Central Bank and Iraq’s international reputation, especially in the credit rating index.

Fourth: It is possible to employ the abundance achieved in repaying debts and in completing lagging projects, and not in reducing the price of the dollar.

It is worth noting that the government overlooked the tasks that it should have given priority and was limited to exporting the exchange rate as an achievement for the people, but in fact the exchange rate will not solve the problem.

There are several policies that the government can resort to. At the level of raising the incomes of the poor, not by decreasing the exchange rate, which if it decreases, the rich will benefit from it more than twice what the poor benefit from, and the evidence is that the number of the poor reached more than 10 million poor in 2019 even before the exchange rate change despite the stability of the exchange rate. The reason is the existence of a gap in the distribution of income, weakness in the policies to support the poor, and corruption in the implementation of the programs of the Ministry of Labor and Social Affairs.

All of these things need reform, but disregarding these main tasks of the state and its role in reviving this class in an oil-rich country, means distracting public opinion with patchwork policies and fake achievements at the expense of the government’s role in achieving real economic growth and providing job opportunities outside the government apparatus of the state.

After concluding the presentation of the research paper, two questions were asked to be answered by the attendees, and these two questions are:

The first question / Is there a possibility to re-change the exchange rate again?

The second question: What is the appropriate rate for the dinar exchange rate, and why?

Interventions

Lack of an integrated vision

- Dr. Khaled Al-Ardawi/ Director of the Al-Furat Center for Development and Strategic Studies:

"The change in the exchange rate again reflects the instability (financial and monetary instability in Iraq), which is a negative indicator that indicates the Iraqi state, and that the appropriate rate is the concern of the specialists, and the issue of the bankruptcy of the retirement fund is a well-known issue and I heard it personally once from a manager The fund itself, and it seems that the improvement in the price of oil might help them a little and solve the problem.

Changing the exchange rate at this level was our only option before the Iraqi government, was it not possible to change the exchange rate gradually?

If we realize that the exchange rate has been changed and we have 10 million poor people or below the poverty line and maybe more, did the government not take into account these poor people when it went to change the exchange rate? Were the government's measures towards the poor appropriate in the budget compared to the effects of changing the exchange rate?

We noticed a while ago that the Minister of Finance was talking about presenting a project to support the poor. Is this project being presented a year after the decision to devalue the currency was taken?! The first was that the law of the poor be approved with the budget law in 2021, as it is not possible to adopt a law that harms the poor, and after a year, a law that treats the poor will be produced, meaning that there is no integrated vision for the decision to reduce.

With regard to the first question, the truth is that the government was in a critical financial position and had three options, namely, to follow an austerity policy, which is to reduce salaries, increase taxes, raise subsidies, or continue internal borrowing. It was adopted in the Al-Abadi government by virtue of the fact that the size of the internal debt (28 trillion at the time) was not The size it is now when it reached 70 trillion dinars, and if internal borrowing is adopted, the size of the debt will increase, which means the rapid depletion of foreign reserves, and therefore the appropriate choice was the exchange rate.

As for the second question, the Central Bank promised to address the effects of the exchange rate devaluation with two policies:

First, it enters the exchange market to prevent sharp fluctuations in the exchange rate.

Second, taking initiatives to stimulate the Iraqi economy, through banks by providing the necessary facilities such as housing loans and others, and the Central Bank supports them financially when needed. Note that it did not enter directly because it is the bank of banks and not the bank of the public.

As for the Ministry of Finance, it provided budget support approximately one trillion dinars, but it was reduced by the House of Representatives, which affected the support of social protection programs and diversification of the ration card, and this was stated by the Minister of Finance in the House of Representatives when hosted by the latter.

So, the budget included addressing the repercussions of decreasing the exchange rate, but it was not passed in the 2021 budget."

The exchange rate issue is political

- Mr. Ahmed Juweed, Director of Adam Center for Defending Rights and Freedoms:

He believes that the exchange rate will change to about 1300 dinars per dollar, as it is considered an achievement for the bloc that makes up the government, as it promised and fulfilled its promise.

The exchange rate will also significantly affect the market because any movement in the market will always cause people to panic, meaning that a small increase in the price of the dollar in conjunction with the global crisis, we will find that the prices of goods rise exponentially and are stored and monopolized by traders.

The issue of the exchange rate is more political than economic, as some blocs are trying to bring down the current government (the caretaker government) by various means with electricity and the cost of living. Achievements are presented to him, including restoring the exchange rate, the ration card and other issues. The issue is not economic because the political blocs do not take economic issues into consideration.

It seems that there is a negotiation between the political blocs over the formation of the government and as a consequence we may witness a relentlessness in prices following the return of the exchange rate to 1300 dinars per dollar.

Yes, if there is a change in the exchange rate, it is a change for political motives, i.e. the exchange rate change is intended to be exported as being accomplished by the government, but in fact it is not accomplished, and with this change the exchange rate will make the exchange rate a game as was the budget. Over the past years, the Central Bank has been away from the government, and the budget has been a theater for political clowning. Currently, the Central Bank is intended to be another theater, by decreasing and raising the exchange rate as an achievement provided by the government to the people! or as a need to cover unnecessarily inflated expenses.

Error is not handled by error

- Mr. Hamid Abdul-Hussein Al-Jubouri, researcher at the Al-Furat Center for Development and Strategic Studies:

He believes that, assuming that devaluation is a wrong decision, no action can be taken to restore it to the previous rate; As the error is not treated by error, because the exchange rate is an indicator of the investment environment and the more stable it is, the more it gives an indication of the attractiveness of the investment environment and vice versa.

Yes, there are three policies that could have been followed to reduce the budget deficit, namely austerity, borrowing, and devaluation of the currency. In my estimation, the first was to use the first policy (austerity) as it would include only the entry of employees, while resorting to the third policy (devaluation of the currency) led to All incomes are eroded for all citizens, so this policy is supposed to be the last resort.

Changing the exchange rate was a wrong decision, but it cannot be returned (the error is not treated by mistake), in addition to that it will be reflected in the future on the Iraqi economy by making its products more competitive. negatively on the economy in the future.

With regard to the appropriate rate of the exchange rate, it is not possible to determine a specific rate because even the current price after changing the exchange rate is it an unreal price? Certainly it is an unreal price because just floating the exchange rate will increase the exchange rate of the dollar against the devaluation of the dinar tremendously, so there is no specific exchange rate that should be chosen.

Comment on the entry

The government’s resort to austerity policy is very difficult, because the economy is in a state of stagnation, and when the economy enters a recession, it needs an expansionary fiscal policy, and that all countries of the world have raised their debts significantly, due to the increase in expenditures in order to revive the economy, so it is not possible in a time of crisis to adopt austerity fiscal policy.

Regarding the exchange rate, is it real? What is the real exchange rate? The difference between the official and real exchange rate is that the first is determined by the central bank and is 1470 per dollar, while the second is determined by the forces of supply and demand, and assuming that the central bank does not sell the dollar for five days, the dollar price will rise significantly, it may reach 400 a thousand for every $100.

No economic identity

- Mr. Basem Al-Zaidi, researcher at the Imam Shirazi Center for Studies and Research:

He saw in his intervention that changing the exchange rate and returning it to the former is politically possible, but economically it is not possible, and the latter is not supported by politicians, given that they have undertaken many economic adventures, and everyone claims that they understand the economy, and this is what we noticed in previous years. Instead of addressing the problem of unemployment and underemployment in the state, they appointed Much in the form of wages, contracts and permanent, despite the warnings of economists that this policy will lead to disaster in the future.

With regard to the second question, one of the reasons that prompted the government to confuse the devaluation of the currency and raise the price of the dollar is the lack of an economic identity for the country, and this is the problem of the fact that Iraq does not have a clear economic identity, but rather has hybrid identities and this leads me to the first two questions, what is the identity of the economy Iraqi? Is there a model similar to him in the world? And second, what is the economic identity that you see fit that can extricate Iraq from its economic suffering?

Answer the questions

The identity of the Iraqi economy is an oil identity, where Iraq sells oil and gets the dollar, and with this dollar we import goods, so if the oil dollars fell, we would not be able to import in the same percentage, or the central bank compensated for the decrease in dollars, and that the central bank could not compensate for a long time, that is, it could withstand the The crisis is a year or a year and a half, so the expectation was that foreign reserves might fall below the level of danger if oil revenues remained low.

Enhancing the competitiveness of local production 

- Mr. Muhammad Al-Safi, researcher at the Imam Shirazi Center for Studies and Research:

He said, at the beginning of this year, the European Union removed Iraq from the blacklist related to money laundering and terrorist financing, after entering it in the year 2020, at the same time we note measures that included Syria and Lebanon, and these countries were badly affected banking and economically, and vice versa with regard to Iraq after the government lifted the exchange rate and a tax system have been set somewhat away from the effects it left behind. We note the European Union and international institutions are satisfied with these measures by virtue of removing Iraq from the black list, which serves as a notice to investors that this country is stable and attractive to investment, and that its financial policies are good policies. What is your interpretation of this scene?

With regard to the exchange rate, I think it will not change. What is being raised in the media is a political issue, as the same political blocs that voted to change the exchange rate are also launching campaigns to restore the exchange rate because it affected the poor! In the sense that it is a tool to improve its image in front of the public, and through my observation of hosting the Minister of Finance in Parliament, it became clear that the legislative and supervisory authorities are unable to perform their role as required, due to the lack of knowledge in the relevant disciplines.

The government worked to reduce the currency in order to enhance the competitiveness of local production, but what happened is the opposite, as the production expenses in Iraq are high expenses, and the low price of the dinar doubles this price, as it cannot compete with foreign goods because of fuel, electricity, and others.

The answer to the question

The International Monetary Fund was keen to keep the exchange rate as it is without changing it, meaning it remains 1200 dinars per dollar, and I am personally surprised, as the usual recipe for the Fund includes five paragraphs for most countries, which are raising taxes, controlling public spending, fighting inflation, and liberalizing the exchange rate, the removal of subsidies.  It is a conditional prescription, meaning that the IMF does not give countries loans if the five conditions are not applied, because if the countries do not implement these conditions, the loans will go to the same way as the previous funds and be wasted.

In Iraq, the situation is different, as the IMF recommended the application of the five conditions, except for the exchange rate, as it is a pillar of safety for the weak and poor classes, because the Fund knows what the liberalization of the exchange rate means, meaning that the exchange rate may reach 300 thousand per 100 dollars, and this increases the poverty rate. And the destruction of the Iraqi economy, which did not resemble the Egyptian economy when the pound was liberated, as it has somewhat of a production base, while Iraq imports everything and this fund did not think about liberalizing the exchange rate.

But in the negotiations regarding decreasing the exchange rate, as the Fund intended to raise the exchange rate to 1,600 dinars per dollar, while the Central Bank did not want to raise the exchange rate, but set the exchange rate at 1,300, and this price did not address a situation, and therefore the Ministry of Finance proposed a compromise solution, which is 1450 dinars per dollar, and this is what the fund was convinced of.

The International Monetary Fund was interested in linking oil revenues and foreign reserves, meaning that it is interested in maintaining foreign reserves, because it realizes that if this reserve collapses, the economy will go into shock, and since there is a possibility to raise the price of the dollar to 1500, it will not be able in the future to defend the exchange rate, because the demand for the dollar will rise in the future, not only because of the decline in oil revenues, but also because of panic, so there will be very strong speculative operations, dollarization and disposal of the Iraqi dinar, and these are dangerous matters for the Central Bank.

Inconsistency in policies

- Dr. Alaa Al-Husseini, researcher at the Adam Center for Defending Rights and Freedoms:

He went on to say, if we look at the issue from a legal point of view, we will find that there are negative repercussions on the citizen, but there are positive repercussions, as I mentioned in the paper, Iraq needs a reformist view and a real program, not as a patchwork program happened.

And when the government abandoned the option of borrowing, which the government has been doing since 2008, and resorted to the policy of devaluing the currency, which is an okay option if it was more studied, the question arises whether it was better to depreciate the currency gradually until reaching the target price, or was it better to be on the shock method as it happened, that is, directly, the price was set at 1450 dinars per dollar.

In light of the changes that took place, for example, such as the decline of the Corona pandemic and the beginning of the recovery of the global economy and the curves of demand for oil and gas that began to rise, especially with the Ukrainian-Russian crisis, is it possible for Iraq to bet that the demand for oil will rise and that it is possible that Iraq’s share in OPEC will increase. It is possible that the Organization of the Petroleum Exporting Countries (OPEC) will be bypassed, considering the problem that Russia has with the world, America and Europe, and the latter's beginning to search for alternatives, even if it does not explicitly announce this search. Could Iraq bet on these curves that support its resources? In addition, the price of a barrel has now risen more than twice what was planned in 2021, and therefore these are all positive indicators towards the Iraqi government.

In this regard, we need to note the decision-maker regarding the 2022 budget, which has not yet been officially presented to Parliament, what are the available options that support this economic step and make it bear fruit, and at the same time there is an important issue, which is two days ago, the government approved a package in the issue of support for the destitute income, the poor and the retired, does this package have a negative impact on the economic step taken by the government in 2020, considering that it will lead to additional demand?  Will it affect inflation rates or not? Is this a kind of contradiction in government policies, as on the one hand it raises the price of the dollar at a time when we rely heavily on imports, and on the other hand it provides money to the consumer to buy more goods and services?

Comment on Dakhla 

Yes, our problem is that decision circles direct public opinion on how to change the budget and the exchange rate, and in fact both are results, and the problem is in the real economy. Preoccupation with public opinion in these policies is in fact a loss of the opportunity for real reform.

With regard to raising the exchange rate, it was not appropriate in terms of timing or amount, but it was a postponement of a topic that was supposed to be worked on for years, and it was the necessity that prompted it to work at an inappropriate time, as is the case in performing an operation for a patient at an untimely time. Appropriate, as it is supposed to work on preparing the patient in terms of pressure, heartbeat and sugar for the operation, but the patient is facing death or risk, and therefore the government was forced to take risks and the operation was crowned with success and its negative repercussions were not as expected, represented by a shock to the economy from which it did not recover easily.

With regard to Iraq’s share of exports, OPEC did not specify export quotas, it only sets production quotas, in addition to the fact that Iraq does not have a large production capacity as is the case for Saudi Arabia, which is also consuming part of its production, this is first.

Secondly, it is not possible to bet on the price of oil, as this rise may be followed by a sharp decline, and there is no continuous rise, and this rise fuels the collapse of itself, because the economy suffers from a recession and in the event of a rise in prices, what is known as stagnation will occur, and this leads to a spiral crisis downward trend.

Integrated political programme

- Mr. Adnan Al-Salihi, Director of the Future Center for Strategic Studies:

In his intervention, he saw that the treatment of the economy in general takes place through a coordinated government team, as it is assumed that the ministries work in a coordinated manner, especially the Ministry of Oil, Trade, Agriculture, Industry and Electricity in addition to finance, meaning that work in them must be organized, and in fact most ministries work independently without taking into account the extent of its compatibility with the performance of other ministries, knowing that they have close ties, in general the issue of the exchange rate and others is an integrated political program.

How much does the state bear to support many sectors, for example, the oil sector, the price of a liter of improved gasoline, which is sold at 650 dinars, costs more than 1000 dinars to buy from abroad, as is the case for gas oil or a little less, and it is sold for 750 dinars, and the citizen is subsidized 385 dinars, and the rest of the products are the same, this as a result of buying from abroad, if we had refineries, we would have become self-sufficient and the issue of support and the provision of currency that goes abroad was avoided.

So is the issue of buying gas for electricity generation, which is another problem. If we had an integrated oil sector, we would have been able to fill the shortage and provide electricity, and this means saving hard currency.

If the electricity was well available, the industrial and agricultural sector would have worked well and would fill the local demand, reduce imports from it, and improve the exchange rate. All of this requires ministries to work professionally, away from interference, in addition to the presence of a coherent government team that has a free hand in decision-making and has the courage to implement the procedure Correct and having a political decision that the government will be successful.

- Sheikh Mortada Maash:

Whether the exchange rate rises or falls does not affect much, as the problem is not in the exchange rate, but in other things, and the most important point is the politicization of the economy for special factional interests, and the real price of the dollar is 1500 dinars as it was in 2004, but because of manipulation for political purposes it has been changed to 1200 in the year 2000, and when the new government works to politicize the economy, the result will be the same as it happened in 2020, because always when the economy is politicized, governments fall because the economy is a red line that cannot be touched.

Were the required objectives of changing the exchange rate achieved in the white paper? How much is the dinar worth against the dollar if the flotation is applied?

The cause of inflation in Iraq is the high costs, and the latter is caused by the weakness of the infrastructure to an extreme extent, rather by poor quality and lack of infrastructure, and as a result, mismanagement and waste. For example, many people are reluctant to invest at home because of the high investment costs and lack of profits.

Taxes are supposed to be raised on luxury and not essential goods, in addition to the fact that they include ordinary merchants, not political and feudal merchants, and this discrimination destroys the economy and trade.

Iraq’s main problem, in addition to the infrastructure problem, is the problem of self-sufficiency, as Iraq has only exported one commodity, which is oil, and as a result it imports everything due to the lack of self-sufficiency, and this leads to import inflation, and the solution lies in achieving self-sufficiency for all that Iraq needs.

As well as the lack of equal opportunities and the absence of competition, and this leads to raising the value of costs, instability and inequity, and stability is what leads to economic growth.

The main problem in inflation is employment, as the rise in prices occurs due to the low level of employment and skills, as some countries have liquidated money by virtue of the closure, so the workers did not work and production decreased, and in Iraq the problem in employment is greater and worse, and if it does not solve the problem of employment, the problem remains large. Therefore, it is necessary to work to raise the level of skills and invest in building skilled and good workers, and this is what makes the country attractive to investment, whether local or foreign, and eliminates the problem of unemployment, poverty and dependence on the economy.

The answer to the question

The exchange rate achieved the financing goals and spared Iraq a major shock, especially with the presence of currency speculators. As for the economic objectives, such as achieving the competitiveness of domestic production, they have not yet been achieved because they need other conditions, as it was assumed that these conditions should be worked on initially, but the financial situation provided a change in the exchange rate on the previous conditions. Therefore, we cannot observe the economic results of the exchange rate in the short term, and they can be observed in the medium term if the government pursues other policies to support the national product.  LINK