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Economist: floating the currency will lead Iraq to 4 negatives at the same time

chouchou
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Economist: floating the currency will lead Iraq to 4 negatives at the same time Empty Economist: floating the currency will lead Iraq to 4 negatives at the same time

Post by chouchou on Tue 01 Dec 2020, 5:12 am

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The economic expert, Rasim al-Akidi, identified 4 negatives that would arise at the same time if the Iraqi government went to float the dollar.

Al-Aqidi said in an interview with (Baghdad Today), “The float of the dollar, or what is known as liberalizing the exchange rate, takes place through two methods, the first is pure or free, and the second is the controlled or controlled method, and in both cases the price of the dollar will rise against the Iraqi dinar and will lead to the withdrawal of a large amount of the monetary block.” in the markets”.

He added, “Withdrawing a large cash block is offset by 4 disadvantages at the same time, and the affected will be large segments, including the increase in prices in the markets in addition to the factories’ reluctance to produce because the value of profits will decrease in front of costs in addition to the absorption of per capita income and the increase in rental prices, so the interest will be limited by analogy. Other damages. ”

Al-Aqidi pointed out that “Iraq needs an economic rescue plan that starts from maximizing non-oil revenues, which are many, and keeping the influential parties away from them, because a large part of the financial resources does not go to the state treasury, and this is part of the causes of the current financial crisis in the country.”

Economists ’opinions differed on the” floating of the dinar “in front of the dollar exchange to face the deficit crisis that the financial budget suffers from.

One party believes that the measure will serve the Iraqi economy in the medium term by activating the sectors of industry and agriculture, but another party believes that it will eliminate the poor and middle classes.

The Iraqi Central Bank rejected the idea of “floating the dinar” during the next stage to increase government revenues and be able to pay employees’ salaries in the coming days, citing its fear of increasing prices and harming the vulnerable classes.

The estimated budget for 2020 suffers from a large deficit of 50 trillion dinars. Observers expected the deficit to rise with the oil market losing about 50% of its prices.

Central Bank Governor Ali Al-Alaq said, in a study published on the Central Bank’s website, that “the devaluation of the Iraqi currency stems from an attempt to reduce the budget deficit due to growing expenditures at unprecedented rates. Prices of imported materials and goods in light of the weakness of institutions and the general turmoil.

Al-Alaq added that “Iraq’s exports are limited to crude oil, and therefore the devaluation does not affect its exports, nor does a significant additional value materialize,” noting that “Iraq’s local industry is weak and unable to compensate for imports.” He revealed that the number of employees, retirees, and those covered by social care reach 6 million, and that they will be negatively affected by this measure.

The Governor of the Central Bank of Iraq confirmed that “the external debt of Iraq will rise after the devaluation of the currency, so the amount of 5.9 trillion dinars will become 7.1 trillion dinars, while the domestic debt remains unchanged.”

“The devaluation of the currency will undermine confidence in the national currency as a result of the absence of reforms and the general instability, and the demand for the dollar will increase, as well as the weak demand for deposits in local currency and conversion to foreign currency,” Al-Alaq added.

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