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Savings imbalances in Iraq (Mohammed Saleh *)

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1 Savings imbalances in Iraq (Mohammed Saleh *) on Mon Nov 09, 2015 3:15 am

Rocky


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Savings imbalances in Iraq




9/11/2015

Dr.. The appearance of Mohammed Saleh *

When you enter the country in crises related to payments, the finger of suspicion go out there that fiscal deficit constant (internal deficit), or that there is a deficit in the current account of the balance of payments (external deficits), is correct that the main objective of economic policy in growth and balance imbalances and stability. In spite of the savings that the imbalance remains the foundation of the most difficult factor in economic policy and its equivalent in providing quick and easy solutions to cope with the double savings deficit above. As the flow of savings is tantamount to a surplus income after excluding consumption during a certain period, the savings could be confounded by himself and also referred to the amount of assets or assets held. Therefore, the stock of savings is an accumulation of savings inflows previous periods. Economies which suffer from low levels of national savings in the structure will inevitably dependent on inflows of external capital flows in order to promote investment and growth levels in the gross domestic product.

Jolt violent about the foregoing, Iraq has suffered since mid-2014 and up to the minute to violent jolt in the account ongoing balance of payments due to the deterioration of the country's oil export prices and lower proceeds of oil revenues to more than 55 percent compared to the years of booming oil revenues, particularly the year 2013 .oz estimated the current deficit in the current account of the balance of payments of Iraq in 2015, the proportion of the gross domestic product estimated at more than (minus 8 percent). and noticed that the internal gap between desired savings and investment desired ratio to GDP is still more than the other to (minus 8 percent) cursor deficit Edjaraa internally similar to the external savings deficit, which confirms the unilateral intensity of the economy and focused overall economic activity about returns Exports of crude oil, the Bible, while real gross domestic product to shrink (minus 2.3 percent) in the year of economic tremor in 2014, the real growth of the gross domestic product is currently only (one-half of a percent) in the year 2015 and about looking to the external borrowing and various external flows and the risk of waiting achieved in bridging the internal twin deficits and external, the economy gradually will become dependent on external flows entity but at a high price may lose an independent economic decision. Also, falling domestic savings level to Aigoy but consumption capacity over time. And foreign currency inflows to Atqoa is the only other domestic demand to meet the needs of the total consumption and then lead to the erosion of savings and opportunities to deteriorate more and more. Vaanaattiyat Central Bank of Iraq, which is a form of savings sovereign servo for indoor and outdoor Astqrrarin are the other did not rise, despite the inflows of foreign currency from crude oil revenues during the past two years, but exposed to the relative decline because of growing consumerism import of the country. It is the same situation that hit him, other countries such as Brazil and Turkey over the last decade. To hide that savings deficit and the state of imbalance college (private and government sectors) have generated so-called: helplessness bilateral any deficit in the current account of the balance of payments, due to the superiority of extra cash inflows of cash flows ( It is the external deficit) versus (internal deficit) is in the low desired savings and the weakness of its ability to meet the investment spending desired by the superiority of consumer spending, which is what is happening in our country today. In this sovereign debt accumulated rate recorded both domestic debt of or foreign relatively increase and including at least 59 percent of gross domestic product, up from 39 percent during the two fiscal couple of years. And the nation is still looking for additional opportunities for local borrowing and the outside what indicates the possibility of high total sovereign debt to GDP to nearly 70 percent, which may flow funding from foreign markets or foreign sources because of low domestic capital market capabilities and limited leverage in financing the sovereign fiscal deficit. General The budget of the federal 2016, for example, which is a total expenditure where 50 percent of the gross domestic product, according to the project, are the other of the estimated deficit did not disturb about 22 percent of the roof of the total spending, which (of 106 trillion dinars) which is more than 11 percent of the gross domestic product of Iraq. At a time when oil revenues and some allocated Eradt sovereign other in the budget task to paragraph operational expenditures (consumer), we find that the investment budget expenditures are constrained by public financial ability to provide opportunities to borrow and finance the deficit, both internal loans available in the domestic capital market (weak in financial leverage ) or resort to external capital markets (Broaf high cost). cash-strapped country's permission facing financial hardship and the plight of funding under the influence of ballasts bilateral deficit gap or Almzdug.akhven into account the difficulties of spending, while Iraq is still in the midst of a fierce war against local sources of external terrorism which occupies a number of towns and cities. On the other hand finance the budget deficit under the influence of the exceptional financial circumstances may be exposed to growing operational spending and strengthen the domestic consumer demand that reduces the savings opportunities and strengthens the savings imbalances Mtlahma with borrowings internal Awalforeigh the private sector, which Maaada to strengthen the imports of high consumerism and deepen again its effects backlash deficit in the current account of the balance of payments. savings rates slow to be to dock with low income levels falling and degrees of productivity and in particular small economic income generating activities, which can accommodate network activities horizontally .vama did not get those small activities extended horizontally on credits or sufficient cash loans, it will increase the degree of the worsening deterioration in productivity and operational capabilities, being a private economic activities providing for jobs for more than 4 million Iraqi man in the private sector, causing at the same time a decline in the income levels due to productivity degradation and erosion of the fastest in savings opportunities. As a corresponding decline in the capabilities of the device banking cash in the granting of credit, which still does not cover only 11 percent of the student audience of credit needs. Cash credit, but did not quite live up to the achievement of a low percentage does not represent only 5 percent of the gross domestic product of the country which is at least globally. And such economic paralysis is that the Central Bank of Iraq has led to rectify the double gap and imbalances savings problems when it launched a credit program and a wide range of $ 6 trillion dinars for the development of savings capacity to market forces the product starting from microfinance and the end of large projects. The issue of savings away from the school debate about demographic composition or population and accompanies it in the case of Aledjar.ala that Milton Friedman, leader of «Chicago Alncodeh School» is the first to realize this dilemma when exposed to the theory of «permanent income», where he found that the growing consumer spending and low savings opportunities and the growing cash borrowing are displayed demographic vehicle and urban at the same time. That is, they phenomenon belong to communities that have donation demographic (The high proportion of young people or young people in the composition of the labor force in urban or cities). Because they work force with professional-old longest in income generation find less Edjara and more spending towards goods and services Alasthlakih.oha otherwise residents of rural areas where the propensity to save the youth labor force is relatively larger because of the uncertainty caused by a tight community and contraction historic rural residence. However, Friedman believes «that allowed the work force to the middle of the professional building them, will follow a strong attitude towards savings to prepare for retirement stage and thinking seriously limited income or generate extra income». The Iraqi economy, which leads to the so-called demographic donation and estimated that the proportion of young people without the age of 30 years in the composition of the labor force (during the next decade) by about more than 60 percent of that workforce, the virtue of savings you will find steeper and take back down to the individual level but no choice of the growing number of city dwellers in the context of demographic gift to Iraq over the next decade will be a force net consumer borrowing and savings in general and with weak tendencies, at the low preparation of the rural population powers known Bmeulha savings. So do not expect the growing savings as a behavior community made ​​in a few days, what requires attention to the danger of the growing phenomenon of imbalance savings in our country rentier oil severe tendency towards rising consumer spending in the weak tendencies savings servo. Savings sources. If the total savings sources are from the source of crude oil revenues which It should devote real productive investment and diversify the local economy as a source of extra income servo to close the internal gap, or even to find savings sovereign fund invests its resources through external financial diversification (due to lack of capacity and financial resources of surplus toward real domestic investment) as supportive of fund returns savings mentioned when necessary to close the external gap. It nevertheless was one of the options available to the national economy over the last ten years. In spite of the large surpluses generated by the current account of the balance of payments of the Iraqi general budget together by holding Mzdhermn financial abundance rentier it did not achieve anything in the economy and its development and make it less unilateral and which can be called (contract lost development). Finally, it is not an option in front of the Iraqi state today (the people and the government and parliament), but the path of reform and teamwork to protect the national economy from waste and corruption and build the foundations of modern economic state based on social competitive market development and the achievement of the welfare state provided the foundations of production efficiency and the principles of justice in the distribution of income and wealth. m / indicate economic theory Keynesian approach across named: the savings-investment balance in the balance of payments method. Asserting that the relationship between savings and investment is the tool that explain the current account center in that Almizan.valachtlav between the value of imports and the value of exports of goods and services is the match the difference between desired savings and investment desired .vetoazin current account of the balance of payments, which leads to improving the savings is due to necessarily for investment His landscapes desirable and holy of income.

* expert and advisor to the Prime Minister for Economic Affairs

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Rocky


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