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Development without loans
Economical 01/25/2024
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Abdul Zahra Muhammad Al-Hindawi
There is a big difference between countries going to borrow in times of crisis, and borrowing in times of prosperity. In the first case, they may not find anyone to lend to them, and if they do, they will set harsh conditions, through which they seek to subject the economy of that country to its hegemony, and thus control its economic, and perhaps even political, amounts. Therefore, many experts and stakeholders consider loans to be a trap set by rich countries for poor or developing countries.
Many countries fell into this trap, which caused the collapse of their currency, high rates of poverty, unemployment, inflation, and other destructive factors for the economy.
But the question raised here is: Why do other countries, which are experiencing a state of prosperity or economic stability, resort to borrowing?
Are there some kind of pressures on these countries that force or oblige them to search for lenders, even if they are simple loans that mean nothing compared to the large volume of revenues and spending of such countries?
In my estimation, any country in this world does not want to mortgage its economy in the hands of another power, and thus becomes forced to revolve in the orbit of that power, whether it likes it or not. It is required to pay off debts and their dues, according to specific timings, and when the payment period is prolonged, the value of the interest may become It is greater than the value of the loan itself, and the disaster is greater if the borrowing is for operational and consumption purposes, or to meet governing requirements, such as war or something similar. However, the situation is easier if the borrowing is for development purposes, and what is better than that is for the borrower to go to finance projects. Giant of these loans, if he finds himself unable to provide the necessary financing for them from his revenues, or through investment.
If we move to talk about Iraq, it went through difficult and complex circumstances during the period (2014 - 2022), which prompted successive governments to borrow externally and internally to secure the governing requirements, such as salaries, food, medicine, and the requirements of the war against terrorism. These loans, despite their magnitude, did not have a clear development impact. In the Iraqi scene, but this scene now appears different from what it was in that period, noting the growing foreign currency reserve, which exceeded the barrier of (100) billion dollars, with a clear recovery in oil prices achieved during the past two years, in addition to the positive expectations that the ceilings will remain. Prices are high above eighty dollars at least for the current year 2024. This comes in light of economic readings from prominent international institutions that indicate that non-oil economic activities will achieve increasing growth during the current year by no less than 5%, and this establishes the idea of a gradual shift from unilateralism. Oil, to economic diversification, and to the extent that all of these economic readings are related to the debt file, the government is talking about restricting external borrowing with strict restrictions, and it is not possible to go to borrowing except in the case of the need to finance new giant strategic projects, through which the loan can be repaid, and this is a good direction. This would free the Iraqi economy from many restrictions, but this does not mean, in any way, leaving the actual existing debt, which is estimated at about 70 billion dollars, more than two-thirds of which is internal debt, and what remains is external debt, which is estimated at about 20 billion. dollars, and this debt as a whole is considered a safe debt for several reasons, the first of which is that most of it is internal, the second is that interest rates are low, the third is that it constitutes only 30% of the size of the gross domestic product, and the fourth is the presence of a cash reserve that covers this size of debt, and from here, with the presence Financial abundance, it is possible to pay off part of this debt, in order to reduce its level in order to provide the appropriate opportunity to raise growth rates for non-oil activities, and to launch development without burdening it with more loans.
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