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Central {stops} the collapse of the dinar and new amendments await the budget
Iraq 2023/02/09
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Baghdad: Raghad Daham
With a resounding decision, the Central Bank stopped the “dinar’s collapse” in the local markets, after the insane rise in exchange rates during the past weeks, which exceeded 170,000 dinars to 100 dollars.
The main stock exchange in Baghdad recorded a rapid collapse at the exchange rate of the dollar against the Iraqi dinar, as prices closed yesterday, Wednesday, at 144 thousand dinars for one hundred dollars, after the Council of Ministers approved the central proposal to amend the official exchange rate to 130 thousand dinars for the category of 100 dollars.
Specialists in the economic affairs assert that "this new adjustment in the exchange rate requires other adjustments in the budget figures, especially on the investment side," while others believe that this will raise the deficit in the public budget.
Economic expert Rashid Al-Saadi told Al-Sabah that "the budget law will witness adjustments to the price of a barrel of oil as well, and there will be a change in the figures for the investment and operational budget, which will reflect positively on the economy's recovery clearly."
Al-Saadi added, "There must be support for the private, agricultural and industrial sectors to benefit from it, away from being affected by exchange rates," noting that "there are a group of factors that affect the budget law and delay its dispatch."
He pointed out that "the most prominent of these factors is the change in the exchange rate, which will require reconsideration, the disputes with the Kurdistan region and the decisions of the Federal Court, as well as the repercussions of the US Federal Reserve's request to implement the SWIFT system."
And economist Nabil Al-Marsoumi says: "The recent measure taken by the government to improve the Iraqi dinar against the dollar is part of a strategy to confront inflation and then lower prices of imported goods, but it is considered a dangerous measure at the same time because there are direct costs that will be paid in return for improving the exchange rate of the national currency." ".
He continued, "One of the factors that will be reflected negatively is the reduction of government revenues denominated in Iraqi dinars, which means direct costs, which will be around 15 trillion dinars annually, added to the deficit, which will be financed by external borrowing, and the indebtedness will increase."
He added, "The decision would also affect foreign trade and exports, create a problem in conflicting financial positions, and affect the investment nature, just as it is difficult for prices to go down when they go up."
Al-Marsoumi also believes that "this measure was taken for reasons that are not economic but rather political, and it is consistent with the state's rentier method of gaining people's satisfaction."
In order to confront the exchange rate crisis, Central Bank Governor Ali Al-Alaq and his accompanying delegation met, during the past three days, in Turkey, Assistant US Treasury Secretary Brian Nelson, to discuss the repercussions of the dollar crisis and its repercussions on the economic conditions in the country.
The US Treasury Department welcomed the efforts of the Central Bank of Iraq on reforms to the banking sector, as well as its commitment to combating money laundering and terrorist financing.
For its part, the Parliamentary Finance Committee confirmed that the issue of changing the exchange rate of the dollar in the budget must be taken into account because Iraq sells oil in dollars and the expenditures are in Iraqi dinars, which will make a big difference in the budget.
Committee member Mustafa Al-Karawi told "Al-Sabah": "It is necessary for the government to take into account this point in the difference in exchange rates," pointing to "the need to take into account the issue of activating other sectors and non-oil imports."
And he added, “The budget was supposed to be sent within the next 10 days, but after the decision to change the exchange rate, you will need more time and a review of all investment or operational budgets, so there must be an assessment of the costs in the budget before it is sent, which indicates a delay.” its approval.”
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