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Established in 2006 as a Community of Reality

Welcome to the Neno's Place!

Neno's Place Established in 2006 as a Community of Reality


Neno

I can be reached by phone or text 8am-7pm cst 972-768-9772 or, once joining the board I can be reached by a (PM) Private Message.

Established in 2006 as a Community of Reality

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    The tripartite budget deficit will exceed 300 trillion dinars

    Rocky
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    The tripartite budget deficit will exceed 300 trillion dinars Empty The tripartite budget deficit will exceed 300 trillion dinars

    Post by Rocky Thu 22 Jun 2023, 4:20 am

    The tripartite budget deficit will exceed 300 trillion dinars

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    Evan Shaker Al Dobardani
     The Central Bank of Iraq, due to the tripartite budget, will face a challenge and a very difficult task, which is to provide the monetary mass of the Iraqi dinar in order to meet the operational and investment expenses of the tripartite budget, which was recently approved, with a total value of 200 trillion dinars.
     
    And where the dilemma of the budget that was approved for three years lies in its allocations, and where the lion’s share was allocated, as usual, to operating expenses at the expense of investment expenses, most of which were ink on paper two decades ago, and where operating expenses burdened the Iraqi economy and twisted its arm, specifically in the last ten years that passed.
     
    Economic recession :
     
    The other dilemma lies in the budget, which is pricing oil at $70 per barrel, and this is a very high and incorrect pricing, knowing that oil prices are difficult to predict for a period of three years because of its influence on many factors, most notably geopolitical factors, and it was assumed that oil would be priced at $50. per barrel in the budget, because according to the current data, as the global economy is on the verge of an economic recession, led by the United States of America, China, members of the European Union, Britain, and the rest of the developed countries, some of which have officially entered into a spiral of economic recession, and where the recession will be more severe in the second half of this year, due to the tightening monetary policy adopted by most central banks of developed countries, led by the United States of America, where the interest rate of the US Federal Reserve Bank reached 5.25%, in order to fight inflation and reduce it to the target levels of 2%, which is considered harmful to the US economy, and at the last meeting of the US Federal Reserve temporarily stopped raising interest rates in order for the US economy not to enter into a severe recession, and also the European Central Bank continues to Its tightening monetary policy, as the interest rate of the European Central Bank reached 4%, and the repercussions of this tightening monetary policy are serious and painful for the global economy, and the banking sector was one of the victims of this tightening monetary policy, as it led to the bankruptcy of several banks in the United States of America and in the European region as well.
     
    As this tightening monetary policy of the US Federal Reserve led to a decrease in the growth levels of the US economy's domestic product, and this indicates the beginning of the economic recession of the United States of America, and therefore it will have repercussions for the decline in oil demand in the second half of this year, and this will negatively affect the economy. Oil prices, on the other hand, and similar to the United States of America, Chinese economic data recently came in a negative way, and this suggests to us that the Chinese economy is also suffering up to this moment, and also the industrial sector has not recovered as required, and China is the largest importer of oil in the world, and therefore it will be Its repercussions are negative on oil prices in the coming period, as well as the German economy, which is the strongest economy in Europe, as its economy officially entered a state of recession, and if it is correct to say what is called a technical contraction after recording a decline in GDP for the second quarter in a row, under the shadow of the policyMonetary tightening by the European Central Bank, which reached an interest rate of 4%, and therefore, in light of these data, I expect that oil prices will decline in the second half of this year, unless there are geopolitical factors that may change the general direction of oil prices and the opposite of what is expected.
     
    J.P. Morgan Bank report:
     
    Recently, a report was issued by J.P. Morgan Bank that there will be a strong sale of global stocks in the coming period, and the majority of selling will be by sovereign wealth funds and pension funds, as it is expected that they will sell part of their stock assets and go to Bonds, and this will lead to a strong selling wave in the stock market, specifically on Wall Street, and this will have negative repercussions on the economies of developed countries and will lead to an exacerbation of the economic recession crisis in the coming period, and this suggests to us that markets are dominated by a state of uncertainty and anxiety, and this will force owners of large capital By escaping from stocks and heading towards bonds for fear of exacerbating the economic recession crisis, which will lead to weak demand for oil, which will negatively affect oil prices in the coming period.
     
    OPEC Plus:
     
    And because we are on the verge of an economic recession and there is weakness in the demand for oil, and fears of a drop in oil prices, the OPEC Plus coalition forced to take preventive measures in order to maintain oil prices, as the OPEC Plus alliance reduced its production twice within the past 3 months.
     
    And had it not been for the precautionary moves of OPEC Plus, we would have seen oil prices approaching levels of 50 US dollars or less, as the first reduction raised the value of prices to levels above 86 US dollars, but it was unable to maintain this level, and oil prices fell back to levels above 70 US dollars due to fears The upcoming economic recession.
     
    It is likely that the honeymoon will not last long among the members of OPEC Plus, and that we will witness disagreements in the coming period from within the OPEC Plus alliance, and if this happens, it will have a negative impact on oil prices, knowing that the history of OPEC is full of disputes between its members, the most prominent of which was the Russian-Saudi dispute in 2022
     
    Even if the OPEC Plus coalition reduces production a third time or more, in order to maintain oil prices, this will be at the expense of reducing Iraq’s share of production, and in both cases, if oil prices decrease or the amount of exports decreases, it will generate a larger deficit in the budget because the amount approved in The budget is 3.5 million barrels of oil per day and is priced at $70 per barrel.
      
    And in the event that oil prices fall, it will have serious repercussions on the Iraqi economy because it is a rentier economy par excellence, and at that time Iraq will enter into a financial crisis that has no negative consequences, because it depends on oil by 90%, and at that time the Iraqi government will be forced to repeat the borrowing scenario in order to cover operating expenses, as happened in In 2021
     
    , but this time the Iraqi economy will slide into a very dangerous slope and will not be spared from this expected crisis, as it happened in the years 2020-2021
    Also, the Iraqi government will resort to borrowing through the Central Bank of Iraq and issuing bonds, that is, issuing a monetary block, that is, the increase in the rate of inflation and the weakening of the value of the Iraqi dinar, that is, we will see the value of the Iraqi dinar falling coinciding with the high rate of inflation, and we will also see a jump in the high rate of borrowing, and also the failure to implement a large part From the budget, specifically in investment expenditures, and it can be ink on paper.
     
    The real and severe deficit will be in the beginning of 2024 and it will be more severe than in 2023 because the signs of economic recession will appear more deeply in the global economy, and because Iraq sold oil in the first half of this year for more than $70 per barrel.
     
     
    * Researcher in Iraqi and international economic affairs / Evan Shaker Al-Dobardani


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