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Tishwash: The journey of devaluing the dinar is “not over” here … The Finance Ministry is preparing for broad measures that it discussed for weeks and did not “reveal”

The Ministry of Finance in Iraq is preparing to take “supportive measures” to remedy the risks and effects that the raising of the dollar exchange rate against the Iraqi dinar may cause in the country.

“The Ministry of Finance is fully aware that there are a number of supportive measures that need to be taken to increase the positive effects of adjusting the exchange rate,” the ministry said in a statement, which “Yes Iraq” received a copy of, noting that “the Ministry of Finance was unable to do this publicly due to the sensitivity of the issue and because The budget must first be approved by the Council of Ministers.

And she added: “The Ministry of Finance has led extensive discussions in the past weeks after the budget was approved by the Council of Ministers on the follow-up to adjusting the exchange rate with many parties inside and outside the government. These discussions will culminate next week with a proposed expanded meeting with the main economic actors from the public and private sector, where the Ministry of Finance will develop a program. Its detailed policy is designed to maximize the benefits from the exchange rate adjustment ”.

And she continued, “The Ministry of Finance hopes that these procedures will coincide with discussions within the House of Representatives on the budget. It should be noted that the main policy measures to protect the poor and the vulnerable have been included in the budget and discussed in the minister’s statement regarding the budget.”

Structural reform

Yesterday, Moody’s Investors Service for the Management of US Economic Risks considered in a report that the devaluation of the Iraqi currency would ease liquidity pressures in the short term only, and that in the event that the Iraqi government did not undertake structural reforms, this easing would be only temporary and would need to reduce the dinar to an additional number .

“The devaluation of the Iraqi dinar will strengthen the country’s financial position in the near term by increasing oil revenues in local currency, thus helping it reduce the deficit,” the British newspaper The National reported in a report.

He added that “Iraq, which is the second largest oil exporter in OPEC, depends in 90 percent of government spending on oil revenues. Most of the borrowing was by purchasing short-term US government papers, which led to the erosion of its foreign currency reserves.”

The agency stated that “the short-term impact of devaluation on Iraq’s debt will be mixed. It is expected that the debt-to-GDP ratio in Iraq will increase by about two percentage points, but it will reduce the debt-to-income ratio by 6 percentage points.

And that “it is likely that the depreciation of the currency will lead to an increase in inflation, given that Iraq imports a lot of food and consumer goods, however, any rise in inflation carries with it the risks of political and social stability.”

Moody’s analysts said that “if Iraq does not implement structural reforms to reduce the size of public sector wages and pension bills, reduce energy subsidies and increase non-oil revenues, the relief provided by the devaluation may be only temporary,” noting that “if the government is unable to control Spending this year, the central bank will face pressure to devalue the dinar further, threatening an inflationary spiral.   link