Iraqi News Highlights and Points to Ponder Saturday AM 5-4-24


Iraqi News Highlights and Points to Ponder Saturday AM 5-4-24

Economic: The Fixed Dollar Exchange Rate Depletes Iraq’s Foreign Currency Reserves

Manar Al-Obaidi     Money  and business   Economist Manar Al-Obaidi confirmed that the fixed dollar exchange rate adopted by Iraq depletes the country’s foreign currency reserves.

Al-Obaidi said, “The only thing that is completely under the control of the Iraqi state is the exchange rate, which forcefully drains all foreign reserves to maintain an imaginary fixed price that traders benefit from to increase their profit margin.”

He added, “I never called for following a free-float policy. Rather, I called for a start to follow a compensation policy managed with a small volatility factor and gradually work to increase it until complete liberalization is reached.”

He continued, “The alternative to maintaining the fixed exchange rate is to continue depleting the reserves until they run out and the oil market is exposed to very expected future fluctuations. Then, will we be forced, not given the choice, to an absolute floatation of the currency or a shocking reduction in the exchange rate, as happened in 2020, and then the risks will be greater and greater?”

Views 26 05/03/2024

World Bank: Dependence On Oil Will Expose Iraq To Macroeconomic Fluctuations

Economy  2024-05-04   Today’s News – Baghdad  The Iraqi economy is expected to return to growth in 2024 at a rate of 1.4%, compared to a contraction of 2.2% during the year 2023, with the growth rate next year jumping to 5.3%, according to data from the latest IMF report on global economic prospects issued this month. .

The contraction in Iraq’s GDP last year comes despite a strong return to growth in the non-oil sector, recording 6%, with inflation receding, according to Fund estimates.

According to the statement of the IMF mission to conduct Article IV consultations, last March, the Fund expects that overall growth will rise again in 2024, with the momentum of non-oil growth continuing during the year, while risks tend towards an increase amid increasing uncertainty.

This comes while the Fund expects, in the medium term, that non-oil growth will stabilize at around 2.5% due to the obstacles that limit the development of the private sector.

Iraq is one of the countries most dependent on oil in the world, and oil revenues accounted for more than 99% of its exports, 85% of its government budget, and 42% of its gross domestic product over the past decade, according to World Bank data.

The World Bank believes that this excessive dependence on oil exposes the country to macroeconomic fluctuations, while budgetary rigidities restrict the available spending space in public finances and limit any opportunity to develop policies to counter cyclical fluctuations.

The public finance balance shifted from a surplus of 10.8% of GDP in 2022, to a deficit of 1.3% in 2023.

This is due to a decrease in oil revenues and an increase in spending by 8% of GDP, to which contractual salaries and pensions contributed. By 5%, according to the IMF.

The Fund expects the public finance deficit to reach 7.6% of GDP in 2024, in the absence of new policy measures, and to expand further after that with the expected gradual decline in oil prices in the medium term.

The increase in the public finance deficit will result in a nearly doubling of public debt from 44% of GDP in 2023 to 86% of GDP by 2029, according to Fund estimates.

Expectations that the current account will turn into a deficit.

The IMF estimates the current account surplus at 2.6% of GDP at the end of last year, expecting it to turn into a deficit by 3.6% during 2024, and for this deficit to expand to 5.1%.

Indicators have improved:

Overall inflation declined from the level of 7.5% in January 2023, to 4% by the end of last year, according to IMF estimates, which reflected the decline in food and energy prices at the international level, and the impact that the process of revaluing the price of the Iraqi currency had on February 2023.

The International Monetary Fund expects the inflation rate to stabilize at 4%, whether as an average for the year or as a level by the end of the year during the years 2024 and 2025.

The Fund also estimates that international reserves will rise to 112 billion US dollars by the end of 2023, compared to about 97 billion dollars at the end of 2022.

The Iraqi government reduced external debt from $19.729 billion in 2022 to $15.976 billion in 2023, according to what the official Iraqi News Agency reported from Iraqi government spokesman Bassem Al-Awadi, this April.

Al-Awadi said that the government took a series of executive measures and adopted a package of financial decisions, which resulted in reducing the external public debt by more than 50%, bringing the debt down from $19.729 billion at the end of 2022, to $15.976 billion in 2023, reaching approximately $8.9 billion this year.

Other steps for a greater role for the non-oil sector.

The IMF believes that reducing the level of dependence on oil, and ensuring financial sustainability, while at the same time working to protect the very important social and investment spending, will require a major adjustment to public financial conditions, centered on controlling the sector’s wage bill. Overall, increasing non-oil revenues.

In parallel, the situation will require high economic growth to accommodate the rapidly growing workforce, boost non-oil exports, and expand the tax base.

The IMF believes that there is a need to implement an ambitious adjustment to public financial conditions, to help stabilize debt in the medium term, and rebuild protective safety margins for public finances, while maintaining necessary capital spending.

Most aspects of consolidating public finances come from reducing current spending, especially controlling the wage bill by reducing mandatory appointments, and from working to gradually implement the rule of natural attrition for workers in the public sector.

The Fund indicated the need to increase non-oil revenues by expanding the income tax base on individuals, making it more progressive, reviewing the customs tariff structure, and considering imposing new taxes on luxury items.

The Fund also believes that there is a need to undertake broad structural reforms to enhance private sector development and economic diversification.

He explained that Iraq needs to raise growth rates in the non-oil sector in a sustainable manner to accommodate the rapidly increasing workforce, and to increase non-oil exports and government revenues, in addition to reducing the economy’s exposure to oil price shocks.

The Iraqi Prime Minister, Muhammad Shiaa Al-Sudani, said last January that his country had set a goal in a three-year budget to reduce dependence on oil revenues from 95% to 80%, in a discussion session at the World Economic Forum in Davos.

Expert Al-Tamimi: Preparing And Amending The Tripartite Budget Must Be Done With The Approval Of The House Of Representatives

May 4, 2024   Baghdad/Al-Masala Al-Hadath: Legal expert Ali Al-Tamimi explained on Saturday that preparing a medium-term budget for a period of 3 years is presented once and with the approval of the House of Representatives.

Al-Tamimi said: The annual budget begins on 1/1 and ends on 12/31 of the same year, and the Federal Ministry of Finance has the right to prepare a medium-term budget for a period of three years that is presented once and legislated, and the first year is obligatory, and the Council of Ministers has the right, based on a proposal from the Ministries of Planning and Finance, to amend it. For the second and third years, with the approval of the House of Representatives.”

Al-Sudani: Iraq Is Moving Today To The Stage Of Revitalizing The Economy And Consolidating Sovereignty

Policy  2024-05-03   Today’s News – Baghdad   Prime Minister Muhammad Shiaa Al-Sudani confirmed, on Friday, that Iraq is moving today to the stage of production, moving the economy, creating job opportunities, facing challenges, and consolidating sovereignty, indicating that everyone bears the task of enforcing the law and building the edifice of justice, equality, and institutional stability.

Al-Sudani’s office stated in a statement received by Al-Youm Al-Akhbariya, that “Prime Minister Muhammad Shia’ Al-Sudani attended, this Friday morning, the celebration held in the capital, Baghdad, on the occasion of the anniversary of the founding of the Asaib Ahl al-Haq movement.”

In a speech he delivered during the ceremony, Al-Sudani praised the anniversary of the founding of the movement, its path in national jihad work, and the constellation it presented of the struggling group of martyrs who valiantly fought terrorism.

Al-Sudani said, “The Asa’ib movement is contributing today to supporting the state’s path after it confronted the terrorist ISIS gangs yesterday,” stressing that “the entire world has witnessed the Iraqis’ sacrifices of their armed forces in all their names, including the Popular Mobilization Forces and their mujahideen.”

He added: “The government, supported by broad parliamentary and popular will, is moving towards achieving sustainable development.”

He continued: “Our country is moving today to the stage of production, building infrastructure, stimulating the economy, creating job opportunities, confronting challenges, and consolidating sovereignty,” adding: “We all bear the task of enforcing the law, and building the edifice of justice, equality, and institutional stability.”

He pointed out that “there is no alternative to upholding the state’s word and protecting the constitution, and our success is best in fulfillment of the blood of the martyrs,” stressing that “those who have tasted the scourge of persecution and suffered from the fire of dictatorship are more deserving of national action to consolidate sovereignty and preserve their constitutional governmental institutions.”

Provoking Thoughts and Points to Ponder on Wealth

 He that maketh haste to be rich shall not be innocent.  – Bible

I glory more in the coming purchase of my wealth than in the glad possession.- Ben Jonson

I’ll fares the land, to hastening ills of prey Where wealth accumulates, and men decay.  – Oliver Goldsmith

It is the wretchedness of being rich that you have to live with rich people.  – Logan Pearsall Smith

One cannot both feast and become rich. – Ashanti proverb

Poor men seek meat for their stomach, rich men stomach for their meat.  – Old saying

  Riches serve a wise man but command a fool.  –  Old saying

The first wealth is health.     – Ralph Waldo Emerson

The smell of profit is clean and sweet, whatever the source.  – Juvenal

There are few sorrows, however poignant, in which a good income is of no avail. – Logan Pearsall Smith

The human race has had long experience and a fine tradition in surviving adversity. But we now face a task for which we have little experience, the task of surviving prosperity. – Alan Gregg

Riches enlarge, rather than satisfy appetites.- Thomas Fuller