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- WED, 01-25-2023, PM 4:53
- KARRAR AL-ASADI
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Today, Wednesday, former Iraqi President Adel Abdul-Mahdi identified two reasons for the dollar crisis in Iraq.
Abdul-Mahdi said in a post on Facebook entitled "The dollar is the tax of the rich on the poor," followed by the Noon news agency, "There are many discussions about the high price of the dollar, and we hastily mention two main reasons:
- It is a global phenomenon, and it is the main reason. The dollar witnessed a significant increase during (2022)." In front of the rest of the currencies, the percentages ranged to less than (10%) for Canada, Australia, China and Malaysia, for example, and (10%-20%) for the Eurozone, South Korea, the United Kingdom, Japan, etc., and about (30%) for Turkey, and (40%) for Egypt. It includes everyone, without exception.
The main reason is related to the recent global developments, and the progress of many economies, in the face of a gradual and structural decline in the US economy. The Fed resorted to raising the interest rate (7) times, in the highest cycle the dollar has witnessed in its history, from (0.75%-1%) in (March 2022) to (4.25%-4.50%) at the end of the year. With the aim of stopping the rise in prices and reducing inflation to (2%), according to Abdul-Mahdi.
The measure will bounce back on all countries. The dollar, despite its decline in the reserves of countries from (75%) in the year (2000) to (58.8%) at the end of 2022, still constitutes the first global currency par excellence. As trading takes place daily (I repeat daily) with approximately (6) trillion dollars in various transactions. The "Federal" is not only the US central bank, but also the leadership of US banks and the economy, and their leadership - since the forties of the twentieth century - of the global network of banks and economies. And the rise in the interest rate will lead to the withdrawal of more dollars, and an increase in the costs of loans, not only in America, but also globally. It generates a huge momentum towards the dollar and its deposit in reassuring sites for its owners. Domestic and external factors, secondary and fundamental, political, economic, speculative and psychological, short and long term, move to demand the dollar. This is what is witnessed - in varying proportions - by all countries, including Iraq, according to Abdul-Mahdi.
This policy also reflects the crisis of the global system, for which we are all paying the price. It is a policy that seeks, on the one hand, to reduce the pressure of rising prices on the American family for economic and electoral purposes, but on the other hand it is forced to provide the liquidity needed by the American economy, so it is forced to print more dollars without a parallel or supportive economic reality. What leads to indebtedness, which today amounts to (31.5) trillion dollars, and represents (135.2%) of the national product, and says: Is there more? The rise in the price of the dollar will encourage imports, weaken US exports, and exacerbate the competitiveness crisis of the US economy. The statistics show a decline in US exports to the global economy since 2000, from (12%) to (8%). Dealing with the urgent at the expense of the long term is something that many American economists and politicians themselves warn against.
- It is a local phenomenon, as Iraq depends mainly on oil for its resources, which is linked to the dollar. Also, because of the modularity of its economy, it mainly relies on importing goods and services ($79.4 billion in 2021, according to the World Trade Organization, representing 24.2% of the gross product), without mentioning undocumented transactions and transfers. For example, Iraqis came third in buying Turkish real estate, with (6241) properties in (2022). With a simple calculation, we are talking about about a billion dollars, most of its amounts will be transferred in crooked ways. And a pastor on that, according to Abdul-Mahdi.
Abdul-Mahdi continued, "Some say: The main reason for what is happening is to stop currency laundering and smuggling and the sanctions against Iran. We see this as a secondary factor in front of the global workers as a basis, and the local one as a rentier economy that depends on petrodollars and imports. Those factors (smuggling and sanctions) were present before Reducing the price of the dinar, and to refresh the memory, we point out that on (4/10/2003), which is the first day of the intervention of the Iraqi Central Bank - and the adoption of the principle of relative floating of the dinar, after the end of the official fixed exchange rate system - the bank sold the dollar for (1920) dinars / dollars For a market price of (2180) dinars / dollars.The central policy continued with the management of the late Al-Shabibi and his deputy, Professor Mazhar, so that its official price settled around (1180) dinars / dollars, and it continued with their successors until the end of 2020.During this period, inflation decreased to a single digit, after it was for a period of two digits (60% sometimes), and market prices stabilized to a large extent, with many gaps and negatives remaining, and the one responsible for them is not only monetary policy, but the entirety of the financial and economic policies.
And he stated, "The current crisis in its internal motives is linked to the unfortunate reduction decision at the end of (2020) with the justification for providing funds to cover some of the proposed (2021) budget deficit when the oil price was (50) dollars approximately. So the decision was taken and became effective, with external influences, and the presence of our royalists." More than the king himself, they exaggerate their fear and measures.Devaluation of the currency is an option that was discussed in the government of Dr. Al-Abadi and our government, and was rejected for its lack of realism and complications, despite the fact that the price of oil collapsed to less than (30) dollars / barrel on that day, and reached (17) dollars / barrel at times, and then fell. Central Bank reserves of about (40) billion dollars, and the sanctions on Iran were the most severe, in addition to the rest of the negative pressures.
He concluded by saying, "The current crisis - in addition to the main external factor - is a political crisis and an internal economic disease. It requires a radical treatment of the financial and economic policies, which are the two main pillars of monetary policy."
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