Behind the scenes of the meeting of the Ministries of Finance and Planning with the governors: The Central Bank is in danger, 2 OCT

 Behind the scenes of the meeting of the Ministries of Finance and Planning with the governors: The Central Bank is in danger

On Monday, reliable sources reported that the Ministries of Finance and Planning had a candid meeting with the governors. The meeting revealed a looming threat to the Central Bank of Iraq.

According to sources interviewed by “Jarida”, the main issue in Iraq is not the lack of dollars, but rather the depreciation of the dinar. The government sells oil in dollars and then delivers those dollars to the central bank. The central bank, in turn, sells dollars to importers so they can buy goods and withdraw the Iraqi dinar from circulation. This causes the dinar to lose value, which is the root of the problem.

According to her statement, the Iraqi Central Bank transfers the funds received from the sale of the dollar to the government through the Ministry of Finance. This money is then utilized for various purposes, including paying salaries and funding projects. As a result, merchants receive money and their demand for dollars increases, thereby continuing the economic cycle.

She pointed out that the government owns the dollar resulting from the sale of oil in the central bank, but American restrictions prevent the central bank from selling it to merchants.

During a recent conversation, she pointed out that the volume of dollar sales made by the Central Bank during the current year does not even cover the budgeted salaries item. This implies that the Central Bank had to purchase dollars and cover the shortfall using its cash stock of dinars, which are about to expire.

Sources have warned that the Central Bank of Iraq will face a difficult and dangerous decision in the near future. The decision is whether to print more Iraqi dinars and introduce them into the market. If this is done, it will result in an increase in the money supply, leading to a rise in inflation and prices.

During a recent discussion, she mentioned that the government may not be able to fund projects in all governorates due to a lack of liquidity. This was confirmed by the Finance Committee’s meeting with the governors, who complained about the lack of funding. She also referred to the explosive budget proposed by the government.

Deputy: 11 countries want to invest in the path of development…the number will reach 50 soon, 2 OCT

 Deputy: 11 countries want to invest in the path of development…the number will reach 50 soon, 2 OCT

Representative Baqir Al-Saadi confirmed on Monday that 11 countries are interested in investing in development projects in Iraq.

During an interview, Al-Saadi emphasized that the development plan is not just a theoretical concept, but a practical reality. The Sudanese government aims to commence the first phase of the project within a few months, and it is a crucial initiative for Iraq’s economic progress.

During a recent statement, he mentioned that as many as 11 countries have expressed their interest in investing in the development of Iraqi road projects. The number of countries willing to invest may increase up to 50, provided the projects are initiated. He emphasized that the world is on the cusp of the development of an exceptional transportation line that will connect Southeast Asian and Indian Ocean countries to Europe via Iraq.

During his speech, he highlighted that the project has 15 significant benefits. These include financial returns, increased investment in building industrial cities and logistical support, job creation, and the development of a new transportation route within Iraq that can attract various international goods.

The Sudanese government announced the contents of the development road months ago. The road will provide a land and rail route to transport goods from the port of Al-Faw to Europe via Turkey.

"RV UPDATE" BY KAPERONI, 2 OCT

 Kaperoni 

  The Central Bank announced that approx 90% of the  currency transferred for imports was done electronically at the official rate, which is a good thing as it shows the implementation of the electronic platform is working.

Question: "What if anything is Iraq doing to reduce the note count...isn’t a reduction of the note count required before a float can occur?"   It's very difficult for Iraq to reduce their money supply due to the current monetary policy.  Remember, the currency auctions are a balance between dinars and dollars in order to maintain the exchange rate...Using dinar in international transactions would give them the freedom to unpeg and end auctions.  I think the most important thing for Iraq to do is to diversify their economy...

...In order for Iraq to go international they'll have to be IMF Article VIII compliant.  They're not close with a current market rate of 1152 which is over 18% from the official rate. Well out of compliance.

Evening News with MarkZ 10/02/2023

The Central Bank denies the scarcity of cash liquidity and describes its currency and gold reserves as “historic”, 2 OCT

 The Central Bank denies the scarcity of cash liquidity and describes its currency and gold reserves as “historic”

10/2/2023

A source in the Central Bank of Iraq denied that there was a “scarcity” of cash liquidity in the country’s markets.

The source confirmed to Al-Furat News Agency: “There is no scarcity of cash, and cash is available despite the current policy, which is a contractionary policy, but cash is available.”

He pointed out that "the foreign reserves and gold at the Central Bank are at historical levels, and the electronic platform is open to anyone who wants to officially enter into buying the dollar at the official price."

Specialists in economic and financial affairs reported that despite the large size of the monetary supply, which amounts to (83) trillion dinars, there is a noticeable scarcity of cash liquidity from the Iraqi dinar in the commercial markets, explaining that this comes for several reasons, the first of which is mismanagement. 

The financial file in the country.

Professor of Economic Affairs, Jaafar Alloush, said in a press statement that “the problem of liquidity scarcity - if it exists - is linked to a number of factors, including the economy’s lack of monetary flexibility in managing public money, while official monetary indicators do not indicate the existence of a liquidity scarcity.” ". 

He explained, "The problem is that the largest portion of the issued currency is with the public, which accounts for 91.3% of the issued currency, amounting to more than 90.070 trillion Iraqi dinars of that currency outside the banking system, and despite the fact that this (huge) monetary mass is used for transaction purposes from... before the public and to carry out its daily economic activity, but it is outside the control of the monetary authorities.”

Raghad Dahham   LINK

Iraqi governorates face funding crisis amid delayed budget allocations, 2 OCT

 Iraqi governorates face funding crisis amid delayed budget allocations, 2 OCT

Shafaq News/ Member of the Parliamentary Finance Committee, Ikhlas Al-Dulaimi, highlighted the pressing issues confronting Iraqi governorates due to the delayed release of financial funding from the 2023 budget.

Speaking to Shafaq News Agency, Al-Dulaimi expressed deep concerns over the challenges faced by the governorates. She stated that despite the budget being prepared with 197 trillion dinars, the anticipated positive impact on service provision in the governorates has not materialized. 

"As the tenth month of the year progresses, there has been a failure to allocate any funding to the governorates, causing significant problems." She said.

Al-Dulaimi emphasized that the funding rate has not exceeded 2% thus far. The allocations have been minimal, leading to significant complexities for the governorates. Projects are often stalled, with even minor changes requiring projects to be returned to the Ministry of Planning and then to the governorate. 

"This lack of coordination between the Ministries of Finance and Planning has hindered project financing for the governorates."

She further highlighted the paradox where essential projects, such as water desalination, included in the general budget, have not been funded despite being in the year's final months.

On June 12, the Iraqi Parliament approved the financial budget for the three years (2023-2024-2025), totaling 198.9 trillion Iraqi dinars ($153 billion) each year. 

The budget is based on an oil price of $70 per barrel and projects oil exports of 3.5 million barrels per day.

The budget includes a significant increase in spending on public sector salaries, pensions, and social welfare programs. It also funds infrastructure projects, such as roads, bridges, and power plants.

The government has said that the budget aims to stimulate economic growth and create jobs. However, some critics have warned that the budget is too large and could lead to inflation and a budget deficit.

https://shafaq.com/en/Iraq-News/Iraqi-governorates-face-funding-crisis-amid-delayed-budget-allocations

Caught in Crossfire: The Escalating PKK-Turkey Conflict and Its Implications for the Middle East, 2 OCT

Caught in Crossfire: The Escalating PKK-Turkey Conflict and Its Implications for the Middle East, 2 OCT

 The Kurdish Workers’ Party (PKK), a militant organization originating from Turkey, is once again at the forefront of geopolitical discourse following recent movements of its rebels into Iraq. This development forms a complex web of interaction, involving the PKK, Turkey, and the increasingly destabilized region of the Middle East. The continued conflict poses significant challenges for geopolitical stability and the fight against terrorism in the region.

Background: The PKK and Turkey’s Unending Strife

Formed in 1978 by Abdullah Ocalan, the PKK has been waging an insurgency against Turkish authorities since 1984, aiming for greater cultural and political rights and the establishment of an independent Kurdish state. The ongoing conflict has led to approximately 40,000 deaths. The PKK, along with other Kurdish groups, including the Peoples’ Democratic Party (HDP) and the People’s Protection Unit (YPG), have intensified their agitation against the Turkish government, especially following the collapse of a two-year ceasefire in 2015.

Amid the escalating tension, Turkey’s President, Recep Tayyip Erdogan, has launched a series of military operations both within and outside the country. These actions were aimed at neutralizing the PKK and other terrorist elements, preventing attacks from Northern Iraq, and securing the country’s borders. The operations also extended to Syria, targeting the YPG and the self-declared Islamic State.

The PKK’s Expanding Reach: Iraq and Beyond

The PKK’s influence and operations are not limited to Turkey. Over the years, the group has established a presence in various parts of Iraq. In 2019, Turkey launched Operation Claw, a land and ground assault that enabled it to establish military bases in Iraqi territory. Turkey has since used these bases to plan attacks and airstrikes, including the testing of a new ballistic missile in Iraqi Kurdistan.

However, Turkey’s operations within Iraqi borders have not been without resistance. The Iraqi government has lodged complaints against Turkey for the violation of its sovereignty, and Kurdish forces have attacked Turkey’s bases. Amid the increasing tension, the PKK invited the Syrian army to defend Manbij and other areas, marking a significant shift in the dynamics of the conflict.

International Ramifications: A Brewing Crisis

The escalating conflict between Turkey and the PKK has far-reaching implications beyond the borders of the two countries. The possibility of the Kurds establishing an independent state in Syria amid the ongoing chaos could accelerate secessionist movements in other Kurdish areas of the Middle East. The heightened activity by Kurdish separatists also poses a growing concern for the United States and its allies, which designated the PKK a foreign terrorist organization in 1997.

Furthermore, the conflict has strained relations between the United States and Turkey. The Erdogan administration has been demanding the extradition of Fethullah Gülen, a Turkish political and religious leader in self-imposed exile in the United States. Simultaneously, the close relationship between the United States and Kurdish groups, coupled with the increasingly close relationship between Russia and Turkey, has added another layer of complexity to the geopolitical situation.

Looking Ahead: An Uncertain Future

As the conflict between Turkey and the PKK intensifies, the future of the Middle East remains uncertain. The conflict’s escalating profile could carry high costs for both U.S. interests and Iraqi sovereignty. The main beneficiaries of the clashes may be Iran-backed militias, who welcome Turkey’s presence as a new rationale for so-called “resistance” attacks outside the framework of the Iraqi state.

As the situation continues to unfold, it highlights the urgent need for a comprehensive strategy to address the PKK issue, taking into account the rights and aspirations of the Kurdish people, the security concerns of Turkey, and the broader stability of the Middle East.

LINK