Expectations of higher inflation in Iraq

[patriotic party girl]

Text size

British studies centre warns of investments fleeing Iraq

The International Centre of Development Studies has warned of higher rates of inflation in Iraq to levels that may exceed 10% in the next few months. These rates have already reached up to 6% on average during the third quarter of 2011. The Centre predicts that the prices of goods, especially food and fuel will increase significantly to add more burden on the Iraqi citizens.

The Centre attributed this to many factors, most notably is the Iraqi government policy of offering large advances to civil servants and the size of financial aids and loans which leads to the accumulation of cash in the Iraqi market in a way that weakens the purchasing value of the Iraqi Dinar without creating real investment opportunities to benefit the national wealth or maintain its power.

This forecast is supported by the international rise of commodities prices and the fact that Iraq is almost entirely relying on importing its food basket needs. Adding to that the fears of the world economy recession which reflects negatively on oil prices that are expected to reach below the level of $90 per barrel. The Director of the Centre, the economist Sadek Hussein Al-Rikaby said that Iraq will be in an unfavourable position if oil prices drop below those levels due to its 95% reliance on oil revenues.

The Centre stated that the current fiscal policy of the Government of Iraq does not benefit the Iraqis but on the contrary it represents a financial trap that will restrict Iraq's future and deprive any achievements in development. The Centre warned that the current fiscal policy of the Iraqi Government could lead to the devaluation of the Iraqi currency and cause further negative effects particularly in relation to Iraq's capacity to attract foreign investments. The Centre pointed out that international investors prefer a much financially and politically stable markets which, as the Centre predicts, is the not case with the Iraqi economy, noting that millions of dollars that could have been invested in the Iraqi economy have found their way to neighbouring regional economies due to incentives and legislation that attracted capital to those economies.

The International Centre of Development Studies stressed on the need to escalate the diversification of Iraqi economy to include new sectors and not only the energy sector. Investments in agriculture, industry and services in addition to the development of human resources has become urgent to break the bond of reliance on oil as the sole source of revenues. Finally, the Centre warned of the dangers facing Iraq as it fails to make use of its wealth and resources due to the inability to manage its resources more than the lack of these resources, calling for the participation of private sector in the development process especially in the private banking sector which may create many investment opportunities to revitalise the economy and create real jobs for the unemployed.

- Ends -

http://www.zawya.com/story.cfm/sidZAWYA20111021132443/Expectations_of_higher_inflation_in_Iraq

[steveflex7]

Articles like this make me wonder what Shabibi is thinking and how worried he is. To RV or not to RV? I'm looking for an RV real soon!