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The exchange rate and a barrel of oil restrict budget legislation
The first 2023/02/06
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Hoda Al-Azzawi
Politicians, observers, and experts in economic and financial affairs have warned of the possibility of a rise in the exchange rate of the dollar and the consequent rise in the markets in the event of legislation and approval of the state budget 2023 without precedent by real procedures and treatments that contribute to the stability of the dollar exchange rate, indicating that this factor and calculating the price of a barrel of oil They are delaying so far the enactment of the upcoming budget law.
And the rapporteur of the Parliamentary Finance Committee for the fourth session, Dr. Ahmed Al-Saffar, suggested in an interview with "Al-Sabah" that the "budget" would be delayed even if it was sent by the Council of Ministers to the House of Representatives, "because it needs a period of time due to its problems."
He explained, "According to information, Prime Minister Muhammad Shia' al-Sudani - as a good first step - carried out a simple restructuring of the budget in line with his government approach, especially with regard to finding solutions to address poverty, unemployment, inflation, and others."
And he noted that "the problem that will face the budget (the price of a barrel of oil) on which the budget is prepared and built, and in light of the fluctuation of oil prices between high and low, the legislator faces a problem on which price the budget will depend on, in addition to the problem of the exchange rate of the dollar, and this is a big problem, especially There is talk that the government will change the exchange rate approved in the budget.
Al-Saffar warned that if the budget is approved and money is pumped into the market through public expenditures while maintaining the same ineffective measures, this “will amplify and exacerbate the problem of the exchange rate, given that an increase in the amount of cash in circulation leads to greater demand.” on the dollar, which in turn leads to further increases if the necessary measures are not taken by supplying the dollar.
And regarding the recent measures taken by the Central Bank of Iraq after the special meeting with the deputy head of the US Treasury in Istanbul, Al-Saffar saw that it was a "good" preliminary package of measures, calling for appending it to a "firm and swift" package of measures, and he also called for focusing on the "smuggling issue". In addition to the government's intervention in monitoring the market and the government's entry as an exhibitor and seller of commodities, especially basic ones, at cost, he added, "On the other hand, the central bank is facing a great challenge and it must be strict and unified in the banking sector, especially with some private banks and speculators," whom he accused of causing In confusing the market and thwarting every attempt by the central bank.
For his part, the expert on economic affairs, Prof. Dr. Jaafar Baqir Alloush, said in an interview with "Al-Sabah": "The delay in approving the budget is related to the crisis of the rise in the exchange rate of the dollar in the parallel market," explaining that "the relationship lies in the extent to which expenditures are compatible with the price gap." Exchange and an attempt to bridge it by increasing expenditures directed to support foreign trade, and this was announced in the official speech of the state.
He noted that the exchange rate is not linked to the budget, "on the contrary, the budget is affected by the exchange rate of the dollar." With regard to the volume of estimated expenditures in the budget (200 trillion dinars) compared to the exchange rate, Alloush explained that it is "a price equation that helps increase the mass Dinar cash directed to restrict aggregate demand (of this size) with limited dollar revenues, and thus will contribute to raising the value of the dollar against the Iraqi dinar.
The expert called for finding a simultaneous treatment of the crisis through three real starting points: the first is controlling liquidity levels and not inflating them, and the second is finding a new mechanism that governs the relationship between the two currencies (the dinar and the dollar) outside the rules of the old currency window, and the third is controlling foreign trade and directing it towards the necessary commodities. The average, they are: directing demand towards the interior, closing the real outlets for smuggling, and creating a sound economic environment for national production, and there is nothing wrong with returning to activating industrialization strategies to replace imports.
Alloush said, "The temporary patches that help expand the base of dollar provision create fragility in the exchange market, and the crisis may exacerbate at any time. Monetary and financial policies must be reformulated and the current method of financial hegemony, which has proven incapable of addressing emergency crises, must be abandoned."
As for the economist, Nabil Al-Marsoumi, he explained in an interview with “Al-Sabah” that “the launch of the budget will lead to spending in both its consumption and investment parts, which will lead to spending additional funds, which generates inflation in money and government spending, and this leads to an increase in imports funded by dollars, and the pressure increases.” On the hard currency," noting that "if the exchange market in Iraq does not stabilize, it is possible that approving the budget will lead to a rise in the exchange rate at higher levels than it is now."
Edited by: Muhammad Al-Ansari
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