Observers are issuing serious warnings against resorting to adjusting the dollar exchange rate

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[size=52]Observers are issuing serious warnings against resorting to adjusting the dollar exchange rate[/size]

[size=45]Translated by: Hamed Ahmed[/size]
[size=45]Observers warned of the danger of reconsidering the dollar exchange rate, stressing that this greatly affects the investment environment.[/size]
[size=45]A report by Al-Monitor, translated by Al-Mada, stated that “Iraqi political figures have called on the new government of Prime Minister Muhammad Shia'a al-Sudani to increase the exchange rate of the Iraqi dinar against the dollar in the coming days by 5.5%, amid warnings from economists that such a move may put The economy is in a downward spiral.”[/size]
[size=45]The report added, "The previous government headed by Mustafa Al-Kadhimi launched an initiative for a financial and economic reform project called the (White Paper) project."[/size]
[size=45]He pointed out, "The aim of the project was its main objective to restore balance to the economy, reduce the size of the public sector, and invest financial resources in improving public services and developing productive sectors," noting that "the white paper stated that the previous exchange rate was harmful to the agricultural and industrial sectors."[/size]
[size=45]The report pointed out that, “On December 19, 2020, the Central Bank of Iraq reduced the value of the Iraqi dinar against the dollar, down from 1,182 dinars to 1,450 dinars per dollar.”[/size]
[size=45]He noted, "This measure was caused by the financial crisis that struck Iraq in the wake of the drop in oil prices in global markets to less than $30 a barrel."[/size]
[size=45]The report stated, "Iraq, and because of the increase in the Iraqi government's spending on securing the salaries of the public sector and retirees, resorted to borrowing from banks and to the Ministry of Finance's bonds, which amounted to more than 30 trillion dinars ($20.6 billion)." And between, “The Central Bank had issued a statement at the time saying that it was the structural distortions in the Iraqi economy that impoverished public finances and restricted the reform capacity sought by the government and the Ministry of Finance, due to the leadership of politics in the economy and the primacy of political thinking and priorities of politicians over economic thought and development priorities.” and its stability.” And the report added, “After reviewing the exchange rate, a strong current emerged led by a number of politicians, most notably Al-Sudani, who called for a return to the previous exchange rate,” adding that “Al-Sudani insisted at the time that the devaluation of the dinar might stimulate the launch of a hungry revolution.” And he finds, “The new value of the dollar exchange rate has benefited a number of local industrial sectors that were able to compete with imported goods and achieve financial self-sufficiency.” The report talked about “a decrease in imports from $21.5 billion in 2019 to $15.6 billion in 2021.”[/size]
[size=45]He stated, "Foreign investors rushed to invest in private and mixed companies, with more than $35 million in 2021." And the report continues, “Iraq’s exports of other goods, except for crude oil, increased by more than 400 million dollars during the same year, to reach 4.6 billion dollars, after it was an average of 3.8 billion dollars in the year 2020. In 2022, this rise in the graph has receded slightly.” In front of expectations of the emergence of a new variant of the Corona virus. And he warned, that “Al-Sudani, upon assuming power, retracted his opinion, and now he confirms that the Central Bank of Iraq, which is considered an independent body, is the authority authorized to decide on the issue of the exchange value and that the government does not interfere in this matter.”[/size]
[size=45]And the report went on, “On October 31, the Prime Minister met with the Governor of the Central Bank, Mustafa Ghaleb, and the two discussed financial policy developments.”[/size]
[size=45]And the report goes on, “Since Al-Sudani assumed his position, the market is witnessing a kind of stagnation,” noting that “businessmen and citizens are concerned that the devaluation of the dinar has prevented them from buying assets for fear of future losses in the event of any change in the exchange rate.” And he stressed, "The Al-Kazemi government was not able to treat the negative consequences of the devaluation of the currency, especially those that affected the segment of the poor."[/size]
[size=45]He pointed out, "The government allocated more than 6 billion dollars to support the affected groups, but Parliament reduced this support to less than one billion dollars only."[/size]
[size=45]The report noted that “the central bank governor confirmed that the devaluation of the dinar has added 23.5 trillion dinars ($16.2 billion) to the general budget.”[/size]
[size=45]And he added, “The Central Bank warned that reconsidering the exchange rate may create instability in the currency market, threaten investments, lead to economic stagnation, weaken confidence in fiscal policy and the value of the local currency, increase speculations in foreign currencies, and encourage hoarding of foreign currencies as a safe haven.”[/size]
[size=45]The report stated, “The Central Bank indicated that the previous exchange rate had given a competitive advantage to imported goods in front of the local, and this prevented any progress for local products in the market.”[/size]
[size=45]Economic researcher Muhammad Dagher said, “Tackling one mistake with another mistake could certainly harm the national currency,” adding that “the economy will collapse, and all goods will be bought and sold in dollars only.”[/size]
[size=45]Dagher added, "The increase in the value of the dinar will also lead to problems with regard to contracts between the government and the private sector, as well as between companies and owners of retail and retail stores." Dagher pointed out that "these problems cannot be solved easily," and believed that "the instability of the exchange rate will also affect the investment environment."[/size]
[size=45]Dagher urged, "The Iraqi government to reduce public sector salary rates, which amount to more than 63 trillion Iraqi dinars (43 billion dollars)," and called for "allocating what is saved from this reduction to achieve economic development." In addition, the government financial advisor, Mazhar Muhammad Salih, spoke of the option of “gradually increasing the value of the dinar.”[/size]
[size=45]Saleh said, "Any future adjustment to the dinar exchange rate must be implemented gradually and over a period of time that takes more than a year, in order to provide an appropriate atmosphere for financial adjustment." And the report went on, that “returning the value of the dinar to its previous exchange rate against the dollar is impossible, because that would dry up financial reserves and increase the burden of public financing by more than 16 billion dollars.”[/size]
[size=45]About: Al-Monitor news website[/size]
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