"Tidbits From TNT" Thursday Morning 12-23-2021

Dec 23

TNT:

Tishwash: Iraq receives an invitation from the United Nations to close the compensation file for Kuwait

Iraq has received an invitation to attend the meetings of the United Nations Compensation Committee, related to Kuwait's compensation.

The head of the Iraqi Financial Experts Committee, Abdul Basit Turki, said today, Thursday, that he had received an invitation from the head of the Compensation Committee at the UN Security Council to determine the holding of meetings to discuss the issue of financial compensation for Kuwait to Iraq, adding that a meeting will precede the work of the sixteenth special session of the Compensation Committee Board of Directors in Geneva on February 9 next year is considering closing the compensation file permanently.

Turki added that Iraq will draft a resolution that includes removing it from the provisions of Chapter VII of the Charter of the United Nations, and protecting it from any claims related to the Kuwait war compensation, whether they are individual claims or the establishment of cases related to compensation, calling on the Ministry of Foreign Affairs and the concerned authorities to formulate a project that protects the country from any Consequences, including canceling all decisions that resulted from the Kuwait war. link

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Tishwash: Kuwait announced that Iraq delivered the last batch of compensation amounting to 44 million dollars before it was due.

The Kuwaiti Al-Rai newspaper, quoting officials, reported that "Iraq paid the last payment of $44 million to complete the remaining $629 million for Kuwait, revealing that the amount returned from the deduction from oil sales amounted to about $585 million, and the remaining 44 million, so the Iraqi government decided to pay The remaining amount instead of waiting for the next quarterly withholding payment to be due, in the spring of 2022.”

She added that "the Iraqi government wants to achieve two goals, the first is a message of friendly signal to Kuwait of its commitment to implement its commitments, and the second is to re-integrate the Iraqi banking system with the global banking system."

And she indicated that "the United Nations Compensation Committee will hand over to Kuwait the last batch of compensation due to it from Iraq at the end of this month or the beginning of next January at the latest, indicating that the committee will meet next February to issue its own report that Iraq has fulfilled all its obligations in terms of paying the prescribed compensation claims. It is complete for Kuwait.

In accordance with Security Council resolutions, the percentage deducted from the proceeds of export sales of oil and its products was 5% in 2003, then it decreased to 0.5% in 2018, and then rose to 1.5% in 2019, to stabilize since 2020 at 3%.

In 1991, a UN Compensation Committee was formed, obligating Baghdad to pay $52.4 billion in compensation to individuals, companies, governmental organizations and others, who incurred losses resulting directly from the invasion and occupation of Kuwait.

On November 21, 2021, the Central Bank announced the payment of the last batch of compensation to Kuwait amounting to (44) million US dollars, expressing the hope that the termination of the payment of compensation would contribute to removing Iraq from Chapter VII link

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Tishwash: Why did traders start hoarding the dollar, and refusing to deal in the dinar in the local markets?

Major traders, even retail owners, are turning towards the dollar and refraining from the dinar to overcome any sharp fluctuations or similar collapse that occurred in neighboring countries and the region such as Iran, Turkey and Lebanon, which may cause them heavy losses.

These fears have prompted citizens to expedite the disposal of the local currency in their possession and replace it with dollars, as well as limiting sales and purchases of hard currency by some owners of companies, car showrooms, and some interests whose dealings are linked to the dollar, for fear of a sudden collapse of the dinar against the dollar.

The companies that deal in loans, debts and deferred transactions have also tended to make the dollar a fixed form of dealing for them instead of the dinar.

An economic expert explained the reason why the local market sometimes resorted to dealing exclusively with the dollar, not the Iraqi dinar.

Bassem Jamil Antoine told {Euphrates News}: "This transaction does not mean a collapse and the exit of the dinar from daily transactions, as the majority of people still deal in the Iraqi dinar and consider it the basis of the currency, but the rise in commodity prices and monetary inflation has become easier in buying and selling in the dollar, which is not new and it has passed." It's more than 20 years old."

And he indicated that "the Iraqi economy is non-productive and consumerist, and all imports depend on the dollar, so dealing with it is easier than trading in dinars, which may be exposed to a loss or disparity."

Jamil stressed, "The Iraqi dinar is still strong, and the strength of the Iraqi economy does not lie in paper and remains a facade," noting that "these exaggerations are largely unjustified, and some people have turned, and unfortunately rumors play a role, and the Iraqi dinar is still a similar site."

Traders say, "The increasing demand of people to buy dollars is due to two reasons, the first reason is with the aim of the daily transactions of some stakeholders for the purpose of trade and buying and selling operations that began to impose dealing in dollars, and the second reason aims to acquire dollars by citizens in anticipation of any collapse or economic emergency in Iraq in the future. ".

On December 19, 2020, the Council of Ministers announced raising the price of selling the dollar to banks and exchange companies to 1460 dinars instead of 1200 dinars to one dollar, with the aim of compensating for the decline in oil revenues caused by the deterioration of oil prices, to witness the impact of that, the Iraqi market, a significant increase in the local market This sparked a wave of intense resentment among the popular circles and some political blocs, as well as the objections of some interested in economic affairs.

The Central Bank of Iraq attributed the reasons for the devaluation of the dinar at the time to what it described as structural distortions in the Iraqi economy that impoverished public finances and restricted the reform capacity sought by the government and the Ministry of Finance.

The devaluation of the dinar caused a great shock to the Iraqi street, which was not expecting such a step, especially since it came at the height of the spread of the Corona pandemic, which caused the suspension of business, the disruption of studies, the closure of markets and the health curfew, in addition to the collapse in oil prices that Iraq relies on. Its sales to supplement the general budget by 95%.

Regarding these concerns, the government reassured the citizens and expressed its confidence in the dinar.

The financial advisor to the Prime Minister, Mazhar Muhammad Salih, ruled out a collapse of the local currency (the Iraqi dinar) and told Al Furat News: "There is no collapse of the local currency, and the Iraqi dinar is strong and covered by good foreign reserves."

He pointed out that "the monetary policy deals with the dollar, and resorting to the system of two currencies (domestic and foreign in trade) because there are precautions in dealing with foreign currency and its stability, as well as the stability of transactions in it as well."

Saleh's opinion was reinforced by a government source and ruled out the collapse of the local currency of Iraq, as happened to the Turkish lira recently and the Iranian toman, due to "the difference in monetary policy from one country to another."

The source added that "the collapse of the local currencies of a number of Arab and regional countries surrounding Iraq will have a significant impact on trade exchange operations with these countries."

He acknowledged that restricting financial dealings by some stakeholders in hard currency will have a relative impact on the Iraqi economy and the Iraqi market, because Iraq's economic policy depends on oil, whose value in global markets still ranges between 75 and 80 dollars per barrel.

Concerning the advantages of devaluing the currency, Counselor Mazhar Muhammad Salih confirms that the benefits achieved from devaluing the Iraqi currency are great and cannot be neglected, and that the talk about returning to the old exchange rate has become a thing of the past.

He adds in a press statement that changing the exchange rate gave strength to many of the country's economic joints, which is consistent with the statements of the Central Bank, which confirmed that raising the exchange rate led to an increase in the competitiveness of the local product, as well as reducing the pressure of expenditures on the Ministry of Finance by 23%, which enabled The Ministry of Finance was able to overcome the crisis resulting from the drop in global oil prices during 2020 and the first months of 2021.

While the economic expert, Hammam Al-Shamaa, explained in a press statement that changing the exchange rate has positives for the government and greater negatives for the Iraqi people, indicating that the government benefited from the currency devaluation in strengthening its financial budget by providing 23% of the salaries of employees who receive salaries from the government, such as retirees. and daily wages.

On how, he explained that the salaries of Iraqi employees were spent in dinars, while the state’s oil imports were in dollars, and therefore, instead of the state reducing the salaries of state employees and retirees and the possibility of facing a popular reaction, it decided to reduce the value of the currency, which enabled it to avoid the reaction that would have occurred Although the result is the same in both cases.

The government announced an increase in the size of the cash reserve in the Central Bank, after changing the exchange rate, which led to an increase in the size of the reserve by an estimated 15 billion dollars to reach nearly 65 billion dollars.

Experts identified the damage to the Iraqis in 3 points, the first of which is the decline in the value of the Iraqi people’s revenues in the public and private sectors by 23%, in addition to the Iraqis’ loss of confidence in the government, which was reflected in the rise in consumer prices by a much greater rate than the change in the exchange rate.

In this context, the economist Ali Al-Fraiji said, "The Iraqi market depends very heavily on imported goods, especially from Turkey and Iran, and as a result, any economic collapse in the countries exporting to Iraq will affect one way or another because of the wrong state policy in dealing with crises. economic situation to which Iraq is exposed. link