Doedee: The devaluation was a last ditch effort to pull the 000 notes off the streets and this is the perfect opportunity to implement the project to delete the 000 from the exchange rate and then comes the RI…imo
Samson: Baghdad’s Big Markets Are Shutting Down, And Merchants Are Entering An Open Sit-In
23rd December, 2020
Wednesday, Jamila markets closed the doors of its stores in protest against the decisions of the Ministry of Finance and the Central Bank to reduce the price of the Iraqi dinar.
Workers in the markets of Shorja, Al-Senak, Hafez Al-Qadi, Al-Rasafi, and Al-Jumhuriya Street began an open protest and sit-in until the decision is reversed.
The head of the Baghdad Chamber of Commerce, Firas Rasul Al-Hamdani, called on Tuesday for the dismissal of the Minister of Finance and the Governor of the Central Bank of Iraq, for issuing decisions that lack economic vision, and caused confusion in the market, deterioration of commercial activity and a rise in prices.
Al-Hamdani rejected, during a protest stand organized by the Baghdad Chamber of Commerce in front of the headquarters of the Central Bank of Iraq, with the participation of a number of merchants and shopkeepers in the markets and earning cash, the decision to raise the currency exchange rate that would lead to “physical damage” to the Iraqi economy, as a result of “ill-considered” decisions of the Central Bank and the Ministry of Finance. And it is reflected in the high rates of unemployment and poverty.
Al-Hamdani stressed that the country’s economic leadership is “missing”, noting the importance of the House of Representatives taking the oversight session as the representative of the people and stopping the decision and “dispersed” ideas. He expressed the Baghdad Chamber of Commerce’s readiness to present proposals and a “profound” vision that would address the current financial crisis.
The Chamber’s president confirmed that merchants, shopkeepers and kasbah will start an open sit-in that will not end unless the decision to raise the currency’s exchange is canceled and a rational and thoughtful financial and economic policy is put in place. LINK
Samson: The price of the new dollar may push Kurds to quit smoking
24th December 2020
It seems that the decision to increase the price of the US dollar has been reflected in the overall life in Iraq and the Kurdistan Region, including the owners of cigarettes in the city of Sulaymaniyah, between welcoming the decision and resenting the material losses, there is light at the end of the dark tunnel.
One of the cigarette dealers in the suffocating market in Sulaymaniyah, Ibrahim Mustafa, told Shafaq News that the decision to raise the price of the foreign currency, the dollar through the Central Bank of Iraq, was correct to solve the economic crisis and provide salaries for employees despite the losses that caused us as cigarette dealers, indicating that the prices increased by 25 % For goods, since most of them are imported from global origin.”
Mustafa believes that “the fluctuation of the dollar’s price will not last for long,” explaining that “the Iraqi government is waiting for the results of this decision and its repercussions, and the results of solutions will appear soon after the stability of the dollar and the launch of salaries that stimulate the movement of the market.”
Citizen Aziz Amin, buying a pack of cigarettes, notes that “the prices have risen, as I used to buy one pack for 1,000 dinars, and now I buy it 1250 dinars, and this is a lot,” adding sarcastically that “the government is trying to quit smoking.”
On Monday, January 21, the Iraqi Council of Ministers approved the country’s financial budget for the next year 2021 in preparation for sending it to Parliament for a vote on it, after an emergency session of the Council that lasted for three consecutive days.
The budget was estimated, the exchange rate of the Iraqi dinar at 1450 per dollar, according to what was announced by the Central Bank, while the region’s share of it was determined at about 12 percent.
Some believe that the high exchange rate of the dollar was a correct decision, especially in the field of selling cigarettes, which is a step to quit smoking and preserve human health. LINK
Don961: Dr.. The appearance of Muhammad Salih *: The Central Bank of Iraq – ideas and issues about the current economic situation
The exchange rate represents, in all cases, the external value of money in Iraq, and keeping it stable is one of the biggest challenges facing the monetary authority in the country to achieve stability in the general level of prices and curb inflation.
Since its establishment more than seventy years ago, the central bank’s monetary policy has relied on an exchange system called the fixed exchange rate system or pegged to foreign currency, specifically the United States dollar.
This is because the nature and origin of foreign exchange flows to Iraq, especially oil revenues, which are the only sovereign resource in foreign currency, and that most of them flow in one currency, the US dollar, because the oil market is a dollar market of origin and origin since the First World War and the beginning of the discovery and investment of oil in Iraq ten years after That war ended.
Regardless of this and that, the trend towards adjusting the exchange rate of the Iraqi dinar, as announced by the Central Bank on December 19, 2020, was mainly related to the problems of the deficit in the current account of the balance of payments, as the deficit in it in the year 2020 is estimated at a maximum (minus 20%).
It was reflected bilaterally as a deficit in the state budget (dual deficit), which indicates the need to adjust the exchange rate, otherwise, otherwise, the foreign reserves of the Central Bank of Iraq will be eroding, which is witnessing a gradual decline and a continuous decrease in the levels of coverage of the Iraqi dinar.
Foreign reserves are expected to fall to 20% from their current levels of between $ 53-57 billion at the end of 2021, unless the average sale of a barrel of Iraqi oil rises to $ 65 or close to it, otherwise the exchange rate must be adjusted in the direction of reduction.
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Don961: Will exchange rates affect the value of exports and imports?
Wednesday 23 December 2020 Baghdad: Hussein Thahab
Emphasizing that the decision to devalue the currency carries with it the positive and the negative, since the exchange rates are among the most important prices in the international economy, and affect the value of exports and imports for all countries, as they affect the value of foreign investment, and exchange rate policies can be used in some countries to gain an advantage Unfair trade in other countries.
Dr. Ziad Tariq from the Ministry of Planning confirmed that “one of the functions of the exchange rate is to link the local economy with the global economy, as it is the link between global prices and local prices through three markets (commodity and service markets, financial assets markets, and labor markets).”
Pros and Cons
Tariq said, “There is no doubt that every action has positive and negative reactions. The positive ones become available to reduce the budget deficit and the ability to pay government sector workers’ dues, reduce imports and flood the local market with goods, and create the appropriate atmosphere to encourage the local product, which has become an urgent need in operating “Workers, reducing dependence on oil, and finally encouraging investments in Iraq, creating job opportunities and transferring technology.”
“The negative side is the high inflation index, as the devaluation of the local currency leads to a reduction in the value of the real income of the low-income classes,” he said, “so the government should protect the marginalized, poor and low-income classes of employees from rising food and non-food prices.”
He added that «the rise in the exchange rate (the depreciation of the local currency) leads to an increase in the value of the country’s exports and then a rise in its national income and vice versa in the case of a lower exchange rate, and in the event of a rise in the exchange rate, it will lead to the revitalization of industrial branches for export, and thus resources will be transferred to them and become Production is profitable for export, and vice versa if the exchange rate falls.
He pointed out that “many countries of the world resort to changing the exchange rate of their currency, according to the supreme national interest (as is the case in Turkey, Lebanon, Egypt, Iran … etc.). Raising the exchange rate (lowering the value of the local currency) achieves some advantages, but at the same time it is accompanied by some difficulties, ”noting that“ the monetary policy in Iraq wanted the Iraqi dinar exchange rate to be relatively low to reduce inflation rates and control the economic rhythm, which was within limits. 31 percent in 2007 and to reduce import prices of goods and services, and this policy remained in place without review despite the suffering of the Iraqi economy from commodity dumping, which disrupted the work of many local companies and factories and made them unable to absorb the labor force of the newcomers and then the high unemployment rates. .
Tariq pointed out that «everyone knows that the Iraqi economy before and after 2003 was dependent on oil resources, as this policy led to addressing unemployment by providing job opportunities in the public sector that were not necessarily productive, and the rise in the price of oil encouraged expansion by spending public money according to political desire. And not according to the economic feasibility, “indicating that” the extravagance of public spending has led to an inflated operational financial allocations at the expense of investment allocations, which necessitated the opening of the loan window to address the budget deficit over the past years. ”
He said, “At the present time, the price of oil has decreased from what it was previously and has affected the government’s ability to pay financial dues to the public sector and the complete inability to finance investment projects.” With exorbitant consequences, the government is facing an unavoidable choice, which is to reduce the value of the Iraqi dinar against the dollar. LINK
Samson: Trump issues a stern warning to Iran
24th December 2020
US President Donald Trump issued a stern warning to Iran, after targeting the US embassy in Iraq with a number of missiles.
Trump wrote on Twitter: “Our embassy in Baghdad was hit by several missiles on Sunday, guess where they came from: Iran. Now we hear talk of additional attacks against Americans in Iraq.”
He concluded his speech with an explicit threat to Iran: “Some friendly advice to Iran: If an American is killed, I will hold Iran responsible. Think carefully.” LINK
Don961: An American report expects serious consequences for the devaluation of the dinar in Iraq
2020-12-24 Yes Iraq: Baghdad
A report by the BN website confirmed that Bloomberg, on Thursday, that the devaluation of the Iraqi currency against the dollar will add the problem of inflation to the list of difficulties facing the Iraqi economy and the population who are recovering from a devastating war with ISIS. Therefore, without making significant cuts in spending, it will not be This is sufficient to prevent the occurrence of economic pain and reduce the deterioration occurring.
“The move to devalue the currency by 23 percent to reduce pressure on public finances and try to secure billions of dollars in foreign aid has already met with opposition among some parliamentarians who are afraid of provoking voter anger after mass protests that rocked the country last year,” the report said.
He added, “Although Iraq is the third largest oil exporter in the world, its economy has suffered from the Coronavirus pandemic that has weakened global demand for energy supplies, and the quotas agreed upon with other oil exporters to stabilize the market also mean that the number of barrels That Iraq can pump is restricted, which narrows its options to increase revenues.
He continued, “According to the latest estimates of the International Monetary Fund, the Iraqi economy has shrunk by 11% this year, and this is better than the initial forecast of the Fund, by 12.1%, but it still leaves Iraq with the largest contraction among OPEC members subject to the production limits, which highlights His excessive dependence on oil production.
He explained that “the IMF expects that the net foreign assets of Iraq will continue to decline sharply until 2024. The debt-to-GDP ratio in Iraq is among the highest in OPEC +, a group that includes non-OPEC oil exporters such as Russia.”
“There will be a need to cut the budget to gain substantial financial support,” said Mark Pohlund, senior credit research analyst at Red Intelligence. Reducing pressure at the moment, ”but it is not enough.
On the other hand, many analysts said that the devaluation was necessary to prove to international lenders that Iraq is serious about reform, but it is not sufficient to release the aid the government wants.