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The price of the new dollar may push Kurds to quit smoking .. Pictures


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The price of the new dollar may push Kurds to quit smoking .. Pictures

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 2020-12-24 08:11
 

Shafaq News / It seems that the decision to increase the price of the US dollar has been reflected in the overall life in Iraq and the Kurdistan Region, including the owners of cigarettes in the city of Sulaymaniyah, between welcoming the decision and resenting the material losses, there is light at the end of the dark tunnel.

 

One of the cigarette dealers in the suffocating market in Sulaymaniyah, Ibrahim Mustafa, told Shafaq News that the decision to raise the price of the foreign currency, the dollar through the Central Bank of Iraq, was correct to solve the economic crisis and provide salaries for employees despite the losses that caused us as cigarette dealers, indicating that the prices increased by 25 % For goods, since most of them are imported from international origin. "

 

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Mustafa believes that "the fluctuation of the price of the dollar will not last for long," explaining that "the Iraqi government is waiting for the results of this decision and its repercussions, and the results of solutions will appear soon after the stability of the dollar and the launch of salaries that stimulate the movement of the market."

 

Citizen Aziz Amin, while buying a pack of cigarettes, notes that "the prices have risen, as I used to buy one pack for 1,000 dinars, and now I buy it 1250 dinars and this is a lot," adding sarcastically that "the government is trying to quit smoking."

 

Some believe that the high exchange rate of the dollar was a correct decision, especially in the field of selling cigarettes, which is a step to quit smoking and preserve human health.

 

 

 

 

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On Monday, January 21, the Iraqi Council of Ministers approved the country's financial budget for the next year 2021 in preparation for sending it to Parliament for a vote on it, after an emergency session of the Council that lasted for three consecutive days.

The budget was estimated, the exchange rate of the Iraqi dinar at 1450 per dollar, according to what was announced by the Central Bank, while the region’s share of it was determined at about 12 percent.

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Iraq's markets are devoid of shoppers after the price drop

Posted 39 seconds ago
 
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Noon Agency
News source / Noon Agency
For the first time in years, the Shorja market, one of the largest commercial markets in the center of the Iraqi capital, Baghdad, is witnessing reluctance by those who are shoppers due to the great rise in prices after the exchange rate of the dinar was sharply reduced against the US dollar.

Since last Sunday, the Iraqi government has implemented the decision to reduce the national currency to 1450 dinars per dollar, from 1184 dinars previously, with a decline of 23%, which caused great confusion to the markets with the sudden rise in prices.

On Thursday, the commercial centers (the Shorja commercial market and other markets) were empty of shoppers, while they were crowded with people on such days every year.

Aziz Al-Kinani, owner of a major food store, said: “For the third day in a row, the Shorja Market is empty of shoppers who previously flocked to buy all their needs. The market is in a state of fear that their living conditions will deteriorate more than they are now.

Al-Kinani considered that "the huge rise in prices is beyond the will of traders because of the great losses they suffered after the national currency was reduced against the dollar."

In turn, Ali Al-Basri, director of a center for selling electrical appliances, said that "store owners may suffer great losses after the accumulation of goods as a result of citizens' reluctance to buy, as well as the instability of the dollar exchange rate."

Al-Basri explained that "the rise in prices is very large in some materials, especially electrical appliances, mobile phones and home furniture, as prices rose from 30% to 40% of the original purchase value before the rise in the dollar price," expecting that the current situation will continue for months in light of the deteriorating economic situation. For most Iraqis, especially those with limited incomes.

But the professor of international economic studies at the Iraqi University, Abdul-Rahman Al-Mashhadani, said that the great rise in prices does not match the rise that the dollar exchange rate recorded, as it exceeded it by far.

Al-Mashhadani added, that the stagnation of the Iraqi market and its emptiness of those who are not shy are an actual result of the total decisions taken by the Ministry of Finance represented in reducing the price of the dinar and deducting a percentage from the salaries of employees and increasing taxes, noting that these decisions reflected negatively on people, due to the adoption of the Iraqi market by up to 90% on Imported goods sold in dollars, not dinars.

The Ministry of Finance justified the decision to reduce the value of the dinar in the face of the financial crisis facing the country, following the decline in oil selling prices in global markets, due to the repercussions of the new Corona virus. And Iraq, one of the countries with a rentier economy, relies on revenues from selling oil to finance up to 95% of state expenditures.

But MP Hamid Al-Mutlaq said that “all the measures and decisions taken by the government are wrong and illogical, and the citizens who are most affected are the citizens. The country is going through economic, security and political conditions.

He added that "the government's continued work with its wrong financial policy that has exhausted the citizens and tied them up with debts may lead to a popular explosion and the situation out of control."

Yesterday, Wednesday, the Supreme Judicial Council directed, in a statement, to “take all legal measures against everyone who causes harm to the national economy, whether from foreign currency dealers or monopolistic traders of goods, food commodities and the necessary commodities that people need daily. The Council called on the Ministry of Interior to conduct inspection tours to wholesale stores and places that sell foreign currency to arrest those who violate the law

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It is well known that the Iraqi economy is an oil-based economy by virtue of its possession of large quantities of it and the occupation of oil of great global importance. As Iraq produces oil and sells it to the outside world in exchange for obtaining the US dollar, and given that oil is considered a public wealth, all its imports belong to the Ministry of Finance and the latter sells the dollar to the Central Bank in exchange for the Iraqi dinar in order to inject it into the economy through the public spending channel.

The link of public finances to the oil dollar has made it in unenviable positions, by virtue of the failure of the oil dollar to flow steadily due to the fluctuation of oil prices for many reasons that may be political, or may be climatic, or may be healthy, as in light of the spread of the Corona pandemic.

The state's hegemony over oil and linking public finances to the latter has pushed the Iraqi economy as a whole to be overly dependent on oil, which led to the liquidation of other economic sectors by two points:

- The high prices of national products in front of the foreign importer due to the increase in the value of the Iraqi dinar.

- Workers left their jobs in other sectors to work in the oil sector in the desire for high wages, and this caused the increase in the production costs of other sectors, then their prices, and the loss of their competitive advantage.

The liquidation of other economic sectors led to a decrease in the flow of foreign currencies, especially the US dollar.

Corruption also contributed to the decline of the business environment, making it a repellent and not an attractive environment, so it had a major role in the decline in the flow of the US dollar, while if the business environment was attractive to business, this would lead to an increase in domestic and foreign investments and this will lead to an increase in the flow of dollars, which will contribute to supporting the Iraqi dinar.

And due to the weakness of the Iraqi economy due to its excessive dependence on oil, its currency has become weak and quickly responds to any event that happens even in the media, and this is exactly what happened during the current period when the draft general budget law for 2021 was leaked and it was found that the Ministry of Finance would sell the dollar to the Central Bank at a high price, which is 1450 each Dollars.

This means the decline of the oil dollar at the Ministry of Finance at a time when it is in dire need of the oil dollar in order to sell it to the Central Bank and obtain the Iraqi dinar to cover public spending, especially the inflated current spending.

The decline of the dollar while not reducing the inflated public spending means that the general budget will suffer a flagrant deficit, and in order to address this matter, the Ministry of Finance will resort to the option of selling a dollar at a high price at the aforementioned price, as was evident from the solution of the leaked draft, so that the bank would sell it to banks for 1460 and the latter would sell it to the public for 1470, and because of fear, the dollar will rise to more in the parallel market.

After the draft budget was leaked to the media and informing the public about it, there was an expectation that the price of the dollar would rise significantly, so speculators rushed to buy the dollar in the hope of benefiting from the rise in its price in the future. This prompted an increase in demand for the dollar and a rise in its price.

The prevalence of corruption and the absence of citizens' confidence in the government prompted many of them to explain the high price of the dollar for political motives, given that many banks belong to the political parties in power, so the latter worked through the Central Bank to raise the price of the dollar to gain more money at the expense of the Iraqi people.

Perhaps this explanation was not acceptable to workers in the Central Bank and that the issue of expectations and speculation that came against the background of the leakage of the draft budget is the most acceptable explanation for them and they have lost their minds that the leakage of the draft budget is a political leak with an economic motive to ignite the price of the dollar and reap more money.

It must be noted that the value of the Iraqi dinar would not have expressed its true value had it not been for the intervention of the Central Bank through what is known as the "currency sale window", where the central bank enters as a seller of dollars and a buyer of the dinar in order to preserve the value of the Iraqi dinar.

Because if the central bank did not enter the currency window to sell the dollar in exchange for the continued demand for the dollar, this would have led to the rise in the price of the dollar and to the devaluation of the Iraqi dinar significantly.

The demand for the dollar results from the weakness of the productive apparatus in generating dollars by exporting surplus production after meeting domestic demand, and increasing imports to meet the local demand for goods and services that are high and diversified.

Therefore, working to reduce the price of the dollar requires working to increase the sale of the dollar in order to absorb the increase in demand for it, so the price of the dollar will decrease and bring it to the desired level, and this is what the central bank will work on by allocating three trillions to sell it through the currency window.

It should be said that the continued support of the Iraqi dinar by the central bank is not consistent with the direction of the Iraqi economy towards a market economy, and support for the Iraqi dinar must be gradually abandoned, not all at once, but after achieving political stability.

In sum, the rise in the price of the dollar is a result of Iraq's dependence on oil, its low prices, and expectations of a rise in the price of the dollar for a certain event at another time.

* Researcher at the Al Furat Center for Development and Strategic Studies / 2004-2020
www.fcdrs.com

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Anticipation and fears of a massive revolution after the dollar's shock

Shafaq News/ Depressed markets, a confused economic situation, and worried people are some of the dollar's shock's effects that hit Iraq and resulted in the collapse of confidence and prices. The dinar's devaluation at a significant rate - the highest since 2003 - immediately led to a rise in commodity prices and negatively affected the living standards.

 

 

 

Economists: Shock style fails

 

 

 

"The appreciation of the exchange rate in this way was a surprise to all observers following the Iraqi economy; even to those working in the Iraqi banking. The shock method is a failed method of managing monetary policy in any country in the world. The rise was supposed to be gradual to avoid problems between the seller, the buyer, and the markets", economist Hilal Al-Tahhan told Shafaq News agency.

 

 

 

"This rise has been reflected very negatively on the prices; in addition to some traders' greed and their monopoly on materials. This sudden rise has affected the economic activity's movement, the market's movement, led to a recession, and leads to the termination of the middle class and employees.. while the poor class may naturally increase with the rise of food, goods, and services' prices", Al-Tahhan added.

 

 

 

"The country's poor economic situation will lead to a massive popular revolution across the country and have unwelcome consequences.. So how were such decisions taken?", Al-Tahhan wondered.

 

 

 

"The shock was great in the local market - and on individuals and traders as well - because it raised the prices of materials significantly. It will lead to a rise in the inflation index, and the government will not be able to control it", said Abdul Rahman Al-Mashhadani, a professor of political economics at The Iraqi University.

 

 

 

"The market's price rate has risen by about 24%, and these prices will remain confused for a while.. The dollar will need a long time to stabilize at a certain price; maybe after the 2021 budget is approved", Al-Mashhadani told Shafaq News agency.

 

 

 

Deputy: The government floated the currency

 

 

 

MP Nada Shaker Jawdat said that the government had raised the dollar's exchange rate, resulting in waisting the local currency's prestige, "Baghdad's wholesale markets have increased prices by one quarter to a third.. so The Iraqi citizen has been sacrificed by reducing his allowances and taxing his salaries, in addition to raising the dollar's price".

 

 

 

"The government used floating the currency's method after it devalued the Iraqi currency. No country with these oil resources and bounties is depreciating the dinar in this way - especially if we know that all goods are imported from abroad. The government has turned to the weakest link in society because it cannot eliminate the corrupt, manage its affairs, and follow its policies in the right way", Jawdat added.

 

 

 

Traders: Markets are depressed

 

 

 

"All the goods we deal with are imported, in the dollar, from Turkey and Iran", Mohammed Al-Hassani, a trader who sells single-use dishes in the Jamila Market, told Shafaq News agency.

 

 

 

"The appreciation of the dollar in this way has pushed the prices of commodities to increase by nearly 20%. This price difference will be paid by the citizen, not the trader. Since the Central Bank's announcement to increase the dollar's exchange rate, and the Jamila Market is experiencing a near-total recession..The sale is limited to only asking about the prices – mostly by mobile phone", Al-Hassani added.

 

 

 

For his part, Abu Sajjad, owner of the Al-Jayyashi food store, confirmed, "The Jamila Market was almost empty of customers today. The prices are very high than they were a week ago. Most of the food is imported and therefore has been affected by the dollar's rise".

 

 

 

"The rise included not only the imported food but also the local one.. local eggs have risen by more than 10,000 dinars, to reach 70,000 dinars for the parcel", Abu Sajjad added.

 

 

 

 

Citizens worried about the future

 

 

 

Many citizens expressed their fear for the future; especially as the worsening living situation portends an increase in unemployment and poverty in the country.

 

 

 

"The state has tended to punish the financially exhausted citizen instead of raising his living standard.. This rise in the exchange rate will increase unemployment and poverty rates in Iraq", Mohammed Ali Amin, told Shafaq News agency.

 

 

 

"All the decisions made by the government - the latest of which is raising the dollar's exchange rate – affected the citizen negatively and increased his suffering even further", Amin added.

 

 

 

For his part, Mohammed Hamza, told Shafaq News agency, "Citizens are losing faith in the Iraqi dinar as a result of this sudden and ill-considered rise in the dollar".

 

 

 

"The citizen will give up many of the goods and services he used to receive, as his income will be limited to basic needs. A popular movement may break out against the government due to the deteriorating living conditions", Mohammed Hamza added.

 

 

 

The Iraqi Central Bank has decided to raise the dollar's selling price to banks and exchange companies from 1,182 to 1,460 dinars per dollar; to offset the decline in oil revenues after the slump in oil prices.

 

 

 

90% of the Iraqi income relies on oil revenues.. the last time the state devalued the dinar was in December 2015, when it raised the dollar's selling price to 1,182 dinars from 1,166 dinars.

 

 

 

 

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