Iraqi Dinar to Devalue?

by **Rocky** Fri 17 Oct 2014, 2:51 pm

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Post n°1

Iraqi Dinar to Devalue?

by Rocky Fri 17 Oct 2014, 2:51 pm

Iraqi Dinar to Devalue?

One possible consequence of the budgetary crisis facing Iraq is a fall in the value of the Iraqi dinar.
As a result of the massive burden of public sector wages and salaries, in addition to subsidies for food and energy, the country faces major expenses in looking after its nearly 2 million internally displaced persons (IDPs).
It must also find the cash to build up its armed forces to fight the continuing threat from the Islamic State.
The Financial Times reports that economists are concerned about 2015, when Iraq will “almost certainly” run a deficit. Baghdad could borrow against its reserves but at the risk increasing inflation and weakening its currency.
According to Luay Khateeb, founder of the Iraq Energy Institute and a fellow at the Brookings Doha Centre, “the moment they do that the Iraqi dinar will devalue.”
(Source: Financial Times)
(Dinar image via Shutterstock)

Source: Iraq-BusinessNews.com.

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by **Rocky** Fri 17 Oct 2014, 2:52 pm

Rocky

Rocky: Admin Assist; Posts : 269035
Join date : 2012-12-21

Post n°2

Re: Iraqi Dinar to Devalue?

by Rocky Fri 17 Oct 2014, 2:52 pm

Time to Bite the Bullet

Friday, 17 October, 2014

If Iraq didn’t face enough challenges already, the slump in the price of crude oil is another unwelcome development for the new Abadi government to deal with.
At a current price of $81.78, the benchmark West Texas Intermediate (WTI) crude is down nearly 25 percent from its June high, driven in part by a strong US dollar and weak Chinese demand.
This comes at a time when Iraq needs all the funds it can get to bolster its defences and eventually eliminate the existential threat from the Islamic State.
As difficult as it will be, Iraq’s parliament must finally agree a budget for this year based on the unpalatable reality that it is now facing.
It must also bite the bullet and accept that in order to fund the war for its survival, public sector cuts will be needed in 2015, and that it may have to run a budget deficit.
A devaluation of the Iraqi dinar is one possible consequence of a budget deficit, but this would also help the balance of payments and leave Iraq in a more competitive position.
Ignoring the budget problem won’t make it go away.

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