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The problem of price distortions in the Iraqi economy
d. Successful Obeidi
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The problem of price distortions in the Iraqi economy
d. Successful Obeidi
In a surprise statement Iraqi Prime Minister Haider al-Abadi recently called for Iraqi officials to erect electricity budgets of any counters to measure the energy consumption in homes and palaces. It is likely that the call went like its predecessors unheeded, but revealed that the political class has a dual responsibility for the electricity crisis: first through mismanagement and corruption in this vital area and secondly through Tbazirhm personally and their families and their entourage in power consumption. It gets something for free, it does not have the incentive to use it rationally and tends to extravagance. The higher the price of a product or service, the consumer is getting keen to rationalize consumption.
But this economic axiom does not apply to officials alone, but also on the Iraqis generally apply. They express the real problem facing the Iraqi economy and play an important role in the phenomenon of squandering public funds and economic resources and in the rampant corruption in the rumor behavior inconsistent with rational economic logic. Any economy in the world can not work efficiently without the obligation of themechanism of the price and without the adoption rates reflect the true cost of the commodity. If we were tomove away from this principle of social or economic reasons, it must be done in a limited scope and after careful consideration and accurate balancing of the potential positive and negative effects.
So support prices does not become an invitation to squander!
After the overthrow of the dictatorial regime in the spring of 2003, gasoline prices in Iraq is the lowest in theworld and less than 1 US cents per liter. This form of support and then the main factor for the worsening fuel crisis and flourishing smuggling operations to neighboring countries. Not be eliminated this phenomenon only after significant lift gradual fuel price decisions in order to become comparable to the level in neighboring countries and global markets. At the beginning of 2016 and contrary to the general situation in Iraq motorists suddenly it became virtually the only group that benefited from the collapse of crude oil prices, when thegovernment decided on a reduction in gasoline prices improved after negating the need to support theimported fuel from abroad. And pay the positive results of the policy of reform fuel prices to reflect circulate to other important sectors are still suffering from the problem of deformation of the price mechanism. The same applies to the electricity sector in particular. Here the picture looks blurry (and possibly dark) as a result of the support Mzodj enjoy electricity. On the one hand you get power plants for oil and gas at discounted prices. It is true that the world price decline for these articles helped to ease the financial burden of this support, but the root of the problem is still standing. On the other hand , the Ministry of Electricity and sells electricity pricing less than the true cost, forcing the state to step in to cover the difference. As a result, theState bears the heavy financial burden hard to bear in the long term. According to IMF estimates it isestimated to support the electricity tariff in 2015 by about 10 trillion Iraqi dinars , or the equivalent of $ 8.5 billion. It is a huge amount by any standards. In light of the financial crisis, this great item comes at theexpense of other important items of public expenditure and contribute to the worsening of the deficit problem.However , the financial burden is not the most serious negative effects to support electricity. This imbalance isalso behind the failure to resolve the electricity crisis despite the tens of billions spent for this purpose. It is true that the lack of electricity a variety of reasons, but the imbalance in the tariff does not encourage consumers to save energy, but is an explicit call for squandering without the expense. It is clear that millions of Iraqis meet this call in their homes and workplaces and in places their fun where electrical appliances run absurd manner as soon operate the national grid. One could even say that without reform of the electricity tariff will remain the goal of processing power for 24 hours just a dream unattainable no matter what thegovernment has made efforts. The government has tried in 2015 modified the pricing of electricity but had to back down under popular and political and religious pressure. It is natural to take into account any reform in the direction of a class of consumers with limited income and that the goal is that the support is limited to only those who deserve it and it remains a source of waste of public money and corruption. Of course, correct pricing will not do much if the Ministry of Electricity did not ensure that consumers, regardless of whether they are officials or ordinary citizens, to pay the bills for energy consumption first hand, and to take firm action against the squatters on the network.
In an attempt to ease public anger as a result of power outages the government of former Prime Minister Nuri al - Maliki has decided to provide the owners of private generators with fuel at discounted rates in thehope that abide by the pricing reasonable for citizens. However, such a decision is thoughtful become asource of corruption and illicit enrichment. Some generators owners do not need to think long to discover that the sale of fuel at market prices will bring them profits without a problem. This is another example of thefutility of trying to solve economic problems administrative procedures is well thought out.
Embodied manifestations of extravagance and waste , most clearly in the ration card. After a lapse of more than 13 years since the overthrow of Saddam Hussein , the state and society and elites still thickened this outdated system inherited from the former regime even though the justification for its existence has been completely negating. State allocates annually more than two billion dollars to buy items of the ration card. If we add to it , consisting of employees, agents Army distribution network costs double that figure for sure. The fundamental problem lies not in the financial burden, but in a limited role in the fight against poverty is themain argument of the proponents of the ration card. Had been allocated to pay for the card in the form ofpayments to the beneficiaries of billions, the utility will be much better and will reach directly to those in need actually, instead of wasting the bulk of corruption in the corridors and goes in favor of the black market and the pockets of merchants. Maliki 's government has tried to reform the ration card system, but reactions wide outs forced them to abandon it. In addition to the possibility of employing these funds in the fight against poverty, the modified ration card and turn it into a cash allowance will provide an extra dose of the growth of the national economy and additional applications can benefit from local products. It is known that the bulk of the ration card allocations go to buy imported goods. This fact imposes on the government to seriously consider not only a review of the ration card system, but also to change the point of support in general to become a catalyst for the growth of domestic production.
Product support rather than the consumer
, despite all the reservations on the price - support policy , but there are sectors worthy of such support forpolitical reasons and economic, social and environmental, and that is the agricultural sector. It can benefit here from the experiences of Western Europe , where these countries began after World War II to intervene in the market through the purchase of grain, meat, butter and other which form an additional demand for agricultural products and pushed up prices and contributed thus to stimulate the agricultural sector growth.This policy did not succeed in achieving rapid growth in the agricultural and animal products and provided only affordable for the consumer, rather , Europe and then started to "suffer" from a surplus of an estimated hundreds of thousands of tons of grain, milk, butter and meat. Iraq is pursuing a similar policy where thestate sets prices rewarding to buy wheat, rice, dates from the peasants in order to encourage them to cultivate. Although it cost the state more than $ 1.5 billion, but it is a right policy , in principle , against thebackdrop of their contribution in providing food security and development of the Iraqi countryside. However , it also requires strict monitoring and continuous review so as not to lead to adverse consequences. It is noted , for example , that the local purchase price of these products is much higher than the import price, and even close to his weakness for wheat. This represents a difference, whether we like it or not, a catalyst for some of the peasants (and perhaps also to farmers aliens) to buy or wheat smuggling from abroad and sell it to thestate high local rate. Thus the system can be turned into support for the Iranian wheat or Turkish. In addition to the waste of financial resources , it gives a distorted picture of the figures wrong about Iraq 's agricultural sector performance and the degree of self - sufficiency. We have already noted such a phenomenon in theformer socialist countries where the state buys the product of certain products at remunerative prices and sell them to consumers at lower prices. This was a distorted relationship do not pay peasants not to retain aportion of their production to cover Ahtaajyatem own fruits and vegetables, but some were purchased these products from retail to re - sell them back to the state at the price of the product. And it can be applied to thetariff in Iraq to help in the reduction of these harmful behaviors and in improving the competitiveness of local products. On
the other hand the state also sold some Mstzmat production such as fertilizer at subsidized prices. A policy that involves the risk that some peasants to "dealers of fertilizers" in the black market. But that does not diminish the need for the state role in the fight against agricultural pests and agricultural research and theprovision of improved seeds and seedlings.
The reform of price - support system , the issue can not be postponed not only because it is contrary to theprinciples of market economy and contributes to the deepening of the financial crisis, but primarily because it provides fertile ground for many of the adverse development process and rampant corruption behavior and redistribution of income in a way unfair. The system used is also currently a clear example of thedisadvantages of the rentier state. But correcting this imbalance is also a sensitive issue because it affects theinterests of many citizens, especially those with limited income, and therefore requires a lot of deliberation and awareness. It will be very difficult to achieve without the political will and cooperation of participating in the political process and away from the populist approach and auctions powers. It is not permissible to justify corruption, waste of public money under the pretext of defending the interests of "hard - working" poor Oulfiat. Success in the fight against poverty requires a purposeful, deliberate and transparent procedures so as not to turn into a slogan hiding behind corrupt.
So support prices does not become an invitation to squander!
After the overthrow of the dictatorial regime in the spring of 2003, gasoline prices in Iraq is the lowest in theworld and less than 1 US cents per liter. This form of support and then the main factor for the worsening fuel crisis and flourishing smuggling operations to neighboring countries. Not be eliminated this phenomenon only after significant lift gradual fuel price decisions in order to become comparable to the level in neighboring countries and global markets. At the beginning of 2016 and contrary to the general situation in Iraq motorists suddenly it became virtually the only group that benefited from the collapse of crude oil prices, when thegovernment decided on a reduction in gasoline prices improved after negating the need to support theimported fuel from abroad. And pay the positive results of the policy of reform fuel prices to reflect circulate to other important sectors are still suffering from the problem of deformation of the price mechanism. The same applies to the electricity sector in particular. Here the picture looks blurry (and possibly dark) as a result of the support Mzodj enjoy electricity. On the one hand you get power plants for oil and gas at discounted prices. It is true that the world price decline for these articles helped to ease the financial burden of this support, but the root of the problem is still standing. On the other hand , the Ministry of Electricity and sells electricity pricing less than the true cost, forcing the state to step in to cover the difference. As a result, theState bears the heavy financial burden hard to bear in the long term. According to IMF estimates it isestimated to support the electricity tariff in 2015 by about 10 trillion Iraqi dinars , or the equivalent of $ 8.5 billion. It is a huge amount by any standards. In light of the financial crisis, this great item comes at theexpense of other important items of public expenditure and contribute to the worsening of the deficit problem.However , the financial burden is not the most serious negative effects to support electricity. This imbalance isalso behind the failure to resolve the electricity crisis despite the tens of billions spent for this purpose. It is true that the lack of electricity a variety of reasons, but the imbalance in the tariff does not encourage consumers to save energy, but is an explicit call for squandering without the expense. It is clear that millions of Iraqis meet this call in their homes and workplaces and in places their fun where electrical appliances run absurd manner as soon operate the national grid. One could even say that without reform of the electricity tariff will remain the goal of processing power for 24 hours just a dream unattainable no matter what thegovernment has made efforts. The government has tried in 2015 modified the pricing of electricity but had to back down under popular and political and religious pressure. It is natural to take into account any reform in the direction of a class of consumers with limited income and that the goal is that the support is limited to only those who deserve it and it remains a source of waste of public money and corruption. Of course, correct pricing will not do much if the Ministry of Electricity did not ensure that consumers, regardless of whether they are officials or ordinary citizens, to pay the bills for energy consumption first hand, and to take firm action against the squatters on the network.
In an attempt to ease public anger as a result of power outages the government of former Prime Minister Nuri al - Maliki has decided to provide the owners of private generators with fuel at discounted rates in thehope that abide by the pricing reasonable for citizens. However, such a decision is thoughtful become asource of corruption and illicit enrichment. Some generators owners do not need to think long to discover that the sale of fuel at market prices will bring them profits without a problem. This is another example of thefutility of trying to solve economic problems administrative procedures is well thought out.
Embodied manifestations of extravagance and waste , most clearly in the ration card. After a lapse of more than 13 years since the overthrow of Saddam Hussein , the state and society and elites still thickened this outdated system inherited from the former regime even though the justification for its existence has been completely negating. State allocates annually more than two billion dollars to buy items of the ration card. If we add to it , consisting of employees, agents Army distribution network costs double that figure for sure. The fundamental problem lies not in the financial burden, but in a limited role in the fight against poverty is themain argument of the proponents of the ration card. Had been allocated to pay for the card in the form ofpayments to the beneficiaries of billions, the utility will be much better and will reach directly to those in need actually, instead of wasting the bulk of corruption in the corridors and goes in favor of the black market and the pockets of merchants. Maliki 's government has tried to reform the ration card system, but reactions wide outs forced them to abandon it. In addition to the possibility of employing these funds in the fight against poverty, the modified ration card and turn it into a cash allowance will provide an extra dose of the growth of the national economy and additional applications can benefit from local products. It is known that the bulk of the ration card allocations go to buy imported goods. This fact imposes on the government to seriously consider not only a review of the ration card system, but also to change the point of support in general to become a catalyst for the growth of domestic production.
Product support rather than the consumer
, despite all the reservations on the price - support policy , but there are sectors worthy of such support forpolitical reasons and economic, social and environmental, and that is the agricultural sector. It can benefit here from the experiences of Western Europe , where these countries began after World War II to intervene in the market through the purchase of grain, meat, butter and other which form an additional demand for agricultural products and pushed up prices and contributed thus to stimulate the agricultural sector growth.This policy did not succeed in achieving rapid growth in the agricultural and animal products and provided only affordable for the consumer, rather , Europe and then started to "suffer" from a surplus of an estimated hundreds of thousands of tons of grain, milk, butter and meat. Iraq is pursuing a similar policy where thestate sets prices rewarding to buy wheat, rice, dates from the peasants in order to encourage them to cultivate. Although it cost the state more than $ 1.5 billion, but it is a right policy , in principle , against thebackdrop of their contribution in providing food security and development of the Iraqi countryside. However , it also requires strict monitoring and continuous review so as not to lead to adverse consequences. It is noted , for example , that the local purchase price of these products is much higher than the import price, and even close to his weakness for wheat. This represents a difference, whether we like it or not, a catalyst for some of the peasants (and perhaps also to farmers aliens) to buy or wheat smuggling from abroad and sell it to thestate high local rate. Thus the system can be turned into support for the Iranian wheat or Turkish. In addition to the waste of financial resources , it gives a distorted picture of the figures wrong about Iraq 's agricultural sector performance and the degree of self - sufficiency. We have already noted such a phenomenon in theformer socialist countries where the state buys the product of certain products at remunerative prices and sell them to consumers at lower prices. This was a distorted relationship do not pay peasants not to retain aportion of their production to cover Ahtaajyatem own fruits and vegetables, but some were purchased these products from retail to re - sell them back to the state at the price of the product. And it can be applied to thetariff in Iraq to help in the reduction of these harmful behaviors and in improving the competitiveness of local products. On
the other hand the state also sold some Mstzmat production such as fertilizer at subsidized prices. A policy that involves the risk that some peasants to "dealers of fertilizers" in the black market. But that does not diminish the need for the state role in the fight against agricultural pests and agricultural research and theprovision of improved seeds and seedlings.
The reform of price - support system , the issue can not be postponed not only because it is contrary to theprinciples of market economy and contributes to the deepening of the financial crisis, but primarily because it provides fertile ground for many of the adverse development process and rampant corruption behavior and redistribution of income in a way unfair. The system used is also currently a clear example of thedisadvantages of the rentier state. But correcting this imbalance is also a sensitive issue because it affects theinterests of many citizens, especially those with limited income, and therefore requires a lot of deliberation and awareness. It will be very difficult to achieve without the political will and cooperation of participating in the political process and away from the populist approach and auctions powers. It is not permissible to justify corruption, waste of public money under the pretext of defending the interests of "hard - working" poor Oulfiat. Success in the fight against poverty requires a purposeful, deliberate and transparent procedures so as not to turn into a slogan hiding behind corrupt.
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