Devaluation ... the former budget director talks about "an inevitable shock" instead of losing "state sovereignty"
3,426 economy 12/24/2020 22:26 Baghdad Today - Follow-up
The former budget director at the Ministry of Finance, Hazem Hadi, confirmed that the devaluation of the local currency in the country caused a shock to the market, while explaining that the shock that occurred was necessary to finance the budget deficit instead of endangering state sovereignty, as he described it.
Hazem Hadi said, in a televised interview (Baghdad Today), that the advantages of the financial budget for the next year are "saving money and avoiding borrowing, because the size of the debt to Iraq has become very large and reached 160 trillion dinars, including internal and external loans."
Hadi added, "The internal debt automatically decreased with the rise in the value of the dollar against the dinar," indicating that
"the shock that occurred in the market was inevitable, because covering the financial deficit by borrowing includes major disadvantages, including the loss of state sovereignty."
He pointed out that "the failure of the economic policy in the country in the past years has made Iraq a market for imported goods and the Iraqi market has been flooded with these commodities, and also led to a decrease in revenues due to the decline in the price and production of oil, and all these factors caused a major financial crisis for the Iraqi economy."
Since the collapse of oil prices earlier this year, Iraq is facing an unprecedented liquidity crisis, and the government of Prime Minister Mustafa Al-Kazemi has been forced to borrow from the reserves of the Central Bank to pay nearly $5 billion per month, representing public sector salaries and pensions.
The Iraqi local markets in Baghdad and other provinces have been turbulent since last week, after the decision to devalue the currency to compensate for the deficit in the 2021 budget.
The decision sparked a wave of anger in the Iraqi street, but Al-Kazemi defended his government's move and said that he had two options: "Either the collapse of the regime and enter into overwhelming chaos, or we enter into a Caesarean section for reform."
Al-Kazemi cited during a speech at the Iraqi Council of Ministers session held last Saturday, in several countries, including South Korea and Singapore, when they had previously taken "difficult decisions" in order to reform the economy.