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Economic 2024/07/16
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Most countries in the world have been suffering from successive economic crises since 2020 until the present time. They are the most severe and most harmful to the economies of countries than the previous crises that swept the world previously, which began with the closure crisis due to the Corona pandemic and the (stagflation) crisis due to food shortages and rising prices and the Russian-Ukrainian war and economic conflicts between America and China, the latest of which is the Zionist war on Gaza and the occupied Palestinian territories and expectations of a new aggression on Lebanon and the struggle to control oil prices and the attempts of the affected countries to find plans and deals to control this rise that occurred during the past years.
From our follow-up, monitoring and analysis of the global economic movement, we notice that inflation rates have risen in most countries of the world and exceeded one rank, while economic growth rates have declined, especially regional countries, most countries with major economies, and even emerging countries have tried to form new economic axes, poles and blocs and conclude agreements between them and other countries for trade and financial dealings outside the Group of Seven, such as the BRICS bloc. Central banks in most countries have taken difficult decisions in order to control the prices of their local currencies from declining and to maintain their foreign exchange reserves at safe rates, thus limiting stagflation and maintaining relatively stable prices and balanced economic growth with the current prevailing economic conditions by raising interest rates at rates that are consistent with their economic situation.
Therefore, as it relates to the economic situation of Iraq, and despite the fact that the reports of the World Bank and the International Monetary Fund to evaluate the Iraqi economy for the current year indicate that the inflation rate did not exceed 3 percent, and according to what was announced by the Central Bank, it is better than the inflation rates in regional and neighboring countries, and that the growth rate in the gross domestic product for this year is expected to be 6 percent, Iraq still maintains a good foreign exchange reserve to cover its imports and cover its local currency in circulation. However, its economy is one-sided and depends on oil revenues, and its financial and banking sector is weak and suffers from sanctions and restrictions on the use of the US dollar in foreign banking transactions, and its credit rating is still within limits classified internationally as unstable, and in the absence of
New policy measures: The public finance deficit is expected to reach 7.6 percent in 2024 and widen further thereafter with the expected decline in oil prices in the medium term. As a result, public debt will almost double from 44 percent in 2023 to 86 percent by 2029. The real sector also suffers from many problems that prevent it from achieving the revenues needed to reduce the share of oil revenues in public budgets. This means that the deficit in the balance of payments and the deficit in the trade balance are prevalent, despite the fact that the government, finance, and the central bank are making great efforts to rebuild a solid and sound banking sector, because without a developed banking sector, a sound national economy cannot be built. The inherited and complex problem is the weak compliance of the Iraqi financial and banking sector with international standards, and the foreign trade policy is unclear despite the measures taken by the central bank to regulate trade financing and the approval of some solid foreign banks to correspond. However, the presence of informal border crossings, illegal inter-trade, and speculators in the foreign exchange market have led to fluctuations in exchange rates from time to time.
In order for the Central Bank to play its role in reducing inflation, controlling the general price level, maintaining the dinar exchange rate within its targeted limits, controlling the interest rate, maintaining its foreign exchange reserves within the required rates, and controlling the money supply, and certainly all of these aspects are among the objectives of the Central Bank and the concerns of its Board of Directors during the next phase and in order to avoid the damage that currently threatens the global economy. This requires taking bold steps as follows:
First - Reviewing the structure and presentation of the general budget and determining the contribution rates of the agricultural, industrial, and tourism sectors and non-oil revenues at no less than 30 percent during the coming years until 2030. Total expenditures must not exceed total revenues in any case and the deficit must be zero.
Second - Adopting agricultural, industrial and commercial policies that are consistent with the trend to support, assist, motivate and encourage the private sector to contribute to sustainable development projects and transition to market leadership in 2030.
Third - Re-establishing a new strategy for the Central Bank for the years (2027-2030) in the field of monetary policy applications, enhancing financial inclusion, controlling exchange rate stability, enhancing regularity in international standards, comprehensive application of digital transformation in the banking sector, and transforming Iraqi government banks into mixed joint-stock companies in accordance with government procedures in this regard and internationally classified.
They are managed in accordance with modern banking technologies, lifting sanctions on private banks, developing their work in accordance with international standards, not allowing the weak ones to remain operating within the banking market, and adopting the principle of competition, whichever is better and serves sustainable development.
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