Financial problem and move the economy in Iraq

Financial problem and move the economy in Iraq

Dr.. Ahmed Ali Abrihi 222 2017-07-08


Euphrates Center for Development and Strategic Studies

Realism requires starting from the oil market and the expectations of prices to consider the financial and economic future of Iraq, and should serious search for sources of recovery from outside the oil market since the price setback in 2008.

Oil price has remained the OPEC basket to the nearest dollar is an integer between 49 and 54 a barrel between the beginning of the last month of the year 2016 and the month of May of the year 2017 and the oil market report, the month of May, the Organization of the Petroleum Exporting Countries that the production of its crude oil has dropped from 33.124 million barrels per day to separate the last of the year 2016 to 31.732 million barrels per day in April 2017. this is the surplus has disappeared at the rate and works the market at equilibrium, after the supply exceeds demand by 1.8 million barrels per day, almost the average in 2015. the World Bank in April forecast of $ 55 a barrel this year and $ 60 next year. It includes the International Monetary Fund report on the Middle East and North Africa, released on 17 May this year, warning of the likelihood of continued price volatility within the current Mdyatea.

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It does not rule out offering price pressure inhibitory if the United States has expanded into the production of non-conventional oil production from outside OPEC in general. But the commitment of the OPEC countries time to restrict production tainted by uncertainty, and the continued commitment to prevent Iraq to increase its oil production and exports until the end of 2018. If the abandoned cartel agreement may deteriorate the price too much because the annual increase in the demand for oil is not large and for example, in 2017 not more than 1.27 million barrels per day, a minimum of surplus extraction energies not to mention the potential increase.

Therefore, it is not reasonable bet to restore prices to levels that were before the recent collapse. Will the general budget deficit in Iraq will continue despite the Fund expects to continue to pressure expenses, as well as not enough crude oil exports to cover imports of goods and services and foreign payments and other current of the years 2017 and 2018.

In the midst of this situation we do not expect the IMF and the World Bank and other international bodies, which had not been interrupted Iraq's relationship with them since 2003, only more pressure for Iraq to deal with recipes known: reduce expenses; cancel the explicit support implicit, including energy prices; cleaning business environment of government intervention; strengthen the freedom of the market; and to appease foreign and local investor; ... and so on.

And also Iraq did not benefit the promises of the seven industrialized countries and, later, Germany and Britain separately, providing loans and generous aid for reconstruction ... and others. Also, Iraq's attempt to borrow from abroad hampered prices high interest margins exaggerated risk linked to oil prices and economic factors and market security situation, this is in addition to the deep usefulness of borrowing from abroad already doubts.

Also, the dual function of the supplier of oil, ie the financing of government spending, foreign payments, on the one hand, and because government spending is the main engine of economic activity overall, on the other hand, makes the task of economic and financial management in Iraq difficult in light of the limited oil resource. Because the matter does not end when local resources management, non-oil, loans and taxes to finance the largest government spending, but the fear of increased demand for foreign currency at higher government spending and, therefore, aggregate demand stimulus of government spending.

Adding to the problem is not being able to revive the non-oil economy independent of oil exports and government spending, which is indicated by the experience of the siege and the last two years, as long as macroeconomic policies and investment management programs are governed by the existing infrastructure. All of this underlines the urgent need for a new economic management of different policies, help to break the structural and then the regularity of the work of the national economy coherently growth with the expansion of production base and generate growing employment opportunities, supply the balance of payments in non-oil exports in the medium and long term.

Still international reserves of the Central Bank is sufficient for this type of restrictive economic performance, can the banking system continue to provide loans, limited amounts to sustain spending as practice of Iraq in the past two years. But the economic and financial problem remains, and most likely can not be the reconstruction and development of infrastructure, we do not expect an investment revival in the manufacturing industry and the general commodity sector. Even with the survival of the levels of spending on what it is Iraq will collide sooner or later, the enrollment of foreign currency.

Why Iraq could not directly manufacturing yet, why not have the national capacity to expand and develop infrastructure in various branches: the buildings of education, health services, government administration, to roads, railways, and sewage systems ... and electricity and others. There must be checking the answers to frequently asked questions about the care provided and whether, indeed, a guide to guide the construction.

There is a thinking and patterns of behavior of the environment have combined elements to prevent the economic recovery, the industry of public opinion in Iraq dedicated to this environment, it has reduced awareness of space on purpose and determination and accustomed recipient aversion to the trouble of searching for the truth and try to diagnose potential resources and causal relationships and the motors objective of the human reaction, sharpen energetic man Iraqi struggle of productive work and creativity to the industry a better future.

Yes, it is necessary to grant an adequate opportunity to other theses and listen to them sincerely, is really no such readiness. It is the body that will take it upon themselves to lead this transformation (the party, a national alliance or coalition forces, civil stream, ..., committees Parliament, the Cabinet departments, ministries, ... etc.) in the absence of overall authority controls despite the large number of speech strategies and plans.

Obstacle to the reform that the official reason, political and administrative, complain and complain like the rest of the people do not believe it complies frameworks theory in economics and management is part of the problem. It is unlikely to break the impasse within the current pattern of thinking and initiatives, but should be open to alternative proposals based on the understanding of another Egayr familiar with the circles of economic and financial decision in Iraq.

* Euphrates Center for Development and Strategic Studies / 2004-Ⓒ2017


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