Sunday Morning Iraq Economic News Highlights 2-26-23
Sunday Morning Iraq Economic News Highlights 2-26-23
Less Than 10 Days After Its Launch.. Suspension Of Selling Dollars At The Official Rate At Sulaymaniyah Airport
2023-02-26 Yes Iraq: Baghdad On Sunday, the Sulaymaniyah International Airport administration announced the temporary suspension of the sale of the official hard dollar, less than 10 days after the sale was opened. And the Sulaymaniyah International Airport administration stated in a statement today, that “according to the notice published by the Regional Commercial Bank (RT Bank), it draws the attention of travelers to stop the currency exchange process in the bank’s office inside the airport,” noting that “the suspension of the sale of the dollar came with a notification from the Central Bank and it will be Temporarily".
This suspension comes less than 10 days after the launch of selling dollars at the official rate at the Sulaymaniyah airport outlet. LINK
Disclosure Of Prior Parliamentary Consensus To Approve The Budget
Today The representative of the State of Law Coalition, Ahmed Al-Watifi, confirmed, on Sunday, that the governments of Baghdad and Erbil will soon reach an integrated road map to resolve the crises, indicating that parliamentary consensus exists and is waiting for the budget to be passed.
Al-Watifi said in an interview with Al-Maalouma Agency, "The budget agreement is in its final stages, and we are optimistic about reaching an agreement that can be implemented within the House of Representatives."
He added, "There are understandings among the political blocs on the need to pass every law that provides service to the citizen and not obstruct it within the House of Representatives."
He pointed out that "there are positive indicators and understandings to move forward in resolving the differences and outstanding issues between Erbil and Baghdad," noting that "the negotiations reached a set of understandings between the two sides to resolve the differences and outstanding issues between Erbil and Baghdad.”
Earlier, the representative of the Kurdistan Democratic Party, Jay Taymur, revealed the scenes and developments of the recent meetings and negotiations that took place between the federal government and the delegation of the Kurdistan Regional Government regarding the oil and gas law, the share of the region, and ending the outstanding differences, stressing that the agreement is almost in place between the two parties. End / 25 hours LINK
Al-Maliki: The Government Without Backing The Political Forces Will Not Succeed
February 25, 2023 Baghdad / Obelisk: The head of the State of Law coalition, Nuri al-Maliki, confirmed that the government without assigning political forces will not succeed.
Al-Maliki said, in a statement followed by the obelisk, that women are the true partner in good work and the transmission of the Islamic message, stressing the need to build a generation capable of assuming responsibilities.
He added that the government without assigning political forces will not succeed and should fulfill the requirements of the citizens.
He concluded his speech by saying that improving the service reality for Iraqis is done through reviving housing and agricultural initiatives. https://almasalah.com/archives/43936
Research Paper: Washington's Emphasis On The Dollar Is A Message To The Factions That Al-Sudani Can Benefit From
2023.02.25 - Baghdad - Nas Former government advisor and researcher at the French National Center for Scientific Research (CNRS) Hisham Daoud wrote about the strategic and political dimensions of the dollar exchange rate crisis against the dinar in Iraq, stressing that the repercussions and consequences of the financial crisis resulting from the dollar are "the most dangerous since 2003" because they are not limited to Not only on the economic situation, but it also has geo-strategic repercussions, and it will have a great impact on the political power relations in Iraq.
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Daoud stated in a research paper he wrote for the Emirates Policy Center (EPC), followed by "NAS" (February 25, 2023), that the goal of restricting the Federal Reserve in New York is to ensure Baghdad's compliance with an electronic system that guarantees transparency in dollar transactions and to stop money laundering and dollar "smuggling".
To neighboring countries, and this constitutes an incentive for the Iraqi authorities to adopt more prudent financial and economic policies. "This American policy also includes a strong message to the Iraqi factions loyal to Iran, which depend to a large extent in exercising their influence on networks of corruption and money laundering."
Daoud pointed out that in the medium term, the Iraqi prime minister could benefit from the tightening US monetary policy to weaken his distant opponents, such as the Sadrist movement, as well as weaken his "close allies" in the coordination framework, who aspire to expand their sphere of influence and exercise extended executive powers.
The research paper indicated that, while the United States is likely to ease its financial policy towards Iraq, it is not possible for it to accept the return of the previous situation to what it was. The electronic financial system will be implemented gradually, and factions linked to Iran will have to deal with it as a fait accompli.
The following are excerpts from the paper:
The crisis was exacerbated to some extent by rumors, misunderstandings, and a state of uncertainty, which led to a halt in the demand for some imported goods, which became expensive and were seen as unnecessary, and thus affected small traders who are today threatened with leaving the market and joining the ranks of Jobless.
The World Bank estimates the unemployment rate in Iraq at 14.5% among the general population, and 27.5% among youth. The crisis has also prompted many merchants to resort entirely to the informal market (let's call it the parallel market), or even to load trucks with dollars and transport them out of Iraq.
Over the years, the armed factions and parties took control of the banking and private financial sector (full control or owning a majority stake in banks), and used the dollar auction system either to achieve huge profits (by taking advantage of the low price of selling dollars by the Central Bank of Iraq), Or to launder illegal money (resulting from smuggling, embezzlement of public property or commissions), or to send money to both Iran and Syria.
The result is that these factions are now relying heavily on the regime to recycle their income. However, there is a problem with the new US restrictions towards the monetary system in Iraq represented in the fact that they affect individuals and importers, as well as financial institutions linked to the factions without any kind of exception or discrimination. However, the armed factions have huge sums of money at stake, and pressure from the New York Federal Reserve could incentivize them to "clean up".
And while the United States is likely to ease its financial policy towards Iraq, it is not possible for it to accept the return of the previous situation to what it was. The electronic financial system will be implemented gradually, and factions linked to Iran will have to deal with it as a fait accompli.
By using disguised sanctions against pro-Iranian elements, supporting the approach of the Iraqi prime minister and his successor, the Dawa Party, and exerting direct pressure on Tehran, this new US policy may bear fruit.
In any case, this crisis shows that all pressure cards are in the hands of the United States, such as the dollar weapon, as well as its ability to collect and extract data, in light of the fact that the information infrastructure of the main Iraqi ministries and institutions is entirely American industry, and the American military aid to Iraq, and the sanctions weapon, Perhaps resorting, as a last resort, to targeted strikes targeting militia leaders and their facilities.
In the meantime, the Iranian position has been greatly weakened due to the continuation of the protest movement in the country and the high rates of inflation (one of the motives for smuggling dollars from Iraq to Iran is to pump dollars into the market for the purpose of slowing down the decline in the value of the Iranian riyal and the resulting inflation and financing the budget deficit);
And the continuation of drone attacks (by Israel and with the approval of Washington) on strategic facilities in Iran. In light of this state of weakness, the Iranian regime now needs to rely on an Iraqi government backed by Washington.
Therefore, Iran is likely to exercise its hegemony over Iraqi factions and militias, and limit these factions' obstruction of the Iraqi government's efforts to implement policies to adhere to the new monetary systems.
At the local level in Iraq, there are fears of a slowdown in commercial activity, and a delay in approving the 2023 budget (which was supposed to be approved at the end of January, and to be approved within two months after that). The worsening economic crisis may also lead to social unrest, especially before the month of Ramadan, which will begin at the beginning of the last third of March, and thus the possibility of re-igniting the protest movement in the country. Moreover, the Sadrist movement may find itself increasingly besieged and excluded from informal decision-making positions and financial resources, and thus may threaten to organize mass demonstrations and possibly resort to street clashes.
Conclusions
Today, Iraq has come to the conclusion that it is necessary to get rid of the dominance of the informal sector and abandon the cash-based economic model, and move towards an organized banking sector that would make way for the growth of the private sector.
The commitment of Iraqi Prime Minister Muhammad Shia al-Sudani to make his rule an opportunity to launch major development projects sends two somewhat contradictory messages. He appears to be sending a message to the factions that he will not attempt to change the status quo, while at the same time encouraging them to transcend political and factional differences to focus on the economy.
However, it is clear that the aspirations of economic development require adherence to international standards, transparency and the fight against corruption, standards that the dominant factions currently see as weakening them organizationally, socially and politically. After it became a wealthy class that relied for an important part of its income on the dollar auction system, these same factions created a weapon that Washington can now use against it. https://www.nasnews.com/view.php?cat=102754
Economists Call For The Elimination Of Dollarization Of The Iraqi Economy
Baghdad - Economy News Iraqi economists called on state officials to eliminate dollarization in the economy, in order to meet the growing demand for the dollar currency.
And the Central Bank of Iraq launched a series of measures to counter the rise in the exchange rate of the dollar against the dinar, including the settlement of private sector trade between Iraq and China, in the yuan currency through the American JPMorgan Bank.
The economist, Mahmoud Dagher, told Al-Iqtisad News that businessmen and importers have begun to increase their numbers to go to banks to obtain dollars to cover imports, and this is a very important step that will contribute to reducing the demand for dollars in the parallel market.
He added that selling goods in foreign currencies inside the Iraqi market increases demand, and this is called dollarization, a procedure that shakes the citizen's confidence in his currency.
On the other hand, economist Aqil al-Ansari told Al-Iqtisad News that the state must control dollarization by preventing the sale of goods in the local market in dollars or any other currency except for the Iraqi dinar.
He stressed that this matter will lead to reducing the demand for the dollar, and therefore the dollar will go to the main needs to cover Iraq's imports of goods, indicating that the last consumer must pay in the dinar currency, while the main importer is the one who buys the dollar from the banks.
He pointed out that what is happening now is the organization of foreign trade for Iraq, which is a very important measure for the Iraqi economy and ends the chaos that was taking place.