PART. 2
The reduction that we can resort to by deleting zeros, yes, based on data and reality.
The Iraqi economy, Dr. Safwan, and as you mentioned, the Iraqi economy is based on sales of Oil, in light of this data, will Iraq succeed if it wants to delete some zeros today from its local currency?
You mentioned that there are proactive steps for any country that wants to delete its zeros should be the first of them today, economic diversification, revenues from various sectors today in light of this data in the Iraqi economy, even if we remain on the rentier economy, will it succeed?
This idea, if it is not implemented, or will it actually fail, meaning that the Central Bank is supposed to have a strategy in determining the value fair for the Iraqi dinar, and where do we go with this value? Are we, for example, with integration with Turkey with the Hashemite Kingdom of Jordan with the Gulf dinar In terms of the environment surrounding Iraq?
I think that if there is a thought to have a qualified trade volume because we link the Iraqi currency to stable economies, such as the US dollar as the yen the Japanese as the sterling pound or even the Chinese yuan through the Gulf currency, the currency.
(Mnt Goat – he tells us they would need a basket of currencies of stable developed countries to link the dinar to. )
The unified Gulf needs a harmonious economic infrastructure
integrated that produces a kind of monetary integration means that we do not think about adding value, but rather link this value to the economies of a system, of course this subject requires developing the tools of economic integration between these countries so that the value
of the currency corresponds to the value of the production of these countries and also imports and thus we create a state of additional confidence in the Iraqi dinar, the Iraqi dinar in the fifties was linked to the sterling pound. The original point of the matter is to return to the pound sterling and if there is another vision from the Central Bank to link the Iraqi currency for example with the Gulf countries, we must start now to determine economic paths for integration so that
we have a specific time. I believe that the Gulf countries have postponed this matter more than times to have an Arab currency unified or a unified Gulf currency, we defend the economies of these countries and support confidence.
(Mnt Goat: This unified concept has been kicking around for a while but will not happen until we are out of this investment. We can see just by the Iranian attitude this is not going to happen any time soon.)
By keeping this currency, I want to thank you very much, Dr. Safwan Qusay, and you are the academic and economic expert for all these clarifications.
You were with us from Baghdad in our second file, dear viewers, the problem of fluctuating exchange rates and the collapse of the value
of the Iraqi dinar against the dollar, the most prominent challenges facing the Iraqi economy.
The reasons are different and the result is one, which is the purchasing power of low-income people and the stagnation of the markets
And negative effects, of course, on the Iraqi economy. After relative stability during the week and the weeks past, the rise in the exchange rate has returned to the forefront again, and the Central Bank confirmed that this rise is temporary because Iraq has a reserve of hard currency that enables it to achieve balance. We will discuss more about this topic later.
The report has become the stability of the dollar exchange rate against the dinar, the greatest wish of Iraqis for about three years, due to the consequences and successive crises caused by the large price jumps that cast their shadows on the markets in general and low-income people in particular, despite the measures of the Central Bank to preserve the value of the Iraqi dinar and prevent the monopoly of hard currency from before Traders and speculators, but the crisis did not end, as the cause and instability did not subside.
Its pace for a short period until it rises again, causing confusion for citizens and paralysis and stagnation in the markets between the electronic window and travelers obtaining dollars exclusively from airports.
And forcing traders to deal in Iraqi dinars in their local transactions, the gap between the official price set by the Central Bank and the parallel market price is still large in light of the continued violations leading to the leakage of the currency to countries sanctioned by the Governor of the Central Bank, and during his hosting by the Parliamentary Finance Committee, he indicated that what Iraq has of reserves of hard currency is sufficient to achieve market balance, but he attributed the widening gap between the official price and the parallel to illegal trade and its effects by withdrawing large amounts of currency in illegal ways.
While a meeting with the American side was revealed in New York at the end of the month current to discuss the file of the sanctioned banks and the aspects related to the external transfer process.
Many factors control exchange rates, such as the increased demand for the dollar to finance imports. And the economic and political crises that burden citizens and require taking measures and solutions that ensure the stability of exchange rates in the long term.
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For more, our viewers, on this topic, Dr. Ahmed Hal, Professor of Economics, joins us at Al-Mustansiriya University, Dr. Welcome to the Economics in a Week program on the screen change, if Dr.
We are talking about hosting the governor the Central Bank in the Iraqi Council of Representatives. In your opinion, did the Central Bank of Iraq fail today in managing the issue of the dollar exchange rate and also the sanctions on some banks Iraqi?
In the name of God, the Most Gracious, the Most Merciful. Greetings to you, my dear brother, and to the viewers of Al-Taghyeer Channel
Your Excellency, welcome. The beginning of the exchange rate crisis is a succession and not a spur of the moment, but
It worsened after 2023 due to the implementation of the
US Federal Reserve platform and forcing the Central Bank to use this platform for transfers Foreign Affairs. Many economic circles and many officials Governmental, whether in the Ministry of Finance or the Central Bank or financial institutions and economic specialists in the exchange rate issue believe that the platform will lead to pressure on foreign transfers, but unfortunately during the year 2023 and 2024 after the growth large with electronic payment cards and forcing society to use the payment card electronic and forcing merchants and companies to use electronic payment in dinars Iraqi and internal transactions also in Iraqi dinars and it did not work with these methods but rather exacerbated the exchange rate crisis because many transfers through
these cards and electronic wallets as well as transfers launched by banks including called direct transfer that occurs between the clearing house between internal banks some banks internal and external banks did not work for example the closest example to the issue of inflation
sales at the central bank and this is something the prime minister himself mentioned that it means in the past before the position is available the prime minister said that more than approximately 30% is correct that it means the transfer from these 100% ratio is that 30% of the external transfer is correct and the rest is smuggling, meaning it is
the same and what he mentioned, but in fact he and many officials in the economic field did not understand the real problem of the exchange rate.
(Mnt Goat – so what is the real problem with the exchange rate according to this economist?)
The real problem of the exchange rate has multiple dimensions, meaning today I do not want to exonerate the Central Bank and say that it is not the responsibility on its shoulders nor Law No. 56 of 2004. The main goal of the Central Bank is to maintain monetary stability. This is the first goal of the Central Bank, and after that the intermediate goals
and the final ones fall, but I remind you that there are multiple dimensions to the issue of the exchange rate and not one dimension
represented by monetary policy, but rather or let me remind you so that we do not leave this point this week.
The interest Sunday the Central Bank sold $281 billion a thousand
281 million yes a dollar a million dollars and the bank or two banks that own 95% of the platform through external transfers are only two banks 95% what are these two banks.
The reasons what is the work of the rest of the banks what is their work what is their work is it that they work discounting transfers. The treasury and that means buying transfers from the Ministry of Finance as well.
Loans are an initiative of the Central Bank and so on and this is a fact that does not develop the banking system and is reflected on the real sector today, Monday, the Central Bank sold $279 million also one bank is the governor.
Dominating this issue Tuesday $283 million and this is the largest sales for the bank. The Central Bank during this period, meaning during the current government, meaning it is assumed that the Prime Minister gave a clear plan and vision in the curriculum. The government, but it really did not control and was shocked by some things on Tuesday 283 million and on Wednesday 274 and also on Thursday 69 total sales during the past week. One billion and 386 or 1,386,000,000 for the week. This means this amount is real if compared with the invoices that came out of the platform and the goods corresponding to these invoices. We will find a huge difference between what entered Iraq of goods and services.
(Mnt Goat, meaning goods and services in the physical do not add up to the money spent on them. So where did the other money go?)
It could be in kind and it could not be possible to be material and immaterial goods and services that make up this amount. We mean by it games, but there must be a percentage and proportion, meaning always when they were talking about this point, Doctor, is the role of the Customs Department in this matter, the Tax Department is also in this?
The subject is if there is any import license given to any merchant or any bank imports a certain commodity from outside Iraq and you know that Iraq is based on imports by more than 90%, so here perhaps lies the biggest problem, so it must come with invoices or official papers proving the value of these goods with what was taken from dollars, our dear professor, let me explain to you, excuse me, that these sales 95% are not the real target, which is the merchant, meaning there are things that fall within the platform that we do not know about the citizen, the Prime Minister himself does not know about them, he may know about them himself, the Prime Minister Council of Ministers because there are technical things related to banking aspects and these have orders and specialized technical issues minutes so that it is easy to transfer large quantities of dollars and store these quantities in a group of countries that control this dollar and then this person or this bank or
this company sells this dollar through a black market clearing. Notice, the target is the real one who sells the dollar, not benefiting from this dollar, but benefiting from it from the black market. Yes, in this case, in this case, Doctor, when these parties obtain these large amounts in dollars and transfer them outside Iraq by any means, meaning to transfer legal or even illegal, unless it is disclosed to the Iraqi government or to the US Federal Reserve to know that this party
that transferred the dollar, then these banks were subject to sanctions, no, no, they are them, they transfer legally.
I will ask you how, how is it stored invoices are a small group of traders, we call them the unorganized trade, trade active inside this country needs dollars to finance imports, which means real trade?
As for these traders, there are companies registered with the Ministry of Commerce that collect shipping bills large, meaning that if this trader applies to a bank or a bank that is not financing his internal trade, no
he gives dollars for the purpose of financing his internal trade, and this means that these traders constitute 70% of domestic trade, note that 70% of domestic trade constitutes these people put pressure on the domestic market. Look, we are coming to convert 95 to 97% of this externally.
(Mnt Goat – here is the exposure of how they find this illegal money transfer. Read on,,)
Externally, yes, and this same amount did not match with customs due to the lack of a tag between the bank.
(Mnt Goat – he then talks about solutions to the problem. Read on,,,)
The Central Bank and Customs are organizations. We said a long time ago that the problem is not related only to the Central Bank. There must be financing and exemption for trade Interior for business owners, small traders for a period of five years from the tax first, I until the exchange rate stabilizes from the tax first, and until we reach the real target and what the bank needs only is.
The one who controls this issue, we exempt from taxes for a period of five years and we exempt from fees for a period of five years and we issue him a merchant card that enables him to easily import what he needs through his card electronic payment via the Internet and we impose on this merchant a shipping policy from customs that matches what is transferred to him of the dollar and this merchant that I am talking about represents a large segment of small traders
And it represents great pressure on the exchange rate in this way, we can reduce the exchange rate level and it could reach the forties, meaning it could reach 40, and this is an acceptable condition as long as Banks the current one or two banks as well as a group of companies
The I and B companies only control and monopolize the foreign exchange and give great privileges for the foreign exchange. The exchange rate will rise later. In addition, whenever government spending increases, the size of the budget increases, and oil prices rise, this will lead to a very large increase in the exchange rate because we said at the beginning of the episode that the problem is the exchange rate.
It is only related to the Central Bank. It is related to the industrial sector, which is destroyed for us. Almost 70% of Iraqi factories are destroyed. This pressure on government spending goes to imports, and whoever goes to imports, we will put pressure on the domestic market that requested the dollar so that we can cover trade.
The domestic market is only large traders and large companies with large capitals. They are first they themselves also evade taxes because of the deception between them and the tax officials, meaning there is a very large percentage of tax evasion and also taking out dollars or sending dollars to abroad in exchange for goods and services that are not real, meaning there are goods and services that are not worth what came out of the dollar and therefore there are figures controlling the issue of the currency or the platform, is this a fault of the government,
Doctor, is this the fault of the government, meaning when you said a little while ago that there is a bank or a party or two parties that we call it that control most of the sales of the currency auction in the bank today , the central bank?
Is this the fault of the government or the fault of the central bank or is the central bank selling the countries of the dollar to which party today buying it from the legal aspect, the central bank tells you that I am what I receive a request from the dollar is food until I reduce the gap between the official price and the price the parallel, but this has become a national security problem and a social problem, I mean, and an economic problem?
And a political problem that greatly affects the country. Who are we? Answer: The Central Bank is the only one who finances and feeds the existing demand is one of the mistakes. Really, how can we finance these imports, most of which are non-domestic imports with a policy that imposes a tax on them that is less than the tax imposed on the same goods from the ports border from the south or from the air border ports.
Okay, so in addition to that, excuse me, regarding your question, in addition to the government, because this is considered one of economic crimes. I mean, who is now prosecuting the government for its mistakes? I just want to know I mean, who is prosecuting me because this 20% difference is a very big difference that is coming to bear on the citizen means that among the goods, food goods are also high in price.
If you notice the reports of the Ministry Planning, there are goods that constitute the food basket, the big thing for the Iraqi citizen, their prices are also high, real estate prices are also very high inflation has increased, yes, inflation in general, so the problem does not lie in a shortage today, Doctor.
The dollar in the Iraqi market, the Central Bank pumps dollars into the central market, but there are some procedures taken by the weak-willed or some merchants or some whales, call them what you want
exploit the dollar and the price difference and go in the end to the black market if we wanted today as a government.
I mean, in fact, we said at the beginning that the methods are to reduce and raise the exchange rate and impose on the citizen to deal in the dinar and impose on the citizen to take the card Electronic.
I mean, these are issues, unfortunately, media issues that we can use as media to cover up a very difficult problem, I mean, these are the tools that can be saved from using the dollar based on the use of the dollar in the country, the problem is bigger than this can solve.
These tools are sterile tools and have become a thing of the past, the government cannot solve the issue of the exchange rate. The exchange rate is this simple, if it wants two solutions, there are on the short-term and on the long-term.
First, the banks and the A&B companies are happy, of course, on these profits that I mean, I don’t see a specific bank increasing its profits or its assets, the assets increasing from 500 billion to 5 trillion in five or six years, what is this business?
Shamad, depending on the auction of Uncle Doctor Of course yes, the dollar is the dollar and bonds the Treasury, the interest on Treasury bonds and the Central Bank initiative loans, these are the three things that the banks are supposed to do, and they are supposed to do a very large development work, finance projects.
The industrial and agricultural projects are supposed to be exclusively financed by these banks, by working in the real sector.
What made me leave 81 banks operating in the country, and these 81 banks benefit either from the auction currency or through the Central Bank’s population initiative and through auctions and Treasury transfers.
The American, even if it stopped and it has been working for very long years, meaning huge capital the banks’ money is one of the reasons for it, the government decisions that support these banks support them
to a large extent, but the banks did not produce a real economy, and this is the goal of the bank and development in Iraq.
(Solutions: )
Back to the Ma’rouf issue, yes yes I said two solutions, two solutions:
1.One on the short-term level, limit the 70% of foreign trade with trade facilities.
The internal, excuse me, which concerns the owners or small traders, these coordinate with the Baghdad Chamber of Commerce. As I said, tax exemption, a merchant card, an import card, and so on details yes because in any case, first they bring in imports through tax evasion, they are tax evaders, and second they come to pressure the market, they buy dollars, so they keep buying dollars.
So that they can finance their foreign trade, this is on the short-term level, I give them credit facilities
Unlimited and I demand them with a large-scale policy, meaning I make myself a branch of the bank branches, for example, TBI, a recognized bank with it and it has a large correspondence It’s easier for these traders and then the other second solution which is in the short term.
2.Traders and then the other second solution which is in the short term
I will create a sub-department within the General Authority of Customs and within the land border crossings and the air and all the crossings and the northern ones in particular because there are companies that are coming to register in the north and have not paid taxes to and are practicing their work in Baghdad and have not paid the tax to Baghdad, they pay it to the north.
Consequently, the north (the Kurdistan region) and the region will not give the taxpayer as stipulated by the law (the money of the taxes into the general budget fund) the budget, but the government will continue to finance the public expenditures in the region, this is on the short-term level on the long-term level, impose on these banks that if you want, banks, whether private, investment, industrial or agricultural, I will give you credit facilities.
Very large if you finance me, for example, a factory for consumer goods that is coming It consumes it and I made it self-sufficient in the industrial sector with these goods, meaning that I direct every bank to a specific industry.
What will this do? This will limit imports because there is a commodity for a commodity foreign and with credit facilities, so it will reduce the level of total demand and thus the demand for imports and then the demand for the dollar and then the demand for reserves at the
Central Bank, which is the prestige of the Iraqi economy, the truth is that international reserves if they decrease.
Today the Prime Minister may be very lucky, but his results are really negative and we are here to monitor the data and we are here to monitor the indicators and give him that we tell him these indicators are negative despite the large economic and political presence that it enjoys, it was not able, unfortunately to achieve very big results, for example, on the exchange rate level and the financial level Economics.
Excuse me, my time is up, Dr. Ahmed Hall, you are a professor of economics at Al-Mustansiriya University. I want to thank you very much for your presence and for these clarifications and information. Thanks also to you, our dear viewers, for following the episode another next week,
God bless you
(Mnt Goat – after reading Dr. Ahmed Hall interview comments you can now tie this to the new strategy of the economic model. You can read more about this new model they are doing in the article titled: “ PRIME MINISTER’S ADVISOR: THE GOVERNMENT HAS ESTABLISHED A ROADMAP FOR THE ECONOMIC MODEL IN IRAQ”. The economic model is a mathematical model used to represent the economy and analyze the behavior of various economic factors, as these models are used to understand how economic elements interact,” You can see how this new model is coming direct from the economists).
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