TNT, Pimpy, FootForward and More Saturday Morning 12-26-2020
TNT:
Tishwash: The devaluation of the dinar is the beginning .. "painful" steps and a difficult year for the Iraqis
A report published by "Bloomberg" agency, Thursday, (December 24, 2020) warned that the devaluation of the Iraqi currency may not save the country and extricate it from its current crisis unless it is accompanied by more painful measures that include a significant reduction in government spending .
"Failure to make spending cuts will lead to severe economic consequences, in a country whose citizens are already suffering from many difficulties," the report said.
So far, the devaluation has not caused massive popular protests like the one that took place in October 2019, but economists expect this to be only the beginning of more painful measures .
The report quotes the economist Ziad Daoud as saying that "the devaluation will be painful for ordinary people, but it is unlikely that it will be a one-time". It is expected that the decrease in foreign exchange reserves expected in the next budget will lead to more adjustment in the currency, either officially. Or more likely on the black market. "
Last Saturday, the Iraqi government announced a devaluation of 23 percent for the first time since 2003, in order to reduce pressure on the budget in light of its attempts to secure billions of dollars in foreign aid .
And Bloomberg notes that "the draft state budget for 2021, which was approved by the government last Sunday and sent to Parliament, expects another difficult year for Iraq . "
Oil exports were estimated in the next budget at an average of 3.25 million barrels per day, at an assumed average price of 42 dollars, with a deficit of about 45 billion dollars .
Many analysts said that "the devaluation was necessary to show Iraq to international lenders that it is serious about reforms," but pointed out that "this is not sufficient for the country to obtain the financial assistance that the Iraqi government hopes to obtain . "
Mark Pohlund, senior credit research analyst at the "REDD Intelligence" platform , said, "Iraq needs to cut its budget further in order to obtain substantial financial support."
And the central bank set, at the end of last week, a new exchange rate for the national currency, to raise the dollar to 1450 dinars compared to 1190 dinars before the decision, which is the first in half a decade .
The decision sparked panic among Iraqis, many of whom rushed to exchange offices to buy dollars, and to supermarkets to store supplies .
Finance Minister Ali Allawi said that these measures are the only ones capable of preventing a complete collapse .
He told reporters Sunday, "If we do not change the exchange rate or adjust our spending, our reserves (of foreign currency) will be depleted within six or seven months."
In particular, the draft 2021 budget includes the introduction of an income tax. And according to the budget proposal, Iraq is also seeking to increase its non-oil revenues in the face of declining crude revenues .
Iraqi officials who worked on preparing the bill say that their goal is to "withstand an unprecedented financial crisis resulting from the emerging Corona virus pandemic and the collapse of oil prices, which Iraq relies on sales to finance 90 percent of its budget . "
Baghdad is expected to end this turbulent year, with GDP growth shrinking by 11 percent and the poverty rate rising to 40 percent of the country's 40 million people link
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KTFA:
Don961: International Monetary: We are ready to support reform efforts in Iraq
Saturday 26 December 2020 Baghdad: Morning
The head of the International Monetary Fund’s mission in Iraq, Toker Mirzoyev, welcomed the cabinet’s approval of the draft general budget bill for the fiscal year 2021, while announcing the fund’s readiness to support reform efforts. The Council of Ministers voted to approve the federal budget for the fiscal year 2021, at the extraordinary session held last Monday, headed by Prime Minister Mustafa Al-Kazemi.
Pandemic and oil prices
Mirzoyev said in a statement to the mission received by "Al-Sabah", Friday: "The Corona pandemic and the sharp decline in oil prices and production have exacerbated economic weaknesses in Iraq," and pointed out that "due to the acute shortage in financing public finances and the challenges facing the payment of external payment obligations." "And local, including wages and pensions, must be made a critical recalibration of economic policies in order to maintain the stability of the economy."
He continued, “We welcome the approval of the Iraqi Council of Ministers to the draft general budget bill for the fiscal year 2021, which, according to our understanding, envisages implementing important financial reforms,” noting that “despite the difficulty of these reforms, along with the reduction of the currency exchange rate that was announced recently, they constitute major steps. The importance of helping to reduce large imbalances in the external balance of payments and public finance, and to ensure economic stability.
Increase remittances to the poor
The statement clarified that «the Iraqi government has developed plans to significantly increase cash transfers directed to the poor and to enhance health-related spending, which are necessary to mitigate the impact of the Covid-19 crisis on the most vulnerable groups».
He pointed out that the short-term plan should be followed by more subsequent reforms, which include deeper structural reforms, in order to strengthen the resilience of the economy, expand the fiscal space to include the processes of reconstruction and social spending of critical importance, and lay the foundation for higher growth rich in jobs and more inclusive. For everyone in the medium term ».
He declared, "The International Monetary Fund is ready to support the reform efforts made by the Iraqi government at this challenging juncture." LINK
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Courtesy of Dinar Guru
Pimpy Article: "The decision to reduce the dinar: To treat treatment or to stop the collapse" ...The choice was to devalue the dinar. Quote: "The Central Bank of Iraq statement regarding the reduction indicates it must be emphasized here that this change in value of the Iraqi dinar will be a one-time event only and will not be repeated." They have devalued the dinar. It's only going to be done once. And will not be repeated. That's a good thing. It means it can only go up from here.
FootForward "Iraqi Dinar Update"
Dec.25, 2020
The devaluation of the dinar is good news……we have had the first devaluation……I expect to see another one. I have expected this to happen for years.
I really think our rate to exchange the dinar will be over $3.50