2024 ended without what was planned.. Will Iraq succeed in escaping the “oil curse”?
Shafaq News/ Iraq witnessed a significant increase in non-oil revenues at the end of last year 2024, as it reached 12% of total public revenues compared to non-oil revenues for the year 2023, while economic experts believe that this number is less than the planned target within the government’s plans.
In this regard, economic expert Nabil Al-Marsoumi told Shafaq News Agency, “The total non-oil revenues achieved in Iraq until last October amounted to 14.438 trillion dinars, representing 12% of total public revenues, compared to 7% in 2023,” noting that “the plan was to achieve 27 trillion dinars in non-oil revenues, representing 20% of public revenues, as Iraq was supposed to achieve non-oil revenues for the year 2024 worth 27 trillion, and this number has not been achieved so far, and almost half of it has been achieved.”
He stressed that “Al-Sudani’s plan is to achieve non-oil revenues of 20% of public revenues, which has not been achieved either, as only 12% has been achieved so far, slightly exceeding half,” indicating that “the increase in the percentage of non-oil revenues, which consists of fees, taxes, profits of public companies, and other financial matters, is important to the Iraqi economy and lies in getting rid of the dependence on oil revenues.”
Al-Marsoumi continued, “The importance of Iraq reaching the 20% rate that Al-Sudani called for is to make Iraq not rely on oil revenues because they are volatile due to prices,” stressing that “the biggest challenge facing Iraq in increasing non-oil revenues is the lack of diversification of the Iraqi economy. In other words, the government must increase agricultural and industrial activities and other activities in the gross domestic product, as today more than half of the GDP is contributed by one commodity, which is oil, and diversification in production means that we create an internal economic process as well as job opportunities for citizens.”
He added, “Iraq, to this day, does not have a clear development plan enacted by law. When there is diversity in production, we need a strict and efficient tax system capable of transferring tax money to the public treasury, and we are in fact very far from this matter at the present time.”
Add to “double”
In turn, the economic expert, Mustafa Hantoush, believes that the most prominent thing that led to the increase in non-oil revenues in Iraq during the year 2024 is the success of the United Nations (Scud) program, as many containers now come through (regular customs) after they used to enter randomly, stressing that this step led to an increase in the revenues of the Customs and Ports Authority to (double).
Hantoush told Shafak News Agency, “There are also some self-financing companies (profitable) that have led to an increase in non-oil revenue rates, as the state has withdrawn part of the money from those companies (their revenues) and returned it to them when needed.”
He explained that “the challenges facing non-oil revenues in Iraq are the absence of only two factors, the first: the regulatory laws that allow the state to seize all revenues for all parties, the second: the electronic factor, in other words today the central bank when it transfers 65 million billion dollars for the purpose of purchasing goods, for example, it is supposed that from these amounts comes customs and taxes of 6 billion dollars, but so far this amount has not come, as we now see the amounts collected are only one and a half billion dollars. ”
He added, “If the process of linking the Central Bank with the transfers and credits process and the outlets is completed and the amounts are taken in advance, for example, any transfer for a certain commodity has the insurance and tax fees taken in advance, here we will be able to raise the customs tax revenues in the country to the specified number when transferring the amounts annually to purchase the goods,” indicating that “many tax and traffic revenues, if the process of automation is completed, we believe that they will double.”
He explained that “the positive effects of increasing non-oil revenues are related to increasing the state’s treasury and thus enabling the state to move in wider financial areas, as there are many non-oil sources, perhaps the most prominent of which is the Ministry of Oil itself, as well as electricity, transportation and communications. In these ministries, the state is supposed to improve its ability to collect and exploit its capabilities.”
Hantoush confirmed, “There are places like the Baghdad Municipality and municipalities that have a huge wealth of properties that are not fully utilized. If the state is able to exploit these places and sites through specialized committees, we can enable the government to obtain large sums of money in this regard.”
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MELANIA HINDS CC HIGHLIGHTS NOTES
The ongoing economic developments in Iraq, particularly regarding the Iraqi dinarand its potential revaluation, have garnered significant attention among investors and citizens alike.
This chapter provides a detailed summary of current events and insights from various sources, highlighting the implications of Iraq’s abundant natural resources, the cessation of the dollar auction system, and the anticipated changes in currency dynamics. The discussion draws on various key concepts such as digital currency, foreign exchange (Forex), and the Central Bank of Iraq (CBI), framing the significance of these developments in a global economic context.
The evolving economic landscape in Iraq presents a unique convergence of resources, reform, and opportunity. As the Central Bank of Iraq moves away from dollar auctions and towards a more independent monetary policy, the potential for a revaluation of the Iraqi dinar grows increasingly probable. The community’s proactive engagement, combined with faith-based approaches to financial prosperity, underscores the importance of collective action in these uncertain times. As we approach critical dates in January, the anticipation surrounding the dinar’s fate encapsulates the hopes and aspirations of a nation on the brink of transformation.
This overview underscores the multifaceted nature of Iraq’s economic journey, illustrating how intertwined financial policies, community efforts, and resource management can shape a nation’s future.
“Oil and Gas Law” resolves pending issues between Baghdad and Erbil
Shafaq News/ The Oil and Gas Committee in the Iraqi Parliament considered, on Saturday, that the agreement on the draft “Oil and Gas Law” and sending it from the government to the parliament will contribute to resolving many of the pending issues between Baghdad and Erbil.
Committee member Bassem Al-Gharibawi told Shafak News Agency, “Agreeing on the draft oil and gas law and approving it in the Council of Ministers and then sending it to Parliament will contribute to resolving many of the outstanding problems between the federal and regional governments.”
According to Al-Gharibawi, the government had previously formed a committee headed by the Deputy Prime Minister for Energy Affairs, the Deputy Prime Minister for Economic Affairs, and the Iraqi SOMO Company to negotiate with the regional government regarding amending the disputed articles and preparing a final version of the oil and gas law.
He added, “The Parliamentary Oil Committee hosted a number of officials from the Ministry of Oil during the previous legislative session, and discussed the formulas and articles that require amendment to the Oil and Gas Law.”
Last week, Iraqi economic expert, Nabil Al-Marsoumi, revealed that 9 foreign companies were demanding compensation amounting to 24 billion dollars resulting from the halt in oil exports after the Iraqi judiciary rejected the appeal of the Iraqi Ministry of Oil to cancel these companies’ contracts with the Kurdistan Region.
The Karkh Court of Appeal rejected an appeal submitted by the Iraqi Ministry of Oil and overturned previous rulings that declared the contracts of foreign companies with the Kurdistan Region invalid .
According to the court, contracts are considered “valid,” enforceable, and binding on both parties, and no party outside the contract has the right to object to them, even if they are based on a legal basis that the Federal Supreme Court in Iraq deemed unconstitutional in February 2022 .
The court explained in the reasons on which it relied that the decision of the Federal Supreme Court issued in February 2022 cannot be applied to contracts concluded before its issuance, in accordance with a general principle in Iraqi civil law.
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NADER FROM MID EAST HIGHLIGHTS
📉 Importance of Monetary Stability: The introduction of the monetary reinforcement mechanism underscores the Central Bank’s commitment to maintaining monetary stability in Iraq. By providing foreign currency to national banks, the mechanism aims to ensure that these banks can meet the demands of their clients without experiencing liquidity shortages. This is crucial for sustaining economic growth and fostering trust in the financial system.
💹 Effective Liquidity Management: Salah’s emphasis on monetary sterilization reflects the Central Bank’s strategy to manage local liquidity effectively. By exchanging foreign currency for the dinar, the Central Bank can control the amount of money circulating in the economy. This careful management is essential for preventing excessive inflation, which can erode purchasing power and destabilize the economy.
🔒 Fixed Exchange Rate Benefits: The decision to maintain a fixed exchange rate of 1,320 dinars for every $100 plays a significant role in stabilizing the Iraqi dinar. A stable exchange rate can enhance predictability for businesses and consumers, making it easier to plan investments and expenditures. This stability is fundamental for fostering confidence among investors and promoting economic activity.
📉 Inflation Control Measures: Salah’s statement that the monetary reinforcement mechanism will help achieve stability in the general price level indicates a proactive approach to controlling inflation. High inflation can lead to economic uncertainty and reduced consumer spending, and thus, measures to mitigate inflation are critical for ensuring sustainable economic growth.
🏪 Facilitating Domestic Supply Chains: The focus on providing foreign currency to national banks is aimed at ensuring that essential goods and services are available in the domestic market. This initiative is particularly important in times of economic turbulence, as it helps to prevent shortages and keep prices stable. The smooth flow of goods is essential for maintaining public confidence in the economy.
🔍 Compliance and Oversight: The plan to enhance compliance monitoring through national and international measures reflects a commitment to transparency and accountability in financial transactions. This increases the integrity of the financial system and helps to build confidence among international partners and investors. The role of correspondent banks in auditing compliance is crucial in this regard.
🌎 Global Financial Integration: By aligning local banking practices with international compliance standards, Iraq is taking steps towards greater integration into the global financial system. This can pave the way for increased foreign investment and economic collaboration, which are vital for long-term growth.
In conclusion, the monetary reinforcement mechanism introduced by the Central Bank of Iraq represents a strategic effort to stabilize the financial landscape of the country.
By focusing on providing foreign currency to national banks, managing liquidity effectively, and ensuring compliance with international standards, the initiative aims to foster a more resilient economy capable of weathering financial fluctuations.
The measures outlined by Mazar Muhammad Salah are geared towards not only stabilizing the Iraqi dinar but also enhancing the overall economic environment, ensuring that essential goods remain available, and reinforcing the integrity of financial transactions.
The initiative is a significant step forward in Iraq’s journey towards achieving sustainable economic development and stability.
