The “dollar crisis” is escalating.. Economists warn against depreciating the exchange rate: it will

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[size=52]The “dollar crisis” is escalating.. Economists warn against depreciating the exchange rate: it will create turmoil in the markets[/size]

[size=45]Specialists in economic affairs rule out the return of the exchange rate of the dollar against the dinar to what it was before December 2020, while they saw that returning the exchange rates to what they were, would create a kind of turmoil in the Iraqi markets and lead us to building a new budget in addition to storming the money market and undermining stability .[/size]
[size=45]On Thursday, the leader of the Sadrist movement, Muqtada al-Sadr, presented six proposals regarding the dollar exchange rate, including summoning the Minister of Finance and the Governor of the Central Bank under the dome of Parliament, organizing the Iraqi currency market centrally and enacting "some laws that increase the value of the Iraqi dinar exchange rate."[/size]
[size=45]As soon as the recall decision was announced, the selling prices of the dollar in the local market decreased slightly, as the price of the $100 bill reached 144,500 thousand dinars.[/size]
[size=45]The exchange rate set by the Central Bank amounted to 1450 dinars to the dollar, instead of the previous rate of 1190 dinars, which sparked a series of criticisms from politicians, economists and citizens alike.[/size]
[size=45]The government attributed the decision to cut at the time to the stifling economic crisis that the country, the second largest oil producer in OPEC, is going through, as a result of the drop in crude prices.[/size]
[size=45]However, the recent rise in oil prices in global markets to record levels not seen in seven years has sparked controversy recently regarding the decision to devalue the Iraqi dinar and the possibility of reconsidering it.[/size]
[size=45]The specialist in economic affairs, Nabil Al-Marsoumi, said in an interview with (Al-Mada), that “Iraq is a rentier state that relies on the principle of stabilizing the exchange rate,” noting that “the rise in the price of the dollar against the dinar has negatively affected the poor segments through the rise in local and imported prices.”[/size]
[size=45]Al-Marsoumi added, "The negative aspects of the exchange rate have been exacerbated for more than a year by the failure to take measures that contribute to reducing the crisis, such as building social sources of income, supporting the poor classes, and tax exemptions for basic commodities."[/size]
[size=45]The specialist in economic affairs pointed out that “tying the exchange rate to a short-term, fast-volatile variable (oil) is an economic absurdity,” noting that “it is not possible to link the price of the dinar with the price of oil, since the latter has sudden fluctuations.”[/size]
[size=45]Al-Marsoumi called for «regulating the exchange market by addressing the rampant corruption in the sales of the Central Bank of Iraq and the domination of the market by the owners of private banks».[/size]
[size=45]Repercussions of the dollar devaluation[/size]
[size=45]And the professor of economics at the University of Basra said, "Restoring the dollar exchange rate to what it was before will create a kind of turmoil in the Iraqi markets and lead us to building a new budget, in addition to storming the money market and undermining financial stability."[/size]
[size=45]For his part, the economist, Ahmed Hathal, told Al-Mada that “oil prices have short-term effects, and if oil price changes were calculated annually in the year (2021), the average would be ($68.63) annually, with a daily export rate of 2.7 million barrels. It is equivalent to the equilibrium price of the hypothetical public budget at least, and the daily fluctuations of oil prices do not depend on its early economic results.[/size]
[size=45]Hathal added, “The exchange rate has short, long or medium-term effects, whether negative or positive. The call to return the exchange rate will cause more social problems than the problems it created when (the mistake of changing it previously), and if it will contribute to reducing prices, it will not decrease at the previous level.” Because there is no complete control over it first, and because it is linked to international markets and their fluctuations, secondly, given that most commodities are imported, in addition to the viscosity of prices declining and their flexibility to rise.”[/size]
[size=45]short term solutions[/size]
[size=45]The economic affairs specialist presented some short-term solutions for the affected groups, including:[/size]
[size=45]1 - Supporting basic commodities for the citizen, ensuring the arrival of all necessary commodities to the citizen, fighting corruption and suspicious contracts of the Ministry of Commerce, or giving cash alternatives to the targeted citizen equivalent to the value of the budget allocated to support the ration card.[/size]
[size=45]2 - Supporting the health sector, fighting the scourge of corruption in the Ministry of Health, drug stores, hospitals and health centers, providing all treatments for the category of chronic diseases, and providing equipment for critical operations and incurable diseases.[/size]
[size=45]3- Supporting the educational process, combating school dropouts, eradicating illiteracy, increasing enrollment rates, and giving cash subsidies to those who enroll in school after primary school, to ensure an educated generation with the minimum costs of study and living.[/size]
[size=45]Hathal concluded, by saying that “these are three basic points that any government must start according to a budget based on programs and performance in order to diagnose failure and corruption in every sector and department of the state,” adding, “It is not reasonable to falter with new decisions or approve a complete budget.” Without a real vision and programs that work to achieve the efficiency of spending the general budget allocations.”[/size]
[size=45]For his part, the other expert in economic affairs, Faleh al-Zaidi, said that “the exchange rate process was not an economic decision, and that all the political blocs participated and agreed to that process of change, and the possibility of returning it to what it was is currently out of the question.”[/size]
[size=45]And Al-Zaidi told Al-Mada that "Iraq suffers from structural imbalances in its economy by relying on only one export commodity, which is oil, which is volatile, according to supply and demand, according to global market conditions."[/size]
[size=45]"Economic blunders"[/size]
[size=45]He noted that "a decision to reduce the price of the dollar must be made through economic reforms first, that is, diversifying exports by establishing an industrial base by operating all government and private stalled and lagging factories, and transferring oil revenues to real non-consumer investment projects."[/size]
[size=45]Al-Zaidi continued, "The confusion in economic decisions and neglect of the rights of citizens who are creditors to the state from the farmers who marketed wheat and barley to the state and from contractors and from the owners of government bonds and banks that loaned the state, all of this has made debts accumulate and citizens demand their rights, so the devaluation of the dinar was in favor of The state will reduce the value of the debt, but at the same time it is causing great harm to the creditors because they will receive dinars at a lower value than before.”[/size]
[size=45]In turn, economic expert Salam Sumaisem said in an interview with Al-Mada that "restoring the price of the dollar to what it was before December 2020, will not necessarily lead to a return to inflation levels to what they were in the past."[/size]
[size=45]She added that "the devaluation of the dinar came within an agreement with international bodies, and it lasted for 5 years, and it cannot easily be reversed."[/size]
[size=45]And Sumaisem continued, "Unfortunately, the government did not implement the rest of its commitments that it set in the white paper, including diversification of revenues and governance in taxes, fees and border crossings, and it was satisfied only with devaluing the currency."[/size]
[size=45]She pointed out, "The Central Bank is the only party capable of taking a decision to change the value of the currency."[/size]
[size=45]The economic expert pointed out, "The central bank must adhere to monetary policy, and its first objective is to achieve economic stability that is achieved through the exchange rate."[/size]
[size=45]big effects[/size]
[size=45]In addition, Abu Muhammad, the owner of a shop in the Dora area, south of the capital, Baghdad, told (Al-Mada), that “the decision to raise the value of the dollar compared to the Iraqi dinar harmed the poor class in Iraq,” noting that “the devaluation of the dinar caused a major economic crisis, because all Food commodities witnessed a significant increase in prices.”[/size]
[size=45]Abu Muhammad added, "The government was unable to follow up on food prices and punish price-manipulators who took advantage of the dollar's rise to raise prices even for locally made goods."[/size]
[size=45]On the other hand, Ahlam Saeed, a teacher from the New Baghdad district, said in an interview with Al-Mada that "the salary of the month is no longer sufficient to meet the family's special needs, because all commodities have increased significantly."[/size]
[size=45]She explained that "the central bank's decision affected the poor and middle class, as they are the ones who are affected by the slightest rise in the value of goods in the markets."[/size]
[size=45]Saeed called on the government and the concerned authorities to “work to restore the exchange rate to its previous state, especially since oil prices have witnessed a significant improvement, and therefore there is no excuse for the government to take this measure.[/size]
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