Iraqi economy .. Between the crisis and solutions

Iraqi economy .. Between the crisis and solutions

Dr.. Abdul Hadi slave

about the difficult situation taking place in the economy of Iraq now because of lower oil prices could say that the problem lies mainly in the poor economic resources management during the previous period, starting from the lack of a clear economic vision and the subsequent failure of economic policy - efficient fee; financial and monetary as well as a lack of coordination between them, or at the low level of efficiency of the overall implementation and the accompanying poor efficiency and corruption of most state institutions, bringing the national economy to what came to him from the deepening of structural imbalances and consolidation Rieith, a large waste of huge funds for the budgets in the years following the year 2003, which were prepared to become the doors to spend only instead of being an important tool of fiscal policy aimed at economic reform, and the case is not the best for tax policy, investment policy or the wage policy or monetary policy, to unfold imbalances in front of lower oil prices , a problem which is the source of funding for President budget, combined with the fragility of other economic sectors , especially the industrial and agricultural sector and diminished its contribution to the gross domestic product and growing military expenditures to meet the regulations , "Daash" terrorist attacks, which forced the government to prepare the current year budget by a deficit of up to nearly 12%.

With the large number of solutions proposed to confront the crisis and assuming adoption of the decision makers , they remain centered within the framework of the corrective actions do not live up to what might be called "economic policy", it addresses the problems are Mojtzi without taking into account the interrelationships between the tools used to bring about reform in the aforementioned policies that should deal with them in real time, both with the reality of the situation or the proposals put forward, to bring about reforms in any of them. The question remains on the table about the capacity of state institutions to implement them, whether it is pressing the operating expenses or maximizing budget revenues and diversify its sources, as well as most of those solutions on their importance is the reform of the programs require a period may last for years. Increased economic sectors contributions of non - oil Gross Domestic Product GDP is not during the period that it could be contributing to address the financial crisis that we are living in real time, as well as the command in the address unemployment phenomenon which disguised the problem and sagging of the state administration or the privatization of public sector companies or tax reform and development of the banking sector and the stock market and the business environment. Also, some of those reforms requiring legislative cover, all of which requires efficient institutions to implement it at a time when we are experiencing from the inefficiency of the institutions and the spread of corruption in most of the joints, which makes them economic reform programs require a radical change in the legislative and institutional system and what it requires from a period of time relatively long.

the reform programs referred to above, which are aimed at structural reform of the Iraqi economy can not be reduced corrective action separate from each other, but also require the preparation of in- depth studies of the nature of the problems suffered by the Iraqi economy, and formulate solutions in light of the clear economic vision policies take into account the characteristics of Iraqi economy , economic, social and political , which passes by the circumstances, and mutual influence between economic variables used as instruments of those policies and find solutions to the negative effects of the applied potential. This brings us this understanding to the reservation to the Convention on Stand -By (SBA) , which was approved by the Iraqi government with the International Monetary Fund, and based in essence on the structural stabilization and structural adjustment imposed by the IMF and the World Bank as conditions for lending policies, a prescription is ready and prepared for all developing countries , do not take into account the different characteristics of these economies and economic and social conditions and the negative effects arising from the application and that most countries that have undergone such policies imposed suffered.

It should be noted here that those known prepared by two international organizations in 1982 after Mexico and other developing countries currently incapable recipe short of burdens accumulated by debt, that is, they came to rescue creditors Western banks from bankruptcy by improving the balance of payments of the countries of the city. According to studies prepared for the evaluation of those policies in the countries that have undergone them, some of them prepared by the International Monetary Fund experts, suggests that the indicators showed a slight improvement in just the external accounts and were temporary periods, and positive results , remember the economic variables of the Interior , but were negative in most of the show those countries; where the rise in inflation, unemployment and low investment rates and increasing problem of poverty and a widening of income inequality between the poor and rich categories gap.

the external debt of developing countries full of setbacks caused by foreign loans and the confiscation of social balance and political stability of these countries scored. One study suggests that developing countries pay $ 13 to creditors for every dollar borrowed under the banner of helping them to overcome the crises and achieve economic reform Mzazm, but more so that the accumulation of debt used as a means of political pressure and the confiscation of the independence of the decision - economic indebted developing countries.

So I think it is appropriate to Find more reassuring and realistic processors to cope with the current financial crisis in real time, within the framework of structural reform programs that have been referred to above, away from foreign loans from commercial banks that will be the rates are too high benefits in circumstances such as those experienced by the Iraqi economy, and what this means to the future burdens can not speculate on the ability to carry around, or conditional international organizations loans.

in light of the above, the best option in real time is a reconsideration of the price of the dinar exchange rate and reduced the real value and solutions to address or mitigate the negative implications of that in the short term , especially citizens slice of low - income people poor and slides, and the requirements of social safety, taking into consideration the preservation of the current exchange rate and borders that can be which bear those costs, as well as re - examine auction currency , which represents the current of its machines one of the most important aspects of financial surpluses leak, and the rationalization of government spending and improve efficiency. And in this regard we would like to point out the following: -

1 - was supposed to revisit the price of the dinar exchange in conjunction with the significant deterioration in oil prices. Though delay to reconsider the exchange rate puts those in charge of monetary policy in a more critical with low reserves of the Central Bank 's foreign currency, and the consequent weak ability to manipulate the exchange rate at levels that are approved later.

2 - The revision of the price of the currency exchange local located within known from the IMF and World Bank policies in the case of prescription borrowing according to their conditions and avoided monetary authorities now impose upon later. Failure to include it under the terms of an agreement prepping credit starting comes to recognizing that such a decision would obviate the need to borrow from them.

3 - There is no doubt that the stability of the exchange rate is one of the objectives of monetary policy in all economic systems , especially in developing countries, but the problem afflicting rentier economies (one - sided) and the Iraqi economy is to try to maintain the exchange rate based on the financial surpluses generated from the export of crude oil, and the consequent severance of the relationship between the structural reform required between the target and the exchange rate. And the depletion of the financial surpluses without a production base provides built -in mechanism for growth with the possibilities of the decline of those surpluses being subject to external variables - building.

4 - The daily auction conducted by the Iraqi bank to maintain the exchange overstated its dinar rate, led to the leakage of a significant proportion of the financial surpluses through the period of high oil prices abroad without any noteworthy structural reform. The problem is not in the sale of foreign currencies , which are supported format by the central bank to maintain the stability of exchange Currency issued by price , but in excessive by the value of the Iraqi dinar which targets the central bank to maintain it, which means relatively decrease the value of the dollar within the Iraqi economy, compared its value abroad, and this leads to leaks to the outside in different ways , or sold in the parallel local market to acquire a difference price.

5 - that monetary policy currently approved may be controlled relatively imported inflation, but the problem in the inflation caused by the structural imbalance Baenkva industry, agriculture and service activities as which led to a lack of local content , the overall presentation is accompanied by a high aggregate demand level, resulting from the high level of public spending and operational.

6 - maintaining the current exchange rate through the auction currency is now commonly accepted among employees segment, as long as they lead to maintain the purchasing power of their income , as well as longer acceptable to importers sector because it offers them the best opportunity to promote their goods, it is also desirable government to achieve social and political goals in the short term, but that the real production sector negatively affected by this policy, and will remain unable to compete with imported goods producers enjoyed working conditions better, and what this means from the worsening problem of dependence on oil revenues are subject to external variables and the continuing state of the economy of aid; the distribution of revenues being is not induce holders to economic resources, to be used in the real areas of productivity, and it will lead to the weakness of the community to contribute to the economic development and growing problem unemployment and rising inflation rates, and the consequent negative consequences for all groups that it tells that to maintain the price of oil will be to their advantage, as well as the government , which they must spend the largest amount of foreign currency that suffer from scarcity to get the same amount of Iraqi dinar within the framework of the budget public.

7 - that the foundation in raising the value of the dinar is the surplus in the balance of payments, driven by higher oil prices and increased volumes produced in previous years without taking into consideration that the exclusion of the oil sector will show huge deficit in the balance of trade and payments.

Finally , we can say briefly that the difficulties facing the Iraqi economy because of poor economic resources management during the past period can be overcome by adopting a clear economic philosophy, draw economic efficient policies, centered goals on activating the role of the private sector and encourage domestic and foreign investment in it, through the provision of legislative and institutional suitable business environment, and the development of the banking sector to perform real role in the desired development, as well as the development of the insurance sector and the stock market, and provide protection for infant industries and restructuring of public companies and managed in accordance with the criterion of economic efficiency, to be gradually and selectively , taking into account the social costs involved, and support the agricultural sector and to encourage exports and restrict imports consumer, especially the unnecessary ones, and focus on satisfying the basic needs of the citizens of housing, health and education. And it is relying on economic resources and self-optimal use of them, while avoiding foreign loans as much as possible, taking into account the social and political circumstances in our country. Given the length of time required for the preparation of these policies, as well as application and structural reforms desired, the perfect choice for the face of the current financial crisis simultaneously be reconsidered at the price of the dinar to gradually close its true value and to reconsider the currency auction mechanisms, to avoid cases of foreign currencies to leak out of the national economy legitimate ways, and other illegal accompanied by a package of measures to develop the management of the public domain, and the rationalization of government spending and improve its efficiency , taking into account the circumstances of citizens with limited income and slides covered by the social care system, that this is not a cause for direct delayed structural reforms. it

remains to say that participation extensive community development is an essential anchor for success, so I think it is important for transparency in the diagnosis of the economic problems, discuss solutions required to meet them on a large scale through various media, as well as the involvement of the scientific research centers in the Iraqi universities and non - governmental organizations in the study and come up with recommendations occasion in question.

* Vice - President of the Organization of our economy for sustainable development