D. Mohammad Reza Sinan Shabibi
Crisis faced by the Iraqi economy now relate mainly down oil prices and declining oil revenues and increased military spending. Treatment here may be Takecvia any reduction in consumer spending, added to a large funding efforts through extraordinary measures such as increasing taxes or for the government to borrow from commercial banks, governmental and in particular, or to issue treasury bonds, the bank purchased.
We support non-recourse to external borrowing, because that would increase the severity of the debt crisis in Iraq. It's also unlikely that Iraq will be able to attract significant external financial resources and is in a state of war and live in a state of instability.
There is no doubt that the economy has a lot of internal or external surpluses have great flexibility to address the crisis. The government can use the internal surpluses by borrowing from them as we mentioned, but it can not borrow from the central bank, because of backups specific purpose is the currency protection, this reserve is to be used only if it stopped the economy from generating financial resources, which it relies on imports mainly . The call for the use of the reserve imagine that the reserve is a type of savings, and this is not right, Valahtaati balance and savings is a financial flow. Although the central bank does not lend to the government, but it can be managed by government borrowing from commercial banks by regulating the issuance of treasury transfers.
There is no doubt that the central bank can contribute effectively to provide the necessary budget indicators as financial advisor to the government by law. The stability of prices and control inflation, the main objective of the central bank, which helps in the implementation of the budget targets, is a key factor in achieving economic stability in general, and on this, the budget should have a special interest in the overall central bank policies, especially those policies that affect their credit. And banks in general have a special interest in this subject, but the other is the government must have a similar interest, considering that credit policies could help in the development of the private sector. Therefore, the central bank has a developmental policies after direct addition which relates to price stability.
On the other hand, the international dimension of the Central Bank, in particular through the reserve growth, also contribute to price stability through an interview demand for foreign currency. The participation of the Central Bank in the preparation of the budget does not demand it be through financial resources to finance the budget, but through monetary policy and coordination with fiscal policy.
The issue is basically plug in the short term, which requires that the government provide the money from internal or external sources, and this financial issue, the deficit in the long term it is a structural issue, and therefore it is a development issue before it is a financial issue. That those in charge of designing the budget must first examine the nature of the disability and whether can be treated in the short term, and thus is it requires a structural change of priorities in the economy or is it just a funding issue? That the deficit falls within the balance of payments and funding of studies, but falls within the developmental studies if characterized by long Bomayor and structural nature.
Iraq's economy can not continue to consumption and development, relying on only crude oil, which will continue for a long time no doubt, therefore, the diversification of the economy financially and productive is essential. We are in Iraq, mainly talking about the diversification of the economy, but the financial and productive diversification, which may result from the activities of the private sector and Antegyate contribute to the deepening of the financial market (private banks) and is certainly a key tributary of the productive sectors. We can not imagine the development of the productive sector (outside the oil sector) without well-developed financial sector.
To address the deficit must be specialized in the House of Representatives is considering all those budget items on the expenditure side and any of these items can be postponed. We must recognize that any adjustment process should not be at the expense of sectors conducive to growth, and this means that the investment budget must retain their priorities effort possible. As the adjustment should not be a social impact, ie not to be at the expense of the fight against poverty. In circumstances experienced by Iraq now, the military spending should be of great importance, although he must be done efficiently.
Deficit has become taken for granted, and it is part of the planning ideas is to determine the rate, which in turn depends on the hypothesis evolution of oil prices and the evolution of spending and the possibility of financing the deficit. The authorities do not have control over the price of oil and therefore the percentage of disability. Therefore, the hypothesis in oil prices should be conservative, and within that should make great efforts to maximize productivity and growth rates.
We have to live with the case of low resources, but that should not lead to lower growth, the matter depends on the proportions of the budget implementation. The increase in execution and raise its efficiency will offset the decline in oil resources, so the government should emphasize the productivity issue.
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