Chinese exports to Iraq surged more than 90% in the last decade
Shafaq News/ The Iraq Future Foundation revealed on Saturday a 93% increase in Chinese exports of direct goods to Iraq over the past decade, warning that this surge raise concerns about Iraq's ability to meet the escalating demand for foreign currency.
According to the foundation's report, Chinese direct exports to Iraq totaled $7.9 billion in 2015, with an anticipated rise to $15.3 billion by the end of 2024 based on early-year data.
The report highlighted specific sectors driving this growth. Machinery and equipment exports, including air conditioning and refrigeration devices, saw a remarkable 162% increase, from $1.4 billion in 2015 to an expected over $3.7 billion by 2024.
Electrical appliance exports, constituting 14% of China's total exports to Iraq, also surged by 77%, from $1 billion to a projected $1.9 billion by 2024.
Notably, Chinese iron and steel exports experienced the most significant spike, with a staggering 280% growth compared to 2015, projected to reach $500 million by 2024.
Moreover, rubber-made product exports, particularly tires, soared by 195%, from $151 million in 2015 to an estimated $446 million by the end of 2024.
The foundation attributed this exponential growth to various factors, including rising demand due to population growth and urban expansion in Iraq and direct shipping from China instead of other intermediary countries.
However, the report cautioned that this surge could pose challenges, leading Iraq towards a phase where it struggles to cover the burgeoning demand for foreign currency. It recommended strategies such as localized manufacturing to reduce dependency on Chinese imports, especially in critical sectors like mechanical and electrical devices and tires.
[WiserNow] ...we have about 17 - 18 currencies that are going up substantially in value. We know that you know that obviously dinar and Dong - Dong is one of those...
...we got some pretty good information...from...one of the very most top people in our lead bank which is Wells Fargo... “Looks good for a shotgun start over the next two days”. ...the green light so to speak is given... And that was said Wednesday...What is interesting is we know we're super close.
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[via PDK] ...we know we're super close... Most banks...have been fully trained all the way down to the teller level about currencies. And now it's a matter of throwing the switch and getting us toll free numbers and setting our appointments
...I think we're very close to ...going...
Somebody put something out about taxation, or this this would be a taxable situation for us - it is not a taxable event...It's BS don't buy it - not a taxable event period.
We're looking for 3 green lights – military - Treasury – and Wells Fargo in that 0rder...They got the green light from the military...we did receive confirmation that we have the Treasury's green light in the last couple of days...we did get the green light from Wells Fargo yesterday...
So in other words, we have all three green lights now covered - military - Treasury - Wells Fargo. The banks are bringing all employees in the banks up to speed on what we're about to witness and it's called Currency Training Protocols - They have been teaching to get everybody down to the teller level. Which remember the tellers didn’t know anything about this...the point is, it's really coming down to the wire.
Floating the dinar... Will it achieve monetary stability in Iraq?
Moaz Fraihat - Washington May 17, 2024
The stability of the Iraqi dinar in recent years has always faced major challenges, as it witnesses price fluctuations, not to mention a gap between what the central bank determines and what is sold in the parallel market.
In order to avoid the “volatility” syndrome and the “gap” in the price of the Iraqi dinar against foreign currencies, some experts believe that the solution lies in a kind of “surgical” operation for the country’s monetary system that may be painful, but it achieves long-term monetary stability for the national currency through... "float".
The cash selling price, according to the Central Bank, is 1,305 dinars per dollar, while the price for transfers abroad is 1,310 dinars per dollar, and the price in the parallel market is about 1,450 dinars per dollar in mid-May, according to local media , while it reached levels of 1,600 dinars per dollar in previous periods.
For months, the Iraqi authorities have imposed restrictions in their efforts to control exchange rates, restricting all commercial transactions within the country to the Iraqi dinar, and established a new mechanism that subjects external transfers to greater scrutiny.
Iraqi economic analysts who spoke to Al-Hurra website, some of them warned against taking a decision that would lead to floating the dinar, while some of them believe that a moderate policy could be taken that suits the Iraqi economy, based on “floating” and “stabilization” at the same time.
Is the flotation policy compatible with the Iraqi economy?
Advisor to the Prime Minister for Financial Affairs, Mazhar Salih, believes that floating the currency price does not suit the Iraqi economy, especially since it is a "rentier economy, dominated by foreign currency reserves."
He explains in statements to the “Al-Hurra” website that “the economic vision that wants to float the Iraqi dinar to end the gap between the official price and the parallel price may be possible in an economy in which the free market alone influences the movement of the balance of payments, and not in an economy in which the rentier government sector is dominant and generates reserves.” Foreign currency".
He added, "The monetary authority in Iraq alone is the main source of supply of foreign currency that meets the desired demand for foreign exchange in the local market."
Saleh believes that the demands for flotation inevitably mean “adopting the prevailing exchange rate in the parallel market, in order to achieve the goal of stability and balance in the official exchange rate itself at a new exchange point that the market will reach at the end of the assumed flotation policy and return to stability again.”
The flotation scenario also means “the withdrawal of the monetary authority as the main central offerer of foreign currency, and its replacement by new forces of free market makers, which certainly have only a weak, limited supply of foreign exchange,” according to Saleh.
He points out that these forces carry “an uncontrolled package of inflationary expectations, and are called in the economic literature (the forces generating inflationary expectations), which will give dominance to the supply forces of speculators” who own limited amounts of foreign exchange, matched by “an open demand for foreign currency from The market side" exceeds what is offered by "at least more than ten times in our estimate."
Chancellor Saleh described this policy as “unruly,” as as long as “the central government supply of foreign currency will be absent from the market, we will not obtain any equilibrium point in the exchange rate that flotation seeks except with a widespread deterioration of the exchange rate as long as it is carried out by forces generating inflationary expectations in a severe rentier economy.” "unilateralism."
He warns that if the exchange rate moves in “a market that is incomplete, in terms of productivity, in its compensation for the required supply of goods and services,” no one “will know how much the new exchange rate resulting from the flotation will be,” which will be accompanied by “a prior wave of inflationary expectations,” the trends of which are difficult to control. , which may push monetary policy makers to “intervene with excessive foreign reserves and unjustified extravagance in foreign exchange to impose a state of stability.”
According to the World Bank, Iraq has 145 billion barrels of proven oil reserves, which are among the largest crude oil reserves in the world.
But Iraq hopes that the country's oil reserves will exceed 160 billion barrels, according to what the Minister of Oil, Hayyan Abdul Ghani, recently announced.
What if the Iraqi dinar was floated?
The claims that have appeared every now and then for years calling for floating the exchange rate of the Iraqi dinar are “strange,” and most of them are made by people who are “not specialized in economics or monetary policy,” according to what Professor of International Economic Relations, Abdul Rahman al-Mashhadani, confirms to the Al-Hurra website.
He asserts in a decisive tone, "Iraq cannot proceed with floating the dinar's exchange rate. The evidence for this is all the agreements concluded with the International Monetary Fund since 2004, and the reviews praised the stabilization of the exchange rate by the Central Bank of Iraq."
Al-Mashhadani added that there was a study by experts at the World Bank during the past years that recommended “raising the exchange rate,” noting that even then, “these recommendations cannot be taken into account because the World Bank is concerned with what is related to economic development, but following up on the recommendations for monetary policies is taken into account if It was from the International Monetary Fund.
In its latest review on Thursday, the International Monetary Fund praised the efforts of the Central Bank of Iraq to tighten monetary policy and strengthen its liquidity management framework.
He explains that “the real gap is in the wheel of production in the Iraqi economy, as the majority of goods are imported from abroad, which means that the flotation will cause a spiral in price rates to become significantly high and affect the marginalized classes,” indicating that such a decision cannot be taken “as a matter of politics.” “Cash” only, as we must “consider the burdens it will impose on citizens.”
Al-Mashhadani confirms that what has been applied in other Arab countries does not “mean that it can be applied to the Iraqi economy,” suggesting that “the exchange rate will become at the levels of 5,000 dinars to the dollar,” as “the Central Bank has lost control over exchange rates, leaving them to float.”
There is a fear that “floating” will cause “social” problems, as “salaries will erode significantly,” which may threaten “new classes to slide into poverty,” while “a class of merchants, politicians, and businessmen will benefit, who will benefit from the state of instability that will result from... This matter".
Al-Mashhadani agrees that floating in the end means “that the parallel market will control exchange rates,” but it will not achieve “the desired monetary stability,” as the central bank will then need to “print more local currency to keep up with demand in the markets,” and the government will need to increase salaries and allocations for aid packages. Social.
"Float with controls" for full "editing".
The economic expert, Manar Al-Obaidi, recommends following a “currency float” policy, but with controls such that a “managed float policy is used to gradually liberalize the currency until complete liberalization of the exchange rate is reached.”
He said in a post on his Facebook account, "Such a policy could be a successful alternative in Iraq by following a managed float policy where the central bank controls the range of volatility and works to gradually increase it until the currency is completely liberalized."
Al-Obaidi gave the example of “the managed flotation policy followed by Morocco in 2018,” noting that it was accompanied by the abolition of customs tariffs on basic materials and “supporting funds for vulnerable classes,” stressing that this experience can be used to influence “inflation.”
"Reasons for the exchange rate “gap”.
The Iraqi government advisor, Saleh, attributes the reason and existence of a “gap” in the dinar’s exchange rates against the dollar between the official and parallel markets to “external factors imposed by the compliance platform and auditing administrative restrictions on external transfer movements, which is not related to the deficit in the authority’s monetary reserves,” noting that the reserve Iraq's foreign currency is considered the highest in the country's history, as it touches the levels of import coverage for 16 months, compared to the global standard, which does not exceed three months of import coverage.
Financial transfers in dollars through official channels have increased significantly in Iraq, while Iraq continues its reforms of the financial sector in line with international standards, according to a previous report by Agence France-Presse.
In late 2022, the Iraqi banking sector adopted the SWIFT electronic transfer system with the aim of providing better control over the use of the dollar, ensuring compliance with US sanctions on Tehran, and also in order to limit the prosperity of the informal economy.
The financial standards that were adopted encouraged the emergence of a parallel market for currencies, attracting those seeking to obtain dollars outside official channels.
Saleh pointed out that there is a distortion in support for the prices of some commodities “on the part of financial policy, which is support in which the rich and poor mostly enjoy it equally without discrimination, and it represents an added, imperceptible real income, and it is the product of a financial policy inherited from the consumer welfare state for the rentier resource.”
He continued, "It is inconceivable until this moment that 90 percent of Iraq's population is receiving support for food supplies provided by the state as an extension of the economic blockade phase of the 1990s in light of the changing standards of living and lifestyle, the increasing number of affluent people, and the growth of the middle class."
In mid-May, the Iraqi authorities announced the purchase of 1.5 million tons of wheat since the beginning of the year.
According to the Ministry of Agriculture, Iraq, with a population exceeding 43 million people, needs between 4.5 million and five million tons of wheat annually.
The International Monetary Fund said Thursday that Iraq's internal imbalances have been exacerbated by significant fiscal expansion and low oil prices.
The Fund added that Iraq needs to gradually correct public financial conditions in Iraq to achieve debt stability in the medium term and rebuild financial reserves.
To ensure compliance with US standards regarding money laundering and sanctions on Iran, about 20 Iraqi banks were prevented from making dollar transfers.
Last September, the Iraqi government decided that merchants who deal with Iran are forced to turn to the parallel market to obtain currency, given that Tehran is subject to sanctions and “is not allowed to conduct financial transfers,” according to Agence France-Presse.
"A positive step for the "economy" but!!
The Iraqi economic academic, Nabil Al-Marsoumi, believes that the solution to addressing the discrepancy in the currency exchange rate through “free floating of the Iraqi dinar” may have “some economic positives.”
He added in an interview with Al-Hurra website that "the economy should not be taken in its abstract aspect, but rather in terms of its relationship to people, especially the poor among them."
Al-Marsoumi warns that "the Iraqi dinar may witness a violent collapse and rampant inflation that will cause prices in the Iraqi market to rise to record levels that will harm citizens, especially the low-income classes."
He explains that Iraq lacks "a national private sector that could contribute to increasing the supply of dollars in the local market, and because of the large volume of imports, which reach 67 billion dollars annually, the government is the only party that owns the dollar."
He notes that "if the government decides not to intervene in the exchange market, we are expected to witness consequences that will cause severe damage to citizens' living standards, making the poor even more miserable, and may lead to social tensions and a major rift in the social peace."
For his part, the economic expert Al-Obaidi defined the primary goal of liberalizing the currency as “creating an economy capable of withstanding various economic shocks, and reducing reliance on reserves that are greatly depleted in order to maintain a fixed exchange rate, which could stop once the reserves run out.” .
He added that this also "contributes to supporting the domestic product and changing the consumption pattern, and thus reducing the import bill for Iraq, which rises annually as an indirect reason as a result of the attempt to maintain a fixed exchange rate."
Not to mention, “continuing to try to maintain a fixed exchange rate depletes reserves,” which will lead at a certain stage, “accompanied by a decrease in reserves, followed by either a complete liberalization of the currency or a significant reduction in the price rate, which will have major repercussions on the citizen, and will cause great confusion in "A market that already suffers from a lack of economic stability."
"What is the alternative to floating the currency?
The Iraqi economic expert, Mahmoud Dagher, confirms to Al-Hurra website that what may be the solution for Iraq is a system “between floating and stabilization,” to help stabilize currency exchange rates.
The expert, Dagher, a former official at the Central Bank of Iraq, explains that “the origin of the exchange system is floating, which is what free countries adopt.”
He explains that "the continuity of the gap requires reaching a middle system that solves the problem between free floating and stabilization. This is a system that many developing countries follow, and it helps solve the problems of currency fluctuation."
Financial expert Saleh proposes alternatives to floating, in a way that serves the objectives of monetary policy and limits inflationary risks, through the use of financial tools such as “taxes and customs duties that act as an intermediary to influence the exchange rate to achieve balance and price stability.”
He added, "Instead of resorting to lowering the exchange rate to harmonize the market through flotation, it would be through amending customs tariff schedules and imposing careful, thoughtful controls to protect the national economy."
Saleh called for correcting the defect in the structure of the Iraqi economy as a whole, as it is not possible to continue with “high operating spending in annual public budgets, which has always generated cash income from rentier sources that are matched only by very limited productivity of commodity and service flows, which has made the country It relies mainly on large-scale imported consumer goods.”
Counselor Saleh revealed, on Thursday, that the loans provided by the International Monetary Fund to Iraq since 2003 totaled no more than $8 billion, confirming that they had been paid in full, according to a report published by the “ INA ” agency.
Last March, the International Monetary Fund stressed “the Iraqi economy’s need for broad structural measures to enhance private sector development and economic diversification, and to raise growth rates in the non-oil sector in a sustainable manner to accommodate the rapidly increasing workforce, and to increase non-oil exports and government revenues, in addition to Reducing the economy's exposure to oil price shocks.
He called for "accelerating the pace of reforms in the financial sector to improve access to financing, by modernizing the banking sector and supporting the ability of banks to establish banking relationships with other banks, and taking steps aimed at merging small-sized private banks," not to mention the need "to restructure the two largest government banks." ".
The Governor of the Central Bank, Ali Al-Alaq, announced in statements in early May that “the banking sector is witnessing major qualitative developments, while calling for cooperation and coordination between Arab central banks, banks and non-banking financial institutions to achieve stability and economic growth,” according to the “ Inaa ” agency.
He continued, "Central banks face new challenges in the interaction between financial and monetary stability, in light of the dominance of general financial policy and the necessity of central banks to facilitate excessive government debts, according to financial control, which requires reducing spending or increasing domestic revenues, or both."
Iraq has begun to recover relatively after years of wars, occupation, and sectarian violence that followed the US-led invasion in 2003, according to an Agence France-Presse report. LINK
Saleh says if you do a float it's dangerous, it's going to turn out to be unruly...He also said he's going to have a mixed or managed float, which is going be stabilizing...They had about 4 articles about that...Why are they saying it and giving one specific option? Because that's what they're going to do...All the different ways of doing it were negative but the one [positive one] was a managed float. That's a mix between a floating currency and a fixed. They manage it and that's the most stable...
Article: "Sudani directed the extraordinary session of the council for next Sunday, the federal budget schedules for the year of 2024" We have the vote for the speaker of the House of Representatives on Saturday and then we have a special session about the 2024 budget schedules with the Council of Ministers then they go to the HOR...
I think they're at the stage where they just got to jump and do it. They have to interlink with the region and...the world so it's going to be a timed event.
I don't have the time, the date for that but I think we're going to see it shortly...
There is an existence of the Chapter VII charter of the United Nations that has not yet been resolved. It's... still restricting the sovereignty at the international level. The pressure is on and it looks like the UN is waving that flag to Iraq reminding them that there is that component still.
Iraq is going to be watching and waiting for their purchasing power...They have revenue streams from all different angles...You got natural resources galore - oil, liquid natural gas, tourism... agriculture...Are they going to be able to support a value of there currency? Of course they are. They were $3.22 back when oil was at $35. What if you added on to that all those things I just mentioned?
Article: "Floating the dinar returns to the forefront will the Central Bank of Iraq resort to it and what the risks?" The bottom line is Iraq is going to make an exchange rate change. They've told you about it...A managed float is a mix of a fixed and a float... Are they going to change it to a free float? Probably not because there's a lot of risks at that stage...Ultimately what is their goal? Raising the value of the dinar against the dollar. That's what they're going to be trying to do..
We all know the project to delete the zeros has been on the table now for many years but it was taken off the table, back on the table...The delete the zeros is all about what? Creating value.
1310 to buy widgets is in the hundreds of trillions and their budget is in the hundreds of trillions. They don't even have that much money printed. They don't even have it on their M1 etc at this point in time. They never have. There's got to be an adjustment...
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Article: "Iraqi Council of Ministers approves the 2024 budget schedules"
The next step would be to take those schedules and deliver them to the House of Representatives. If we see that, that's going to be powerful because everybody's gonna be biting their nails because it could very well suggest something could happen prior to that happening. It's a nail biter...
Article: "Specialist: Floating the dinar is economic suicide"
Them bringing up exchange regimes obviously...they're going to do something because why talk about it if it's not going to change. You don't.
Non-oil revenues...Iraq has the largest sulfur deposit in the world. They can tap into that. It's going to be part of their non-oil revenues. The amount of natural resources Iraq has is off the charts. Anything that suggests they can't afford to do what they're going to do and go to a market economy I think is highly mistaken.
Shafaq News / The Kurdistan Regional Government (KRG) announced, on Friday, that more than 25,000 government employees have received their salaries through the “My Account” project.
According to KRG’s Media and Information Department, employees with bank cards enabling them to receive their salaries via ATMs will receive their payments gradually by the end of next week.
Earlier, Kurdish Prime Minister Masrour Barzani had confirmed that one million employees would have access to banking services by the end of this year, with financial services accessibility in the Region expected to reach 35% by late 2024.
KRG shed light on the My Account payroll system’s advantages, assuring that civil employees have more control over their balances with lesser fees compared to other options.
In a statement, KRG’s Information and Media Department highlighted key features differentiating “My Account” (Hesabi) from the “Domiciliation” project.
“My Account”, according to the statement, empowers employees to select their preferred bank, unlike domiciliation where a bank is assigned based on pre-existing agreements.
The new system includes six private banks, according to the statement. The other system involves five state-owned and 38 private banks.
“My Account” also offers free ATM withdrawals at the chosen bank. Conversely, employees who have their salaries domiciled should pay extra charges upon withdrawals through agents or ATMs.
“Enrolling in the My Account system is free, unlike Domiciliation, which may charge up to 25,000 IQD depending on the bank,” the statement continued.
“My Account utilizes debit cards that can be used all over the globe, whereas the Domiciliation system typically employs, salary cards’ not linked to other accounts.”
Up until April, over 300,000 civil servants have already registered for My Account. KRG said it is actively expanding its ATM network to ensure convenient access for registered employees. The current count of 231 ATMs is expected to quadruple by the end of 2024.
