International Monetary Fund comments on Iraq's budget and reiterates its warning of "inflation" in the currency

[6ly410]

List the reasons

International Monetary Fund comments on Iraq's budget and reiterates its warning of "inflation" in the currency

Economy | Today, 14:11 | 

    International Monetary Fund comments on Iraq's budget and reiterates its warning of "inflation" in the currency » Baghdad News Agency Today (baghdadtoday.news)

 

 

Baghdad Today - Baghdad

The Financial Post reported on Monday a warning that the International Monetary Fund issued to the Iraqi government on the budget in its current form after its approval after four continuous days of deliberation and political problems between Baghdad and the Kurdistan region of Iraq.

The newspaper said, according to what was translated by (Baghdad Today), that "the Iraqi government under the management of the current Prime Minister Mohammed Shia Sudanese passed the "largest budget" in the history of Iraq worth up to 153 billion US dollars, explaining that "the International Monetary Fund issued a warning to the Sudanese government on the thirty-first of last May about the government's spending of such large sums given the current economic conditions."

The newspaper pointed out that "the concern of international criticism is due to fears that large government spending will lead to "inflation" in the Iraqi currency, which in turn leads to a spiral of economic deterioration affecting the future of the country, as it described.

It is noteworthy that Iraq recorded a decline in inflation rates during the month of April, reaching one percent, with the Central Bank heading towards buying large quantities of gold to support the local economy.

For his part, the Central Bank of Iraq announced that the country has become in the thirtieth place internationally in the quantities of gold reserves.

[Laid Back]

“Central Bank heading towards buying large quantities of gold to support the local economy.”

 

One of gold’s primary roles for central banks is to diversify their reserves. The banks are responsible for their nations’ currencies, but these can be subject to swings in value depending of the perceived strength or weakness of the underlying economy. At times of need, banks may be forced to print more money, since interest rates, the traditional lever of monetary control, have been stuck near zero for over a decade. This increase in money supply may be necessary to stave off economic turmoil but at the cost of devaluing the currency. Gold, by contrast, is a finite physical commodity whose supply can’t easily be added to. As such, it is a natural hedge against inflation.

As gold carries no credit or counterparty risks, it serves as a source of trust in a country, and in all economic environments, making it one of the most crucial reserve assets worldwide, alongside government bonds.

 

Go Gold backed currency 

Go Stronger Dinar $1+

 

[screwball]

As I said the other day this budget will cause inflation and IMF just reiterated what I said….they will have to adjust rate to counter inflation caused by massive government spending.

[Officiallytook]

12 hours ago, screwball said:

As I said the other day this budget will cause inflation and IMF just reiterated what I said….they will have to adjust rate to counter inflation caused by massive government spending.

Yes let's change the rate. So we can do some massive spending.

 

17 hours ago, Laid Back said:

Go Gold backed currency 

Gold backed oil backed no back just get back to your old rate

[md11fr8dawg]

4 minutes ago, Officiallytook said:

Yes let's change the rate. So we can do some massive spending.

 

Gold backed oil backed no back just get back to your old rate

BINGO!!! WE have a winner!!

[jg1]

The only problem is, they say by increasing the rate will cause inflation. Zzzzz. 

[screwball]

On 6/13/2023 at 10:32 PM, jg1 said:

The only problem is, they say by increasing the rate will cause inflation. Zzzzz. 

Too many zeros will do that! Must remove them they are inflationary and in iraqs case deflationary???

[screwball]

If there’s such a work criss between devalue and inflation lol

 

[yota691]

Iraq needs fiscal discipline and reforms to maintain growth momentum, IMF says

Country’s fiscal expansion plans pose further economic risk and can stoke inflation

 

An oil refinery on the outskirts of Karbala, Iraq. The IMF says Opec’s second-largest crude producer needs to boost its economic resilience. AFP

 

 

Sarmad Khan

 

Jun 01, 2023

Powered by automated translation

Iraq needs fiscal discipline and wide-ranging structural reforms to reduce its economic vulnerabilities as foreign exchange market volatility and a drop in crude production continue to slow its growth momentum, the International Monetary Fund has said.

Opec’s second-largest oil producer needs to boost economic resilience to achieve its inclusive growth targets.

However, its fiscal expansion plans pose risks and could stoke inflation further, the IMF said in a statement at the conclusion of a staff-level discussion with Iraq.

Inflation in the country, which hit 7 per cent in January, is projected to average 5.6 per cent in 2023, said IMF mission chief Tokhir Mirzoev, who met Iraqi officials in the Jordanian capital, Amman, last week.

After recovering to its pre-coronavirus level last year, oil production is expected to contract by 5 per cent in 2023 as Iraq complies with Opec+ production cuts and partly due to the effect of the closure of the Kirkuk-Ceyhan oil pipeline.

 

Foreign exchange market volatility, in the wake of tighter anti-money laundering controls by the Central Bank of Iraq, has “adversely affected import-dependent non-oil sectors”, the IMF said.

 

Earlier this month, the Iraqi Interior Ministry banned people from dealing in US dollars in the latest move to control a fluctuating black market exchange rate.

The announcement reflects an attempt to close the gap between the official exchange rate and the black market, which has stoked inflation and caused public outrage.

 

The First Gulf War in 1991, followed by harsh UN-imposed economic sanctions and the US-led invasion in 2003, caused a substantial devaluation of the Iraqi dinar.

As a result, Iraqis have turned to the US dollar. A wide range of dealings, from wholesale trading to retail purchases, are settled using the greenback.

Iraq, which relies heavily on the sale of hydrocarbons for revenue, has struggled to maintain growth momentum despite favourable oil market conditions last year.

The IMF estimates that its real non-oil economy contracted by 9 per cent on an annual basis in the last quarter of 2022, “negating its growth during the previous three quarters”.

It expects real gross domestic product to expand by 3.7 per cent in 2023.

 

However, authorities’ fiscal loosening plans laid out in the draft 2023 budget law would widen the non-oil primary fiscal deficit further to 75 per cent of non-oil GDP and bring the overall fiscal balance to a deficit of 6.5 per cent of GDP, Mr Mirzoev said.

 

Shoppers at a popular market in central Baghdad. Inflation in Iraq could rise with the government's fiscal expansion plans. EPA

The combined effects of increased government spending, the exchange rate revaluation and reduced oil production would bring the fiscal break-even oil price to $96 a barrel.

“In the short run, implementation of the authorities’ fiscal plans could reignite inflation and FX market volatility,” he said.

 

“Over the medium term, continuation of current policies in the presence of substantial uncertainty about the future path of oil prices poses critical macroeconomic stability risks.”

Barring a large increase in oil prices, the current fiscal stance could lead to “mounting deficits and intensifying financing pressures in the coming years”, the IMF official said.

The IMF mission cautioned against the planned establishment of new extra-budgetary funds, which raise governance and efficiency concerns, and recommended that authorities adhere to on-budget government expenditures.

The fund also urged Iraq to put in place a framework to manage government guarantees, including parliamentary approval, as well as the publication of an annual ceiling and a list of government guarantees as part of the budget law.

“Accelerated efforts to establish a Treasury single account are also needed to strengthen public financial management,” the IMF said.

Creating an enabling environment for the development of the country’s private sector is critical for achieving “durable and more inclusive growth”.

Iraq should also prioritise efforts to boost governance and reduce corruption, as well as restructure large state-owned banks to improve access to financing and reform its labour market to promote private sector job creation, the fund said.

[horsesoldier]

Seems to echo the refrain of the: song that never ends it goes on & on my friends, this is the song that never ends, it goes on & on .... You get the the idea.

No telling how many more times the IMF will have to reiterate the warning to these deaf as as a post pin Head bureaucrats.

Iraqi politicians seem to thrive & delight operating within the shere of Crisis & Chaos.