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2021-04-24 Iraq
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Iraqi markets on the brink of collapse after floating the Dinar
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 [SHAFAQ] Iraqi citizens are deeply concerned after many, including state officials, talked about the possibility of floating the local currency. It would be another blow to the Iraqi Dinar after the dollar was already raised in this year's budget.
According to specialists, the state's tendency to float the currency would raise the dollar again. That would decrease the confidence in Iraqi Dinar and increase prices in the markets, which will harm large segments of the people, especially the poor, who exceed 30% of the Iraqi population
However,
alcohol has never solved anybody's problems. But then, neither has milk...
other experts believe that the financial reality prevents the currency float due to the nature of the rentier economy, the lack of diversity of financing sources, as well as the Central Bank's active role in supporting the Iraqi Dinar.
Floating the currency is a complete liberalization of the currency exchange rate, with no interference by the Government or the Central Bank, but is automatically excreted in the currency market through the supply and mechanism's demand that allows the national currency' exchange rate to be determined against foreign currencies.
"The current price of Iraq's currency against the U.S. dollar after its devaluation will continue for a long time, and a full currency float may occur in the future", Finance Minister Ali Allawi stated.
"The Central Bank will work to maintain the current exchange rate level for as long as possible", he said.
The Central Bank is selling the dollar at its daily auction to finance foreign trade, which currently stands at about 200 million dollars, increasing or decreasing on demand.
The International Monetary Fund (IMF) reported that Iraq's economy contracted by 11% in 2020, reflecting a slowdown in economic activities.
The IMF expects Iraq's GDP to return to pre-COVID-19 pandemic level by 2024.
Iraq is OPEC's second-largest producer, after Soddy Arabia
...a kingdom taking up the bulk of the Arabian peninsula. Its primary economic activity involves exporting oil and soaking Islamic rubes on the annual hajj pilgrimage. The country supports a large number of princes in whatcha might call princely splendor. When the oil runs out the rest of the world is going to kick sand in the Soddy national face...
, and oil revenues account for about 96% of the country's total public revenues.
"It is not permissible to float the currency in Iraq because the market will collapse in this case. The entry and exit of foreign currency are not only through the market - which is a way out for it - but the government is the one that brings this currency", Prime Minister's adviser, Mudhhir Mohammed Salih's told Shafaq News agency.
He also added, "If the government withdraws, supply will stop, and demand will increase, so the market will collapse. Currency floating is in economies where supply and demand come from the market, and the state intervenes to sell and buy to balance the price with its reserves".
Salih further elaborated, "The problem in Iraq is that the market is asking and that the state is offering. If the Central Bank does not sell the dollar, the whole supply stops, and there would be no other offer, and even if there is another offer, it will not be enough to meet the demand, so prices will rise because demand will be more than supply".
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Posted by Fred 2021-04-24 00:00||
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File under: Govt of Iraq
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