Euphrates Center discusses the funding crisis and the direction of monetary policy in Iraq

Euphrates Center discusses the funding crisis and the direction of monetary policy in Iraq

Essam governor 63 2016-04-20

Euphrates Center for Development and Strategic Studies

In the context of the ongoing Iraq's monetary policy now and what shaped the move from a difficult and a difficult Fords in fee-based strategies to promote the reality of economic Iraq, especially suffering from crises and deep imbalances in revenues GNP, especially on the eve of a new page of the worsening oil sector pages point decline in the price of a barrel of oil supply and the frequent mention of what caused this decline from the collapse of the country's resources.

And for all those reasons and others felt the Euphrates Center for Development and Strategic Studies held monthly discussion circle Saturday 09.04.2016 under the title (funding crisis and the direction of monetary policy in Iraq .. challenges and policies) in the hope that dispels the darkness of the popular and national fears of the possibility of access to the general economic decline and the state's inability to meet its obligations service and pension segment of citizens, under those climates and the resulting CNT decided to host Vice CBI former governor, Dr. Ahmed Abrihi Ali on the Hall of affection and prosperity Association in the presence of a distinct included academics, economists, researchers, journalists and those interested in economic affairs of the country.

Adar Episode Dr. Haidar Hussein Al Tohme teaching in Karbala University and a researcher at the Euphrates Center speaking about the economic crisis that has plagued Iraq a necessary vehicle economically, politically and security, which is to rely on the recovery of oil prices, fragile pillar threaten the overall economic activities in the country are expected to be policy cash prominent role in providing new outlets for the financing of the economy and the budget.

The merits of the relationship between the financial budget and resource oil and monetary policy

To study all of these dimensions and what the solutions proposed by Dr. Ahmed Abrihi Ali presented a research paper dealt with through which the merits of the relationship between public finance and oil supplier and monetary policy budget after oil price decline and bringing them to low levels, and is now moving around $ forty and can not go beyond this barrier and appears to be It will stabilize around that number, and through it increased the supply of OPEC oil then Saudi Arabia submitted a proposal to freeze at this level which means a freeze on the level of production is greater than 2015 and the difference in the oil market for the same year it was around two million barrels per day.

At that time there was a request to store the surplus and the primary surplus, in fact, there is no surplus in the original, all the show was to accommodate somewhere, but he however continue to generate additional pressure on the price, especially since the projections published talking about the survival of the oil price low for the year 2020 but this pessimistic outlook because technically linked to the latest published data.

And the Most High, that the reason we stopped when the price of oil on the grounds that it represents all exports or backbone of the Iraqi economy, which means that foreign currency inflows in the balance of receipts is from oil, as well as payments through which imports of goods and services to the private sector and imports of goods and services to the government and the expenses of the service external government debt and other obligations, add to that paragraph the private sector to invest overseas and did not say it is in fact exist, but it is, alas, since the lower oil price and so far expert attention is generally focused on how to offset the revenue Avckdnaha down the price of oil even went views about raising taxes or imposing fees Kmarkip or sell assets to the government-owned. While the origin of the problem does not lie here, but the real problem is in the balance of payments that the state has lost a major source of hard currency, and thus must think about how to fund the repayment of external payments in other words, now if we collected revenues wills God you have to collect from the local currency, and the contrast is not our foreign currency All those revenues will fall and the value of its remaining, and then repeated the blockade model in Iraq will deteriorate and the price of the Iraqi dinar to arrive perhaps in theory to zero and whatever the safety of your economy and whatever earnings.

He adds Ali, experts and advisers and the public left the essence of pulp crisis and busy secondary issues related to how the government's measure of domestic spending, as long as government spending is still low, does not generate total demand collides with a production capacity does not generate total demand exceeds the available supply of goods and services, so long as the national economy assumes that the government spends a hundred trillion dinars Feltenvq there are institutional arrangements related to the safety performance of the state and its relationship with the stability of the total system in the long term, and the implications of human rights and the implications of a political must the government should first financed spending of real revenues and tax or oil or otherwise, for the time second go to borrow from the private sector and if it is forced to go to borrow from the banking system and if it is forced to borrow more from the central bank. This gradient is imposed as long as the national economy assumes spending because the question of financing this spending minor issue so far and that big our problem is that the only source of foreign currency is oil supplier, and although we did not think about, and so far in how to measure an alternative foreign currency supplier, and on this basis, it is essential that we build our policies on the worst possibilities and the best possibilities and create our scenarios fit in with any circumstance. For example, if we passed in 2017 and the price of a barrel of oil did not exceed the barrier of 60 dollars, what does Iraq we are when we say that the government's main greatest resource is oil means key supplier of foreign currency, usually in the oil state of public finances has a surplus in foreign currency, but it has a shortfall in revenue from the national currency and everyone reads that non-oil revenues are not to exceed 7% of the total revenue.

The role of the private sector in supplying the national economy

Explains Ali, we used to just have to arrange the impact only on the premises but the introductions of realism does not arrange them any trace, especially since the government has become to have deficits in the dinar but if the revenue 90% of foreign currency but paid out the equivalent of only 25% of spending, here means has a surplus of foreign currency, and this is the first source of funding for domestic spending, the central bank for his part, is selling worth 55% of the private sector, the remaining amount is added to international reserves so he became in 2014, we have $ 87 billion in international reserves, Iraqi private sector only receives foreign currency generator which is totally foreign currency and does not have an attractive activity of foreign currency, and the government when they are not processed in foreign currency exchange market also will collapse the economy and this other reality.

Ali also questioned the role of the private sector in supplying the national economy this plasma last year, for example, despite the financial hardship faced by the country, but the government has provided to the private sector amounted to $ 44 billion, but this sector is not able to be lists of the Iraqi economy anything of foreign currency, in the context of that hypothesis and when the decline of the Ministry of Finance's oil resources did not sell to the Central Bank of the estimated 70% as before, but less so perhaps sum up 30%, the private sector alone needs $ 45 billion whence come the difference certainly from international reserves and then draining international reserves at the central bank gradually to bridge the shortfall in the balance of payments.

Consequently, the drop in foreign exchange reserves, particularly if the oil price continues down, then we are exposed to more and more setbacks at the level of international reserves, and certainly will not be able to withstand more if they have reached the international reserves of the Central Bank to below ten billion dollars, then it must be stopped Valahtaattiyat when divided on this deficit identifies us how long can the international reserves of the Central Bank perpetuate the ordinary course of imports of goods and services activity, and to clarify more, the central bank reserves can not cover private sector demand of foreign currency.

Complements Ali, the most important government options that have an investment program for the development of productive capacities commodity is heading for export, and another option is to reduce the demand for foreign currency in different ways and to invite the private sector to invest in the interior, and codifies imports unnecessary and is also working on a review of monetary policy, and be there foothold and competitive in the international market in the type and quality and cost at the same time, the exchange rate must be appropriate to the seller and the buyer, and in order to achieve those goals has to be an investor in the private sector to prepare feasibility studies and takes into account the price and the cost and the exchange rate in addition to obtaining technology, organization and administration of the foundations and the like that go into the production and marketing process.

Interventions:

Dr. Hashim Jabbar al-Husseini Karbala University School of Business and Economics wondered openly: the Central Bank reserves to what extent can withstand the continuing decline in the price of oil to fill the shortfall in the demand of foreign currency, this decline reserves at the Central Bank Is came after a drop in oil prices or what ?, the last thing strategies are in place for the development of productive capacities is the solution for the long term and is there a solution in the near term ?, is finally crisis in Iraq or Dinareh dollar?

For his part, the teaching explained in Karbala University, College of Management and Economics assistant professor Dr. Abbas Kadhim Daami "that there are three rings, ring balance of payments monetary policy and ring and ring the general budget, and all these episodes are particularly certain procedures and with the presence of these political disputes and the political interference in the administration these rings, is possible in the future to create a state of high coordination between these episodes together in our procedures compatible and coordination in order to get us out of this crisis and actually move us toward economic development?

Dr. Kamal al-Kadhim Jawad Faculty of Administration and Economics University of Karbala, said you suggest in an exhibition speaking with the need for private sector development in order that the hard currency generates Everyone knows that the competitiveness of the productive sectors of Iraq, particularly the industrial do not have the ability to compete in the international market, a variant of our point of view is the regulation of imports and we are working on import substitution which means the private sector works on import substitution and through coordination with the authorities responsible for the import and reduce the import of the private sector and working on supplying the local market products in order to reduce hard currency leakage.

He said a supporter Mohamed Abdel teacher assistant at the managerial and technical college "to the questions set, especially as the paper put forward the idea that moving Iraq toward export Wallis best for you to achieve self-sufficiency First ?, for the policy of the Central Bank, which is now used to raise foreign currency auctions in the reducing stage auction resulting in a steady increase in market prices, is Iraq's only ports this mother has other options, also talked about the trend towards export, and that process definitely need a lot of money, Iraq suffers from a lack of cash surplus foreigner.

At the same time put Riaz Rahim al-Rubaie, a master's student University of Karbala, problematic to rely on the private sector, but the sector is also suffering from major crises, the fact that local companies is a member companies rely on what has until profits earned transformed into private holdings and do not achieve growth , does our system promote this sector?

For his part, Hussein Ahmed Jawad Talib Master Finance and Banking Sciences, stated, in the last period the Iraqi government has raised some imported materials and in return has the support of the local product, but did not support the regulatory quality and control of local companies, and the result is it possible in the light of this government move to raise the Iraqi government and whether exports can compete in foreign markets?

Mr. Hamad Jassim Mohammed, a researcher at the Euphrates Center, said that Iraq Rei, a country dependent on oil. In light of the decrease in oil prices Is it possible for Iraq to face a funding crisis at the expense of financial resources available currently and how they can finance these expenditures?

As Abdul Fadel Aoun researcher at the center of the Euphrates, "wondered whether the Iraqi currency is not recognized abroad and whether there is a problem that the private sector is using the local currency instead of the dollar abroad ?, another question centralized economic decision-making in Iraq, especially in this crisis, where lies when politicians or when the two economies and whether the dispersion of economic decision is a reaction only?

And at the same level, Sheikh Morteza pension Prime news Foundation for Culture and Information Department, raised three questions, inflation in the consumer sector, the productive sector account Is it caused by the growing consumer culture in the people of Iraq after the 2003 ?, next question you talked about the existence of a dollar crisis and not Dinareh Flo the project is linked to foreign currency financing is there a problem or not ?, following question battle of the ongoing reform in Iraq and the concept of changing the government is it after a special economic order by creating confidence among the international community for investment and loans?

For his part, Jassim al-Shammari believed Master Director, Center for Studies and Research in the Office of the Karbala Provincial Council, that the law of most states rely on the private sector to support its economy, but the financial crisis in Iraq, the first thing that hurt the private sector and this is evidence that the private sector subsisted on the state, the question here Is there a particular sector in Iraq is possible to think or develop or promote the Iraqi economy ?, also in the time that you propose the revitalization of the private sector through exports to be born or to be a foreign currency note on the contrary, that there is a contradiction in the central bank's policy, particularly it continues in the currency auction and accepted that the first beneficiary of the auction currency is the private sector, is that the auction currency is the temporary treatment of the Iraqi economy or the auction currency is a disease in the body of the Iraqi economy ?, another question, why do not you call to activate belonging to the Ministry productive state institutions industry, iron and steel plants or canning plants ?, final question: Are the decline of the Iraqi economy is due to the lack of interest in the establishment of the state sovereign wealth funds and whether if they exist for the situation changed?

Dr. Khalid Silverline Aerada director of the Euphrates Center for Development and Strategic Studies, "said Dr. away by virtue of close you are to the political decision-maker in Iraq Are you able to take the proposals put forward to address the already crisis, especially as we do not need to proposals only, but we need the permission Alsagah to do these treatments and solutions, the other thing we note that the nature of the demographic boom in Iraq, where there is a large growth in population, a frightening and scary compared to the decline in economic performance, besides confirming the report tangible increase in the proportion of crimes in Iraq. where up state in this context, note that the salaries are paid monthly mechanism may be exposed the delay ?, and finally if we had installed for the price of the Iraqi dinar exchange Do deals with our monetary crisis in Iraq, whether it is included in these processors or not enter?

For his part, Dr. Haidar Moderator following ask questions, the fact that Iraq is facing is in foreign currency and there is no problem with funding the budget and foreign currency are the two sides of supply and demand and including the foreign operation is governed by external factors flows can not be required under the foreign currency from demand-side management, also Is it possible feminine demand, especially as the demand for the currency has become so Mnfelta pain nostalgic time for treatment is in foreign currency from the demand side and what mechanisms determine whether more than an appropriate exchange rate at the moment?

In conclusion it has to answer all inquiries and interventions in the light of the political, economic and security changes experienced by the Iraqi reality plagued much of the legislative, legal and financial drawbacks and then gave the center's director, Dr. Khalid Aerada certificate of appreciation to the Vice former central bank governor Dr Ali valuation big for his research and his paper-rich economic with data .