RECAP NEWS FROM DINAR IQD & DONG VND, 2 JULY

 STATED ON SATURDAY APPROVED FEDERAL BUDGET DOES NOT CURRENTLY REQUIRE BORROWING

Shafaq News/ Mazhar Muhammad Salih, the financial and economic advisor to the Iraqi Prime Minister, stated on Saturday that the recently approved federal budget, endorsed by the President of the Republic and entered into force last week, does not currently require borrowing.

Salih clarified to Shafaq News agency that the budget is based on a deficit due to the decision to set the price of a barrel of oil at $70, combined with high expenditures. However, he assured that the budget deficit has potential solutions, including utilizing the surpluses achieved in 2022 and implementing other financial measures.

If the need for borrowing arises, Salih emphasized that Iraq will opt for internal borrowing through the issuance of treasury bonds by the Ministry of Finance. He pointed out that maintaining oil prices above $70 per barrel will help reduce the deficit, while a drop in prices below this threshold may lead to an additional deficit.

Salih highlighted that the crucial factor is the stability of the annual average of oil prices rather than short-term fluctuations within a month or two, as this ultimately determines the impact on the country’s revenue, considering the amount of oil production exported.

The Iraqi parliament voted on the financial budget for 2023, 2024, and 2025 on June 11, following four consecutive sessions marked by disagreements between political forces regarding particular articles.

The budget for the current year amounts to 197.828 trillion Iraqi dinars (approximately $152.2 billion), with a total deficit of 63 trillion dinars (about $48.3 billion). However, details of the budget items for the years 2024 and 2025 have not been released.

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SUDANESE FINANCIAL ADVISOR TALKING ABOUT THE MEASURES TO CONTROL THE DINAR

The Advisor to the Prime Minister for Financial Affairs, Mazhar Muhammad Salih, confirmed the strength of the quantitative and price monetary policy tools in managing public liquidity, while identifying factors for stabilizing the purchasing power of the Iraqi dinar.

Saleh said in a statement to the official agency, “Some are betting on the impossibility of controlling the levels of local liquidity generated by government spending, especially in the federal general budget 2023, which is based on methods of financing the budget in Iraqi dinars in exchange for oil revenues in foreign currency mostly, as oil revenues constitute reserves.” The Central Bank of Iraq, which helps to intervene in the money market to sterilize local liquidity levels and control them when they rise through the ability to meet the increasing demand for foreign exchange.

He added, “The bet is losing on the inability to intervene and control the levels of liquidity in dinars, which will rise with the rise in government expenditures due to the conditions of the compliance platform and the fear of them in meeting the demand for foreign exchange. Monetary policy and the strength of foreign reserves, which are the highest in the country’s financial history, are the only ones that possess the price tools.” And the different quantity affects the levels of liquidity that government spending mostly generates.

And Saleh continued, “There is a strong coordination and integration between monetary policy and the joints of economic policy and financial policy, and it affects drawing the rules of price stability factors and building an efficient commodity supply in order to achieve the goals of the Central Bank in stabilizing the purchasing power of the Iraqi dinar, based on the goals of Decree Law No. 56 of 2004.” “.

He noted, “There is a very pessimistic extremist imagination that is spread from time to time and is not at all commensurate with the strength of the monetary and price policy tools in particular, and the opportunities available for government policies in general in addressing the shocks that are seen from time to time in the issue of public liquidity management.”