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Al-Alaq: The devaluation of the dinar should not be the first line of defense to confront the financial crisis

The Governor of the Central Bank of Iraq, Ali Al-Alaq, stressed that the devaluation of the dinar against foreign currencies should not be the first line of defense to confront the financial crisis and bridge the budget deficit.

In a letter addressed to the former Assistant Secretary-General of the League of Arab States, Legal Adviser to the Prime Minister, Dr. Fadel Mohamed Jawad, and obtained by Al-Iqtisad News, Al-Alaq said that “by virtue of the responsibility of the Central Bank for monetary policy, the study and review of the exchange rate is a continuous matter from Before formations of the bank and its board of directors based on in-depth studies that take into consideration all factors and variables, “noting that” the exchange rate is not a sacred matter so that it cannot be compromised. ”

He added that “the devaluation of the dinar against foreign currencies should not be the first line of defense, nor should it be a means to bridge deficits, shortcomings and failures in the performance of other financial, commercial, investment, tax and customs policies”, explaining, “easy solutions that achieve financial value should not be used Limited at the expense of damage to all segments of society caused by inflation, especially the fragile and poor segments. ”

He stressed that “we note the inaccuracy of the (some) account of the reduction achieved by the dinar from resources to the public budget, as the correct calculation is that we subtract from the total dollar revenues the share of oil companies, which amounts to 14 billion dollars annually and the payment of debts, interest and external liabilities amounting to more than 5 billion Dollars, in addition to the equipment and materials imported by the government, such as oil derivatives, ration materials, etc., the net of this amount strikes at the new price of the dinar, ”noting that if the dinar’s value is reduced to 1500 dinars per dollar, what the Ministry of Finance gets from the difference is 5 trillion dinars.

He noted that “the devaluation of the dinar against the dollar will lead to protection and stimulation of the local product is something that many notes suffer because this measure is used by some countries to encourage exports and in the case of Iraq the goal is to provide ingredients to stimulate domestic production and protect it from dumping policy practiced by exporting countries, especially neighboring countries, This goal will not be achieved by reducing the value of the dinar because the price difference is because of the dumping policy or because of the depreciation of the currency of these countries in a very large way. ”

Al-Alaq called for controlling random imports and stopping dumping policy through controlling border crossings, as the number of informal border crossings is more than official and strict application of customs duties is an effective application of laws to protect the product and the consumer and anti-dumping. Source