The role of the financial sector in addressing the budget deficit in 2016
Muwaffaq Hassan Mahmoud *
It is now clear that oil market conditions do not Chiraly imminent breakthrough is not in prices nor in the level of demand, as it is likely that the excess supply remains Glut prevailed for many future years because of shale oil production in the United States and sandy in Canada as well as increasing production in Saudi Arabia, Iran and Iraq that the supply side, the demand side, the market experts do not expect significant increases due to slower growth in China's economy and perhaps India and other parts of the world .osoturk the subject of speculation on oil markets, market experts and reports of research institutions involved in organization of energy international and OPEC, but I Sontaleg in these papers from the premise that the next worst oil markets will be the impact on Iraq's impact seriously.
from the above I see that the scarcity of oil resources will last for years to come to 2020 or beyond which forces initiative to take radical and bold action is aware of the depth of the problem the range does not err appreciated Iraq's need for foreign capital.
as far Alammerbalqtaa banking inclusive of the Central Bank believe that the reform would sector and restructuring in particular could make it important for the national economy hinterland in this complex situation, which passes by the home below are scenarios for discussion of key indicators as a bargaining work of the working paper. I. CBI: - 1 - dinar exchange rate sees some economists to be one of addressing the budget deficit crisis methods is to reduce the Iraqi dinar exchange rate against foreign currencies, since such a reduction would provide the Treasury dinars more for $ Less . We must before taking any decision in this regard from the analysis of this point of view to display the positives and negatives as to help decision-makers to take the path that they deem to address the deficit crisis, which is compounded daily with a decline in the price per barrel of oil should not be forgotten that the compensation for the price fall to increase exports is very limited is in the current conditions in Iraq. the first thing that the resulting reduction of the dinar exchange rate is the high prices of imported goods at a rate exceeding the reduction rate and thus falling purchasing power of the dinar at a time when General incomes in cash is low as a result of austerity measures, which do not find the state inevitably which shall effect a double on family income, we do not need to be reminded that Iraq has become a country that imports most of its needs and even the food which let alone the needs of the various equipment and capital equipment and household list goes on and if we want to count. And we have to show that reducing the currency exchange in countries Ttofferldeha productive capacities and industries export rate policy policy is justified as it aims to support the competitive position of its products in foreign markets as well as the domestic market while the price elasticity is price elasticity high local products are available productive capacities ready to run in the term short leading to increase production and increase exports and achieve the desired result, but the situation in Iraq is completely different after the industry deteriorated and deteriorated agriculture which after Iraq was the biggest exporter in the region of cement, known for its quality at that time, as well as the matter of a number of oil derivatives Kziot engines and other Thus we see that reducing the dinar exchange rate will not result in any increase in exports and reduction of imports, Iraq today does not produce goods for export is oil either we say: the revitalization of industry and agriculture LAN's to compensate for the imports import substitution by lowering the exchange rate making Iraqi products at a competitive site the best locally and abroad is the goal unrealistic, as the problems facing the domestic production of industrial and agricultural Bjanabih multiple aspects of Aihlha action unilaterally as a reduction of the exchange rate. It should not be absent from our deliberations importance of monetary stability on the overall macro-economic activity in the short and long term, and this stability Humen the most important duties of the central bank as defined by law and is not here right place to review the experiences of developed countries from the developing and the implications of sacrifice Bhmalastaqrar. Go back to the issue of the deficit, which was estimated at the beginning of it the equivalent of $ 22 billion, calculated on the basis of $ 45 to the average price of a barrel of oil exported, but the price of oil continues to deteriorate and I doubt Iraq's ability to to rely on increasing exports to compensate for the decline in the price at the current level for the price of oil Vsadarat determinants .uallah the deficit will worsen with the decline in the price of a barrel of oil. Even if Cefhna on the issue of rising imports prices and thus falling purchasing power of the family, it is to result in reducing the rate of the dinar to the desired outcome should be very large and would be a negative impact on the general level of prices is also great and would be a negative impact on the purchasing power of the dinar purchasing power most also tell us the experiences of countries that have resorted to devaluation in the hope of increasing exports and reducing imports due to the recovery of speculation and speculation speculations on the exchange rate. Based on what is stated in the above, I see the need to maintain monetary stability and avoids the lowering of the Iraqi dinar exchange rate to address the budget deficit is the price, as the disadvantages and the most serious price inflation will exceed greatly pros, which is limited to the treasury grant dinars dollars more to meet less hope of addressing the budget deficit was the result of structural abnormalities in the overall economy, and therefore it is not a deficit Gosairalagel but a long-term inability to see that the causes not attributable to a lack of resources but also to the poor in the distribution and it must be Find ways to rethink systems and the philosophy of the income distribution between consumer spending any current expenditure and the investment spending as well as the need to search for sources to maximize revenue on the one hand and the reduction of expenditure on the other hand this will not only be achieved by a bold political decisions the level of the problem is not paying attention to the arguments and slogans are not the saturation of hunger and thirst of Troy. Olabd me and we discuss the subject of Sarsrv dinar that refer to circulate issued by the Central Bank of Iraq has recently under No. 9/1/416 dated 12/27/2015 entitled (foreign exchange rate) and I've attached a picture of the circular anyone who wants to see it. I see that the circular involves many risks to monetary stability, since it gives the impression that the central pave the way for reducing the rate of the dinar and this will be an incentive to convert savings from the dinar to the dollar and then make it difficult to control the exchange rate. Therefore must be clearly announced on all sides to comply with the stability of the exchange rate to avoid rush Atarellhvaz the purchasing value of the cash assets of the citizens. 2 - speculation on the exchange rate: There is no doubt that one of the most important demand for the dollar sources is speculation on the price in order to make a profit from the difference between the purchase price from the central bank and Saralabie in Ousarh market foreign Khawwalat Worse than this that these outrageous profits at the level are not subject to state taxes. From here we see the need to work to bridge the gap between the price of the dollar, and we see that it is possible to achieve this goal if the central bank to set clear instructions to meet the legitimate demand for the dollar ie when demand is enhanced documentation Kalaatmadat documentary or to cover the medical treatment expenses or university study abroad until the Iraqis transfers as a result of the liquidation of their property in Iraq provided that the official documents. We see the central bank to be the guarantor of these arrangements guarantor so as to enhance global banks the confidence of these arrangements and the sector of the Iraqi banking. That would cancel the margin between the two prices that decays demand for dollars for speculative purposes and to achieve profits from the difference between the two prices, and we believe that the best way to unify the price and prevent the illicit enrichment, which we have seen since I work with what is known window of the currency at the Central Bank he began to respond to the request of the project on the dollar within the lines that we have it. 3 - dollar selling window and trade finance is no doubt that the dollar selling window with the central bank represents the bleeding for the balance of foreign currency at a time to suffer the oil prices from a major crisis due to excess supply and falling prices to below the $ 30 a barrel and the worst is that oil experts expect further deterioration in crude prices due to supply and demand factors, as I said, raising serious doubts about Akaddrhaly maintain the balance of the foreign currency cover imports for a number comfortably Months . So I see that the national security forces to return without delay to the manner of letters of credit to finance imports and to stop the style of bank transfers by the commercial banks and the central bank can not find out the sources Dnanerha not to mention follow-up is doomed, while retaining the manner of remittances to pay Okiem some food commodities, perishables such as meat, poultry and vegetables and fruits that export to Iraq periodically agreements with importers on credit to pay more or less (60-90 days) as was the case in the seventies and eighties before Aaharb with Iran. But this does not preclude meet the transfers of personal and family legitimate requests and enhanced documentation supports its legitimacy. As I pray for a return to the style of letters of credit for trade finance is not absent from my difficulties facing the Iraqi banks in dealing with foreign banks as part of installing credits and communicated to the supplier foreign It difficulties due to the low credit rating of Iraq's credit rating, a rating which applies to include Iraqi banks also which pays foreign to the requirement of insurance banks have up to 100 percent of the value of accreditation before agreeing to install accreditation and notification confirming / advising to-equipped foreign boards, this serious issue to be addressed at the state level, as I see and I propose to deal with them a plan of cooperation between the trade Bank of Iraq and the Central Bank of Iraq to find a formula to banking arrangements respond to the conditions of foreign banks on the one hand and the reservation of public money from the misconduct of this or that party in terms of the other. Can be summarized arrangements proposed by the appointed banks covering among correspondents Trade Bank of Iraq in the most important countries that traded with Iraq's main trade partners are deposited has exaggerated the appropriations and authorizing a payment of amounts matching documents complying presentations according to the terms of credit and notice from the bank the amount of the credit or the installer bank advising or confirming bank depending on the situation and see that interfere with the central bank to be the guarantor of these arrangements guarantor Bmayazz foreign banks the confidence of these arrangements and the banking sector and the Iraqi banks and see that this trust can Taatazzkellma committed to the Iraqi side to fulfill what is worth its obligations and will be the impetus for foreign banks to reduce their terms to communicate and install the credits and then proceed whenever this trust has been strengthened to grant credit lines to Iraqi banks lines of credit and as I call for a return to documentary credits, I do not posing as a magic solution to our problem Vosalib circumvent practiced by some people do not stop at the end and remain there supplementary measures indispensable seeking to fill the gaps assigned to the central bank and banks and commercial Perhaps could be the subject dealt with in detail in the appropriate place any with the relevant technical authorities in the two approvals. 4 - the Central Bank of Iraq Law No. (56) of 2004 prohibits the article (26) of the Central Bank Act grant any funds directly directly or to the government or any public body facets owned by the state, and I see the need not to prejudice this article must be alert to the serious negative effects that result from compromised relations with the IMF and other financial institutions fund and the credit rating of Iraq, not only this but it will be authorized economic and financial repercussions are difficult to control. it must Lee pointed out that the former central bank law was to allow the government to borrow no more than 10 percent of the speculative revenue of the general budget, but the current law prohibiting such borrowing aware of the legislator of the seriousness of the economic and financial implications. I must point out that Article 26 is one of the most important pillars of independence of the central bank's independence from those political pressures that have become axioms of science money economies. But this independence should not prevent the bank from carrying out an important developmental role in the field of investment and I'm here to invite him to support the construction industry and construction to urge banks to lend to the sector that the bank bears the interest rate spreads between the interest rates charged by commercial banks and the easy interest rate soft interest including not exceed 3 percent or 4 percent a maximum of him, and I will deal with the subject of investing in a later place of this intervention. But why building and construction sector in particular? The reason I'm seeing clearly being a sector that generates Okpramadaaf investment multiplier through the operation of a large number of manpower labor intensive and stimulate a lot of local industries Calcment for building materials, bricks, plaster and tiles .... etc banker Iraqi *