The success of monetary policy in support of the Iraqi national economy

The success of monetary policy in support of the Iraqi national economy

Posted on 2017-07-24 by sotaliraq

Mohammad Reza Abbas

Theoretically, that monetary policy in a country such as Iraq must be completely independent policy for fiscal policy. Monetary policy led by the Governor of the Central Bank of Iraq, and was appointed by the Prime Minister and the approval of the House of Representatives, but the governor should play an independent role for the orientations of the government 's economic, and that the function of the central bank concentrated determine the interest rate and the stability of the value of the Iraqi dinar in the global markets. On the other hand, there is a fiscal policy led by the government, or the Prime Minister and the function of the stability or development of the national economy through two important, namely the imposition of taxes and the method of disbursement. And through these two functions Prime Minister can control the national economy. Taxes, however, do not constitute important tools in the Iraqi national economy because they do not constitute a large proportion of the state budget, and at best make up only 5% of the size of the state budget so that the state can not be relied upon as instruments of stability or payment of the national economy , such as imports oil which accounts for nearly 90% of the Iraqi state budget. Through oil imports can state the national economy control, as these resources give freedom to the government spending on various projects, such as public roads, construction of dams and agrarian reform, building schools and hospitals, pay state employees of the military and civilian salaries, in addition to these resources were used before the former regime in his wars with home and abroad.

Iraqis owe it to the Central Bank of Iraq in standing next to the government since 2014 and until this date, and not the Central Bank of Iraq 's cooperation with the government was the case of the Iraqi economy during the years of the collapse of oil prices in world markets are not much different from the case of the Iraqi economy and global economic boycott of the time against Iraq after the occupation of the State of Kuwait. Who lived this historic period of others happy from the history of Iraq will remember very well that the US dollar has become equal to 5000 Iraqi dinars, and increased financial inflation to become equal to 24,000%, the inflation rate was not seen by a German country only at the time of the Second World War. Central Bank of Iraq continued funding of Iraqi imports despite the decline in oil imports and dwindling reserves to about $ 42 billion after it was nearly $ 80 billion before the decline in oil prices in the global market.

The continuation of the Central Bank of Iraq to cover imports and transfer prices fixed, produced by the two cases Sahatin which is what it needs to provide the national economy from foreign goods and services and financial control of inflation in the country. Imagine if there was disagreement and lack of harmony between the Iraqi government and the Governor of the Central Bank, with bank financing imports, what will be in the country? Iraqi trader will be forced to buy the dollar on the black market at high prices and, without doubt , there will be a scarcity of goods and services and the prices of these goods will be high and the price of services can not be poor to get close to them. Central banks in democratic systems can bring down governments if they do not conduct understandings between governments, the Central Bank of Iraq was able to bring down the government by imposing a cease - rate policy. But the Central Bank of Iraq chose the path of government support and support the national economy through sustained commitment to transform static and provide all the needs of the national economy from foreign exchange rates.

But the central bank can not continue its current policy indefinitely, because of the simple that the continued deterioration of oil prices in the global markets and the continuation of disabled agricultural, industrial and service sector will impose considerable pressure on foreign currency reserves under the hands of the Central Bank of Iraq and the continued contraction of foreign currency will reserve lead to the failure of Iraq is unable to meet its financial obligations to the world, a significant increase in the rate of price (inflation), and the decline in the national economy and a large increase in the number of unemployed.

What work? It may not rely on the oil sector in economic development, because peoples experiences have proven without a doubt that the dependence on a single commodity revenues will introduce the national economy to instability, just as we observe now in Iraq and the rest of the oil - exporting countries. Yes, we must continue to produce oil and sell it , but you must be the sole supplier or not be the largest in the national economy. Industrial and agricultural sector should should move to support the national economy by the oil sector. And that the oil sector can provide hard currency for the country, but he can not provide jobs for the country because of the nature of this sector in Iraq. The oil sector in Iraq is using technological oil production and that this technology does not need a huge hand worker, while moving the industrial and agricultural sector needs a huge hand worker. Then the return of wellness to the agricultural sector and its ability to provide all that Iraq needs of grain and fruit and vegetables will provide Iraq billions of dollars and will support Iraq 's hard currency reserves. In such a case grain dealer it does not need to convert to Dnanarh dollars in order to pay the cost of importing Grain. This example also applies to the industrial sector, where sent through life to this sector at least the demand for manufactured goods, at least so students hard currency. For example, when the Oil Ministry to establish a project producing gas cylinders, this decision has Mnftin, namely the use of hands local labor and secondly to provide hard currency for the country. Imagine if the start of the stalled factories work which exceeds ten thousand factory prepared, Iraq will raise the weight of his shoulders for the care of the unemployed and the leakage of billions of dollars of goods imported from the ease with production inside Iraq. This also applies to which health - care sector , including the service sector. Imagine if the capacity of the Ministry of Health set up a specialized institute for heart disease or eyes, or bones. This move will create jobs for hundreds of Iraqis, shorten the time and cost to the patients and their families, and the survival of hard currency within the country.

I hope that the cooperation between the Central Bank of Iraq and the federal government continue to advance the country which is lagging far behind the rest of the neighboring and non - neighboring countries. As I believe that the Iraqi economy is heading towards progress and the most luxurious, as the latest reports indicate the high value of the dollar generally dinar because of the large demand for imported building materials. If this is the real reason for the high value of the dollar internally, the Iraqi economy out of the current economic recession will be definite, and there will be the finest of all economic sectors: quarries, industry, agriculture and services.


[You must be registered and logged in to see this link.]