"A BURNING ECONOMIC DEBATE.. IS RAISING THE EXCHANGE RATE THE MAGIC CBI SOLUTION FOR THE IRAQI ECONOMY?"
"Raise the exchange rate On the other hand, Deputy Governor of the Central Bank of Iraq, Ihsan Shamran, believes that "industry will not rise unless the state finds itself in it,
and neither will agriculture unless the exchange rate is changed, as the current
rate is unfair, and the Iraqi exporter sells goods at any price and makes a profit because the dollar is very cheap." Shamran added in a press statement that "the cheap dollar is
pushing some exporters to sell any commodity inside Iraq in exchange for the dollar, as the exchange rate should be between 2,000-2,500 dinars per dollar, considering
that the Iraqi currency is very strong due to its high balance."
No, raising the "official" exchange rate to 2,000 - 2,500 is not the solution. In the article they actually mean lower the exchange rate making it less valuable. You have to read this last paragraph carefully. It would only cost more to buy.
How would this help the consumer?
The solution is to get off the sole peg to dollar. Then re-peg the dinar to a basket. What are they waiting for?
TÜRKIYE: WE HAVE NOT RECEIVED INFORMATION FROM IRAQ TO RESUME KURDISTAN REGION OIL FLOWS
The Turkish Energy Minister said that his country has not yet received information from Iraq regarding the resumption of oil flows from the Kurdistan Region of Iraq. Oil Minister Hayan Abdul Ghani said last Monday that oil exports from the Kurdistan Region of Iraq will resume within the next week.
Turkey halted oil flows in March 2023 after the International Chamber of Commerce ordered Ankara to pay Baghdad $1.5 billion in compensation for unauthorized oil exports to the Kurdistan Regional Government via pipelines between 2014 and 2018
.
Abdul Ghani told reporters, “Tomorrow, a delegation from the Ministry of Oil will visit the Kurdistan Region to negotiate the mechanism for receiving and exporting oil from the region. The export process will resume within a week.”
Dinar Update
Qoute:
"There is no way out except through radical and immediate reforms, starting with restoring the exchange rate to what it was."
How many times have Majeed & I have told you all this?
What is one major reason they have to revalue? To avoid a crash!
Which means this is not a prerequisite for a new exchange rate in regards to the Iraqi Dinar needing to lose value before we see it on the Forex market.
They have no other option to exercise.
They have no other opportunity to the contrary.
They have no more delay tactics available.
They no longer have the ability to drag their feet.
Donald Trump put extreme pressure on their banks for those who were using the dollar. Now the real estate market is suffering because there is no liquidity moving.
FINANCE MINISTRY DENIES, HOURS AFTER DOCUMENT LEAK, ANY “MAJOR DEFICIT” IN SALARY FUNDING
(Kurdistan just had major oil wells shut off for almost 3 weeks. That was the cost of their salaries that normally would be sent to them by the Baghdad government. What the hell do you think is going to happen?
OF course there is going to be shortfall in the salaries. Of course this will have an impact. The budget, which relied on this revenue of this $2.5 billion dollars is now short.
What do you think will happen?
This again is why they desperately need the Oil and Gas Law. You can see why the Kurds pay games in getting this law passed. It always gives them leverage instead of something to complain about and hold back oil. I call this a “dysfunctional” government. This law should be rock solid and passed a decade ago or more.)
The Ministry of Finance denied the existence of a liquidity crisis just hours after the spread of an official document issued by the ministry confirming that there is a “large deficit” in financing salaries, after months of denial and refutation of reports regarding the financial situation in the country.
According to representatives and specialists, the “US sanctions” on banks have exacerbated the crisis, in addition to the high debts and the size of salaries that have doubled significantly over the past two years. The Iraqi Ministry of Finance announced yesterday, Tuesday, the start of financing the salaries of state employees for the current month of February.
According to a statement by the ministry, “the Accounting Department of the Ministry of Finance is beginning to finance the salaries of state employees for the current month of February, in accordance with the approved financial procedures and allocations allocated within the General Budget Law.”
The ministry affirmed “its full commitment to disbursing the dues of employees, retirees and those covered by the social protection network according to the specified timetables, without any delay or shortage in funding.” The ministry also categorically denied, according to the statement, the existence of any financial deficit affecting salary expenses, stressing the continuation of work to ensure the stability of the financial policy and the provision of dues according to the approved plans. Just hours before the statement, an official correspondence dated February 9 was leaked to the media on Tuesday, indicating a “major deficit” in securing salaries, in an official letter between the Ministry of Finance and the Prime Minister’s Office, signed by Finance Minister Taif Sami, regarding the permanent appointment of meter readers’ contracts.
According to the official letter, the Iraqi Ministry of Finance responded to the Prime Minister’s request to appoint a new batch of permanent contractors to the Ministry of Electricity.
It stated: “If the inclusion of a text regarding the permanent appointment of meter readers’ contracts in the Ministry of Electricity is approved, this will lead to the state’s general treasury bearing additional financial burdens, and will lead to the rest of the ministries being asked to do the same, at a time when the treasury is suffering from a major deficit in financing salaries, pensions, and the social safety net.”
In February, the parliamentary finance committee confirmed that the salaries of all employees and retirees for the year 2025 are fully secured.
Member of Parliament Rafiq Al-Salihi explained that there are guarantees from the government in this regard, calling on official bodies to confront the rumors.
Another member of the committee, Jamal Koujar, said that the salaries of all employees, retirees, social welfare and other categories are fully secured during the current year, and there are no concerns about them, as rumored. Press reports had quoted other MPs and officials warning of a “liquidity crisis” and saying that “the treasury is empty.”
Last December, the head of the parliament’s finance committee, Atwan Al-Atwani, said that Finance Minister Taif Sami confirmed that employees’ salaries are secured through 2025.
The Ministry of Finance had denied, at the end of last year, that there was a shortage of liquidity, stressing that it was committed to the process of financing salaries. The ministry said in a statement: “The information circulating on social media claiming that it has apologized for disbursing state employees’ salaries this month due to a shortage of liquidity is completely incorrect and has no connection to reality.”
It stressed that it is “fully committed to the process of financing employees’ salaries, as the Accounting Department has financed the salaries dues of ministries, governorates and non-affiliated entities for the current month of December according to the schedules specified for each of them, and it is continuing its efforts to ensure the continuity of disbursing financial dues without any delay or interruption.”
The ministry called on all media outlets and social media users to “exercise accuracy and caution in transmitting information, and to verify the sources of news before circulating it,” noting that “its doors are open to respond to any inquiries through official channels.”
Bankruptcy… Since Donald Trump, the US President, won the elections last November, warnings have escalated of “economic sanctions” that could paralyze the financial situation in Iraq. Sources for (Al-Mada) revealed that the US is closely monitoring a “plan to finance” the Lebanese Hezbollah with Iraqi funds (in US dollars), for the party that is suffering from a severe crisis in securing salaries. The Central Bank of Iraq had denied the news circulating about sanctions against 5 new Iraqi banks accused of smuggling dollars to Lebanon and Iran.
Member of the Parliament’s Finance Committee, Mustafa Al-Karaawi, believes that any sanctions issued against banks will cause a problem in the flow of dollars, and thus halt domestic economic activity.
Al-Karaawi confirmed, in televised statements, that “in the event of obstacles or problems in the issue of currency conversion between the Iraqi dinar and the dollar, a problem may arise in supplying the currency to the Ministry of Finance.” The Central Bank is working, through ongoing negotiations with the United States, to develop the financial and banking system in the country, according to an official statement.
Mishaan Al-Jubouri, a former MP, expects that US sanctions on the Iraqi banking system “will escalate.” Al-Jubouri said in a tweet on “X” that US sanctions on banks and “factions” are not just threats “but seem inevitable in the coming months.” Member of the Finance Committee Mustafa Sand previously warned of a severe liquidity crisis in Iraq.
He said in statements that current indicators do not provide clarity on whether “salaries are secured or not?” He stated that “what is in the government’s hands is not only zero, but negative, as we face a deficit of 29 trillion dinars required to pay debt installments and interest during this year alone.”
He added: “Last year, we did not pay a single dinar of internal obligations, which means that we face doubling interest, and we will not obtain new loans easily, as the Ministry of Finance and banks will work to reschedule the debts for the year 2026, which places the responsibility on the next government.”
Amid this crisis, Hanan Al-Fatlawi, a representative of the State of Law, wondered in an official letter about the reasons for increasing the salary of the President of the Republic from 20 million to 27 million per month? The government paid 81 trillion dinars in salaries and subsidies within the safety net during the past year, until last November, according to economics professor Nabil Al-Marsoumi, in a series of posts on Facebook.
Al-Marsoumi said that the Central Bank of Iraq revealed an increase in Iraq’s internal debt by 2%.9% to reach 81 trillion dinars for the month of November 2024, compared to the previous month, which reached 78.77 trillion dinars. According to Al-Marsoumi, the Central Bank should have disclosed the annual, not monthly, growth rate of domestic debt, which rose from 70.6 trillion dinars in 2023 to 83.049 trillion dinars at the end of 2024, at an annual growth rate of 17.5%.
(If you are pumping more oil than the cost of extraction goes up. Also Iraq has to rebuild its infrastructure and that too is a cost. This is actually a good sign not bad. But remember that Iraq can not take on debt that exceeds a percentage of the CBI reserves. If they follow this law there is no way they can ever go broke and crash the economy.)
The Minister of Reconstruction, Benkin Rikani, had posted a provocative comment on social media about the liquidity crisis in Iraq. Benkin responded to a question from a commenter on his Facebook page, who asked him to pave a street in eastern Baghdad, in colloquial language: “By God, we have no money.”
The current Government’s decision to raise the value of the dinar was an incorrect populist move, as it increased the cost of salaries and drained the dollar reserve, benefiting only a minority.
With the decline in oil prices and the possibility of US restrictions on the flow of Iraqi funds, Iraq is approaching a stifling financial crisis.
There is no way out except through radical and immediate reforms, starting with restoring the exchange rate to what it was,
reforming the management of border crossings, activating the collection of taxes and service bills, and stopping financial corruption.
It is also necessary to recover the money stolen from those convicted of corruption, and to review the estimated costs of projects that have been inflated to serve the companies of parties and parliamentary blocs.
Quote
مشعان الجبوري
@mashanaljabouri
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قرار حكومة الإطار برفع قيمة الدينار كان خطوة شعبوية غير صحيحة، لانها زادت كلفة الرواتب واستنزفت احتياطي الدولار انتفعت منها أقلية فقط. ومع تراجع أسعار النفط واحتمال فرض قيود أمريكية على تدفق الأموال العراقية، يقترب العراق من أزمة مالية خانقة.
لا مخر
