Officials: The Iraqi financial crisis may make us borrow from the International Monetary Fund again

[Mary B]

 Officials: The Iraqi financial crisis may make us borrow from the International Monetary Fund again

 

Iraq Stock Exchange

 

Economy News - Baghdad

Between the fall in crude prices and political volatility, the shrinking international intentions to save it and the new Corona epidemic, Iraq stands on the brink of a financial catastrophe that could push it into austerity measures and re-renew popular anti-government protests .

But officials seem strangely optimistic, which experts describe as a "denial" given that an expected collapse in oil prices will cost Iraq two-thirds of its net income this year .

 

Brent crude prices fell this week to $ 26 per barrel, the lowest level since 2003, in the wake of global oil demand affected by the outbreak of the Corona virus, and the price war between major producers Saudi Arabia and Russia .

 

In contrast, the head of the International Energy Agency, Fatih Birol, says that Iraq, whose oil revenues constitute more than 90 percent of its revenues, will face "enormous economic pressures ."

Iraq is the second largest oil producer in the "OPEC", and usually exports 3.5 million barrels per day .

Iraq adopted in its draft budget for 2020 on an expected price of $ 56 a barrel. And with lower prices, Iraq’s net income will decrease by 65 percent this year, compared to last year, causing a monthly deficit of $ 4 billion dedicated solely to paying salaries and maintaining government business continuity .

 

Birol points out that "in the current crisis, Iraq will suffer to exceed oil revenues of $ 2.5 billion per month," calling on officials to find "urgent solutions." This prediction is based on the price of $ 30 a barrel before the recent decline .

 

Ways to reduce costs

 

On the other hand, senior Iraqi officials say to Agence France-Presse that the ministries of finance and oil, the Iraqi Central Bank and state-owned banks are looking at ways to cut costs and find financing .

 

The Governor of the Central Bank of Iraq, Ali Al-Alaq, explains to the agency that "there is some concern, but it is not severe ."

"I think oil prices at this level will not last long. We don't expect big spikes, but at the level that secures the required volume, " he says.

Al-Alaq believes that officials are still closely reviewing the draft 2020 budget, which is one of the largest budgets of Iraq at around 137 billion dollars .

Over 75 percent of it is earmarked for salaries and other costs, with the remainder being spent on capital investments .

Total salaries jumped from $ 36 billion in 2019 to $ 47 billion this year, after 500,000 new employees were hired to appease the rising street for months .

The government employs about four million Iraqis, pays three million of them, and welfare for a million employees .

The relationship explains that "based on our preliminary indicators, we will be able to cover external debt and salaries", and reduce the benefits and services that "lack economic efficiency ".

But eliminating any benefits in a time of global economic downturn could put people back on the streets with even greater momentum .

 

He points out that other options include recovering "trillions" of the Iraqi dinar from accounts in state-owned banks, as the ministries have stored years of surplus funds, issuing bonds to people and rescheduling internal debt payments .

 

The central bank governor added that new talks are also underway with the International Monetary Fund, but with the absence of a budget and the formation of a new government, it appears that it will not bear fruit .

 

The government does not plan to devalue the currency, obtain new foreign loans, or stop payments to international oil companies, which are worth $ 1 billion a month .

 

Al-Alaq was optimistic that the pressures would push the government to introduce long-awaited financial reforms, saying that "a blow that does not break your back will strengthen you ."

Not optimistic

On the other hand, some officials openly admit that they do not share the optimism of the relationship .

A senior Iraqi adviser describes the situation as a "serious crisis", while another says that it will be impossible to reduce the budget in a country that TI ranked 16th on the list of the most corrupt countries in the world .

"Some ministers oppose cuts because it will penetrate their patronage networks," the chancellor says .

 

He adds that the government assumes that oil prices will return to normal within two months, which the International Energy Agency did not expect .

 

In a related context, Ahmed al-Tabaqshali of the Iraq-based Institute for Regional and International Studies notes, "Putting the head in the sand is not politics ."

 

Although Iraq faced a collapse in prices in 2014 and 2016, it did not witness the current significant decline in global demand, especially from China affected by the Corona virus, the main importer of Iraq .

 

Reliance on the international community is less permanent than it was in 2014, when world powers were eager to help Iraq fight ISIS .

 

Tabkashli says that Iraq may have to resort to reserves worth about $ 60 billion to cover the deficit, but it will inevitably have to reduce salaries and perhaps borrow internationally .

 

Even if the markets eventually stabilize, Iraqi oil will struggle to compete with the abundant Saudi product .

 

So Tabaqli considers that "there are painful adjustments that we need to make now, not leave them to our grandchildren."

 

 

http://economy-news.net/content.php?id=19354

[NoviceInvestor]

Thank you Mary B

[Flamtap]

Thank you Mary B.

Let's see now.....hmmmm.....there is a world-wide economic downturn, and they want to borrow internationally. Even though they have seemingly taken the last cookie crumbs out of the jar.....or honey (for all the Winnie the Pooh fans out there). Sure, let's keep playing them with loans.......🙄........Good Luck with that one. Oh wait, St. Patrick's Day has passed them by too.....No such Luch Iraq. Time to pay the piper and all the investors.....

 

Their back is against the wall and the crooks are trying to find a way for the walls don't cave, like they fell in Jericho and the city was exposed. It's only a matter of time. And the time is short.

 

I shall believe, the report of the Lord(Jesus). 

 

Flamtapping Out. 

 

 

[WheresmyRV?]

Hopefully the IMF and the World Bank will tell them to go pound sand.  If all their leaders and GOI members each gave up $300,000 of their own money they would save their country.  

[DoD]

If the IMF had any balls or brains one of them would tell Iraq to get a PM an seated cabinet with a functioning government before you start your begging again. At some point there has to be a person or an organization to force Iraq to abandon their ties to Iran an become part of the international community...

[horsesoldier]

“ BORROW “ .... I’m still laughing 😝 They’ve perpetrated the Crime Of the Century and think no one has seen it yet. ??? Still they want more. That’s rich.

[3n1]

8 hours ago, DoD said:

At some point there has to be a person or an organization to force Iraq to abandon their ties to Iran an become part of the international community...

 

been thinking all that for years DoD , and any rational group would require it or Iraq themselves would want to propel the country forward but it never happens its as if they are not required to meet any standards at all for some reason , i stopped trying to comprehend the country they want the benefits without the cost and sacrifice to attain it ... we wait 

[Calijim]

Maybe it’s time to play their hole card and Rv the Dinar. They could really solve a lot of their financial problems.

[Dinarrock]

1 hour ago, Calijim said:

Maybe it’s time to play their hole card and Rv the Dinar. They could really solve a lot of their financial problems.

As long as you can fully understand that when they RV their currency it Does Not create a bunch of Magic money for Iraq to pay anymore of their bills!! This is a hard concept for many to understand but if Iraq say RV’d their currency to say $1.00 tonight they would still need to borrow money from the IMF tomorrow to pay their bills. No magic money is created in that transaction it only gives the Iraqi people inside Iraq greater purchasing power that’s all that’s it nothing more!! Iraq will still be selling their oil for say $30 per barrel right now or whatever the going rate is that’s their income and they still will pay their bills from that it make no difference if their currency is a 1/10 of a penny or worth $5 to our US dollar they will still be short money to pay their bills hence why they will absolutely still need and ask for loans. Now what the IMF needs to do is say hey yes we will give you the loans you need to keep your economy going however only if you RV your currency and stop your auctions period...that’s what we need!

[horsesoldier]

4 hours ago, Calijim said:

Maybe it’s time to play their hole card and Rv the Dinar. They could really solve a lot of their financial problems.

 

Absolutely right . . . it would solve allot of OUR financial problems as well 

[Laid Back]

Please borrow a few trillions dollars to cover the RV. 😂😂😂

[screwball]

1 hour ago, Laid Back said:

Please borrow a few trillions dollars to cover the RV. 😂😂😂

Notice..:.,may! LOL

[screwball]

10 hours ago, 3n1 said:

 

been thinking all that for years DoD , and any rational group would require it or Iraq themselves would want to propel the country forward but it never happens its as if they are not required to meet any standards at all for some reason , i stopped trying to comprehend the country they want the benefits without the cost and sacrifice to attain it ... we wait 

Edited March 21, 2020 by screwball

[screwball]

19 hours ago, DoD said:

If the IMF had any balls or brains one of them would tell Iraq to get a PM an seated cabinet with a functioning government before you start your begging again. At some point there has to be a person or an organization to force Iraq to abandon their ties to Iran an become part of the international community...

Yep....he called trump! America’s greatest American her!like him not!

[DWS112]

IMO, these comments show a Central Bank with a master plan ready to implement!

 

On 3/20/2020 at 4:49 AM, Mary B said:

officials seem strangely optimistic, which experts describe as a "denial" given that an expected collapse in oil prices will cost Iraq two-thirds of its net income this year

 

 

On 3/20/2020 at 4:49 AM, Mary B said:

The Governor of the Central Bank of Iraq, Ali Al-Alaq, explains to the agency that "there is some concern, but it is not severe

 

 

On 3/20/2020 at 4:49 AM, Mary B said:

The government does not plan to devalue the currency, obtain new foreign loans, or stop payments to international oil companies, which are worth $ 1 billion a month 

 

 

On 3/20/2020 at 4:49 AM, Mary B said:

Al-Alaq was optimistic that the pressures would push the government to introduce long-awaited financial reforms, saying that "a blow that does not break your back will strengthen you 

 

[gregp]

Thanks DWS. Real positive!!

[KristiD]

On 3/20/2020 at 8:58 PM, Dinarrock said:

On 3/20/2020 at 7:51 PM, Calijim said:

Maybe it’s time to play their hole card and Rv the Dinar. They could really solve a lot of their financial problems.

As long as you can fully understand that when they RV their currency it Does Not create a bunch of Magic money for Iraq to pay anymore of their bills!! This is a hard concept for many to understand but if Iraq say RV’d their currency to say $1.00 tonight they would still need to borrow money from the IMF tomorrow to pay their bills. No magic money is created in that transaction it only gives the Iraqi people inside Iraq greater purchasing power that’s all that’s it nothing more!! Iraq will still be selling their oil for say $30 per barrel right now or whatever the going rate is that’s their income and they still will pay their bills from that it make no difference if their currency is a 1/10 of a penny or worth $5 to our US dollar they will still be short money to pay their bills hence why they will absolutely still need and ask for loans. Now what the IMF needs to do is say hey yes we will give you the loans you need to keep your economy going however only if you RV your currency and stop your auctions period...that’s what we need!

 

Agreed Calijim!

 

And @Dinarrock, you are correct that an RV will not change the fact that Iraq still gets USD$30/barrel - at least for as long as the petro dollar remains king.  Although, Trump has a new plan for the US and the petro dollar may not be king indefinitely so Iraq may start selling oil in other currencies.

 

And you are also right that the RV gives Iraq greater purchasing power, which is greater value/wealth.  However many dinar they are holding, will instantly have much greater purchasing power/value/wealth after an RV.   I'm guessing Iraq holds trillions of dinar, so that's a lot of increased purchasing power/value/wealth which will buy Iraq a lot of time to start diversifying their economy which is currently 90% based on oil.   Sure Iraq would like a  new loan, but they won't desperately NEED it, because they'll have plenty of new found value/wealth from an RV to tide them over while they diversify into new industries. 

 

But I disagree that this only happens inside Iraq.  After the RV, let's says it's $.50, whoever holds dinar anywhere in the world instantly has over 500 times more value in USD, than they did pre RV.  They will be able to almost immediately go to a bank and exchange those dinar for USD, euros or whatever.... in most countries around the world.  This worked the opposite way when Iraq purposely devalued their dinar to like 1/20 of a penny and instantly made dinar holders almost broke; it destoryed the store of value/wealth they had prior to the devaluation.  And it happened to all dinar holders, both inside and outside of Iraq.   Likewise, it will work the other way when they purposely add value to the dinar.  Dinar holders will instantly have over 500 times  more value (in this example) in USD terms (or in any other currency) - anywhere in the world.  The key is that the dinar is now artificially maintained way below market rate.  As long as Iraq RVs to a value that either the CBI can continue to maintain (like they do now) or that the market will maintain (or even increase), meaning the supply and demand of the free market will continue to support that value, that increased wealth/value that was created by the RV will be retained.  I think the dinar is so grossly undervalued now, that if the RV rate is low enough, the CBI may still be able to maintain that low rate through the auctions like it does now.  Alternatively, I think the market will support a much higher value while Iraq grows and expands its economy because Iraq is a very resource rich countyr, that's finally getting back on track after 2 decades of destruction, and has already demonstrated for some fifty years that it can maintain a very high market rate.  Iraq also has fresh water (which is not common in the Mid East) which supports hydropower and agriculture, natural gas, minerals, rare earth elements and probably much more gold than we know about, so I think Iraq can easily maintain and even increase a $.10 to $.50 or more value.  So an RV now should not only immediately help Iraq, but also greatly benefit those of us who hold dinar all around the world.  This is why we invested in the dinar after all.

 

 

[jcav]

Well said KD.   Don't forget purchasing power throughout the whole world, not just inside Iraq.