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Iraq's markets are confused ... and the government is reassuring: reform has begun

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Iraq's markets are confused ... and the government is reassuring: reform has begun

   Time: 12/22/2020 10:43:10 Read: 6,278 times

{Baghdad: Al Furat News}
The latest sudden decision to reduce the value of the Iraqi dinar against the dollar by 23 percent of the Central Bank of Iraq, an unprecedented economic disruption in Iraq, and caused a sharp decline in the joints that were considered the main engine of the local market.

The decision came into effect last Sunday, and provides for the reduction of the local currency to 1,450 Iraqi dinars per dollar, from 1184 dinars, which caused an increase in the prices of materials and goods by not less than 25 percent.

A member of the Parliamentary Finance Committee, Muhammad Al-Darraji, said in a press statement, "The process of reducing the value of the Iraqi dinar will provide the state with about 10 trillion dinars (about 6.9 billion dollars)."

But Al-Darraji believes that "the government was supposed to adopt measures preceding the adjustment of the Iraqi dinar exchange rate."

He added, "If half of the amount that the currency rate adjustment will provide is spent to deal with the negative effects of the decision, the government will have about 5 trillion dinars ($ 3.45 billion) for the cost of employees’ salaries for one month. "

The inflation rate in Iraq reached one percent in October 2020, on an annual basis, according to the data of the Central Bank of Iraq, and it is expected to witness a remarkable rise after reducing the values of the local currency.

And "the government should have adopted financial allocations, under the heading of inflation allocations for those whose monthly salary is less than one million dinars (about $ 800)." According to Darraji.

Commodity prices increased during the past month, after the dinar exchange rate reached a record low of 1,310 dinars to the dollar at that time.

For his part, MP for the Al-Fateh bloc, Fadel Al-Fatlawi, said, "The devaluation of the dinar is an ill-considered procedure that will cause an increase in the prices of foodstuffs in the market."

He stated that "the citizen should not be affected by any financial measures resorted to by the government."

In turn, the economic expert, Ali Nehme, said that "the employee segment will be greatly affected by the decision to reduce the value of the Iraqi dinar."

Nehme estimated that the employee lost about 33 percent of income due to the expected rise in the prices of basic commodities, which are imported from abroad in dollars.

He explained that "the pharmaceutical, food and other sectors were significantly affected within two days of the implementation of the decision to reduce the local currency rates."

And: "In Iraq, we do not need to reduce the value of the dinar, but rather we need to pressure military and unnecessary expenditures, and control the customs file. Therefore, what has been announced about what will be provided will be provided" by reducing the value of the currency.

While legal expert Tareq Harb confirmed that the House of Representatives cannot cancel the decision to reduce the national currency.

Harb said in a press statement, "The decision to reduce the value of the Iraqi dinar against the US dollar was not issued by the federal government, but by the Central Bank," indicating that "the parliament does not reject the decision to reduce the value of the national currency."

In response to a question whether the House of Representatives rejected the price of the dinar against the dollar in the budget bill for 2021, Harb stressed that the value of the dinar has been determined and the matter is over, and the budget has other provisions regarding salaries, tax collection, and the like.

He added that all the independent bodies approved by the constitution are linked to the House of Representatives except the Central Bank, which is independent. .

Prime Minister Mustafa Al-Kazemi tried to assuage all these concerns about the decision to raise the dollar exchange rate.

Al-Kazemi said during a press conference yesterday, after the cabinet voted on the draft fiscal budget for 2021, that "the budget is a reform budget, and takes into account the protection and support of vulnerable groups, and in return the decline in the revenues of high-paid politicians and stakeholders, and this is one of the causes of media attacks." That they obtain from the government. "

He stressed that "the budget provided protection for the poor, as well as the budget included taxes on senior employees and the protection of small and medium employees, and will also contribute to supporting the national industry and the agricultural sector."

And Al-Kazemi stated that "what happened regarding the exchange rate is a new evidence of the level of political targeting of the government after causing a great media fuss against it," noting that "for years, there has been talk about the corruption of the currency auction. Go today to the window of currency sale, and look at the banking activity, you will find an increase With regard to deposits in dinars for the people's confidence in it, especially after the increase in interest on deposits in Iraqi dinars. "

The prime minister emphasized working "to protect economic security and confront the weak-minded who try to manipulate prices," rejecting "attempts to manipulate people's feelings."

The Commander-in-Chief of the Armed Forces announced the directive of the Minister of Interior and the Head of the National Security Agency to take all measures, to prevent price manipulation in any way.

And some factories and companies have temporarily stopped in Baghdad and some provinces, especially those that import their raw materials from abroad, following the devaluation of the local currency.

"The economic situation is very confusing, and there are no solutions in sight yet," said Firas Jamal, the owner of an electrical appliances company. "The electrical appliances are imported from outside the country in dollars and are sold in Iraqi dinars.

He continued: "According to the contacts with other companies and factories, many of them preferred to close the door of their factory or company while waiting for what would happen."

The Iraqi Ministry of Finance justified the decision to reduce the value of the dinar in the face of the financial crisis facing the country, following the decline in oil selling prices in global markets, due to the repercussions of the Corona virus.

And Iraq, one of the countries with a rentier economy, relies on revenues from selling oil to finance up to 95 percent of state expenditures.

And last week, the "Future Iraq" Foundation for Economic Studies and Consultations (a non-governmental organization) said that the sales of the Central Bank of Iraq for the period 2004-2020 amounted to $582 billion with a loss estimated at $20.7 billion as a result of the difference between the official price of the dollar and its price on the black market.

The country is experiencing a suffocating financial crisis, as a result of the decline in oil prices due to the Corona pandemic crisis, which has paralyzed large sectors of the world’s economies.

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