Experts analyze the exchange rate and the possibility of changing it up or down in the coming period

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After the reserves reached 99 billion

Experts analyze the exchange rate and the possibility of changing it up or down in the coming period

2023.01.08 - 09:25

Experts analyze the exchange rate and the possibility of changing it up or down in the coming period (nasnews.com)

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Baghdad – Nas  

Economists have warned of the consequences of expanding spending under the influence of an unprecedented rise in monetary reserves and rule out a return of the old exchange rate due to financing problems.  

  

  

Professor of Economics Nabil Al-Marsoomi, touched on the exchange rate crisis that will be present in the writing of the federal budget, and said in an interview with the official newspaper "NAS", (January 8, 2023) that "the reserve of the Central Bank exceeds 99 billion dollars, which is the largest in its history, and therefore the problem is not in the supply of dollars, but the problem in bank transfers through the electronic platform established by the US Federal Bank with the Central Bank of Iraq", noting that "this platform checks remittances and returns most of them and they finance The country's imports, which led to a significant decline in the sales of the coin auction to reach $ 120 million per day from more than $ 250 million."  

  

Al-Marsoomi added that "the current procedures are ineffective in light of the increase in cash sales, which now constitute from 75 to 80% of the sales of the currency window, while it was no more than 10% two months ago, which led to an increase in the smuggling of dollars out of Iraq to carry out remittances to traders and importers, which also means increasing the exchange rate and raising the prices of goods and services," returning "the continuation of sales in this way that it will cause a crisis in the dinar that the state needs to cover its expenses of $ 7 billion per month, and therefore will be forced The central bank to issue a new monetary currency, which means increasing the size of the monetary mass and raising the prices of goods and services."  

  

Regarding the return of the dollar exchange rate to the old rate, Al-Marsoomi explained that "returning to the old price will lose the government 40 trillion dinars from budgets when converting the dollar to dinars at the old exchange rate, which will lead to a decrease in government revenues," explaining that "in light of the significant increase in the 2023 budget, which reaches 180 trillion dinars in light of the price of 1450 dinars, the deficit will reach 40 trillion dinars."  

  

In turn, economist Jaafar Baqir Alloush said, according to the newspaper, that "the return of the dollar to its previous price of 1118 dinars is pure wishes," noting that "the expenditures amounting to 180 trillion dinars will be worth 124 billion dollars."  

  

Alloush added that "if the previous price is returned, expenditures will have reached $ 161 billion, and the planned deficit will be approximately 50% of the budget value, meaning the implementation of a budget in this way will cause a real disaster in the state's ability to meet its short-term obligations."  

  

The expert called for "working to control the rhythm of the channels of movement of the dinar and the dollar through transfer mechanisms and a way to restrict demand and expenditures, because without that, the disaster will be coming and the poorest groups in society will be affected."  

  

For his part, the financial adviser to the Prime Minister, Mazhar Mohammed Saleh, explained to the newspaper, "There is a paradox in the economy today, between oil revenues that are the highest in the country's economic history of more than $ 116 billion, and foreign reserves that touched $ 100 billion, which is also the highest in the country's financial history, in addition to a surplus in the current account of the balance of payments that may touch positive 15% of GDP, which is one of the great positive indicators that indicate the strength of the country's external economic sector."  

  

"All this creates external restrictions for the international compliance and control departments on dollar payments responsible for the flow of dollars from the country's foreign deposits to cover the demands of the private sector in its foreign trade, especially imports, a signal that occurs for the first time after the economic blockade in the nineties of the last century," Saleh said.  

  

These measures "come in the face of the weak transparency of some members of the Iraqi trade community and their disclosure of their foreign trade in the dollar currency, which is responsible for financing 85% of international trade, and because Iraq is located within the dollar zone in its foreign trade", he said.