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Dr.. Haitham Hamid Mutlaq
After the noticeable decrease in the levels of the global pandemic, the world’s economies witnessed a recovery in activity and exchange movement, which was reflected in the situation of the Iraqi economy after the contraction reached more than 11% in 2020, which was confirmed by the World Bank in its last report in June that the Iraqi economy began to be active Gradual stagnation affected by the rise in global oil demand and high rates of oil revenue, and despite the optimistic expectations of the same report that the average growth rate of GDP would reach 5.5% for the next two years, the Iraqi economy is in fact facing a major challenge as it is a rentier economy in the first place as it depends on Its revenue from export 4.5 million barrels per day to finance 90% of public spending, which does not enable it to diversify the sources of total income from other sectors because private and public investment spending is extremely low, but almost non-existent in most items of the general budget in favor of operational spending, which prevents the activation of Operations that modify imbalances, restore overall balance and break the deadlock in the income cycle, especially in the service sector.
Therefore, the macroeconomic balance lacks the revitalization of the investment sector and its expansion and deepening in a way that compensates for the leakage in the income cycle in favor of economic growth.
And because of the fundamental distortions in the structure of the Iraqi economy that affect aggregate demand and the investment structure and the social and institutional restrictions that are affected by it, they have serious repercussions on the business sector and the investment environment and their impact on the levels of marginal efficiency of capital and their direct reflection on the preferences and decisions of institutions and individuals to initiate their financial and investment activities Parliament is called to expedite the formation of the government to approve the general budget and make necessary adjustments in the allocations of investment contracts for the public sector, create the appropriate legal and administrative environment for the development of the private sector, and start the structural and macro-financial treatments required to reduce the obstacles to attracting foreign direct investment necessary to demarcate the strategic framework infrastructure and to overcome the difficulties facing the prospects of investment and financing.
Therefore, five important points can be identified to break the deadlock in the investment sector, which are:
The first: represented in the financial abundance due to the high rates of Iraqi oil revenues, due to the rise in international prices, and the cancellation of production cuts (OPEC +), where the rates of exports of oil output witnessed a remarkable increase in the second half of 2021 to reach 3.244 million barrels, at an average price of $110 per barrel. ., which increased the surplus of public financial balances and the total external balances of Iraq, but we do not find this financial abundance any presence in the aspects of investment spending so that the stagnation in the flow of money and investment continues. Despite the approval of the recent food security law, what it included of subsidies and direct financial transfers did not support the movement of investment capital, but rather targeted a number of short-term social and economic activities, to reduce the effects of the lack of government formation and the delay in approving the budget, especially on a number of necessary operational activities that touch life citizen and achieve minimum food security.
The second: It was represented in the absence of an investment policy that supports the local product, as it is strange in spite of what the world is witnessing of a significant rise in global inflation rates resulting from the sharp rise in the levels of the commodity price index of food and the prices of energy sources globally and despite the increase in internal demand as a result of high levels Urban and population growth, if we do not find any economic orientation towards encouraging and developing national production from the food basket that has the potential to produce locally.
The third is concerned with the rentier economy and the fluctuating nature of world oil prices and their volatility. The financial abundance consisting of the rise in oil product revenues is considered by many economists as an exceptional leap to initiate structural treatments to build and develop the minimum important infrastructure to attract foreign capital.
Fourth: It relates to the internal and external financing structure for compensating operations for the severe shortage of capital formation necessary for growth. The financial sector faces internal and external indebtedness that poses a real challenge to fiscal and monetary policy makers towards coordinating the objectives of investment financing to diversify sources of income in projects in the agricultural and local industries sectors to raise the flexibility of paying installments The internal debt, estimated at 50 billion dollars, and the external debt, which decreased to 20 billion dollars, and thus reducing the weight of the public debt on the economy.
Fifth: It is possible to build an investment map to manage the economics of the oil sector towards reducing rentierism by following the policy of substituting imports in both oil derivatives and natural gas and deepening some strategic petrochemical industries for the service sector and infrastructure necessary to attract foreign investment and rebuild the structure of the oil industry, to ensure increased supply flexibility. For oil and gas.
The mentioned five points can contribute to achieving a macroeconomic balance for the movement of investment and money, in the light of building the formulation of a macroeconomic policy that reduces the rentier phenomenon.