The political economy of the Iraqi dinar
Pratha News Agency 109 2020-12-28
Dr.. Maytham Al-Aibi Ismail * ||
In one of its aspects, the interpretation of the decision to raise the exchange rate of the American dollar against the Iraqi dinar refers us to what is known as the (Monroe) model that Chomsky focuses on in his vision of the contemporary Middle East, (this name reminds me of raising the air for the wonderful dress of Marilyn Monroe).
Chomsky's hypothesis defended in his book (Illusions of the Middle East) is based on the logic of American hegemony over the region as a region of influence by force, as Chomsky mentions, for example, in one corner of his book, that US Secretary of State Madeleine Albright declared during the Clinton administration; When, in her speech, she referred to US interests in the Middle East: "We will act collectively when we can, and we will act unilaterally if necessary, as we do not recognize borders or obstacles, or even international law or the United Nations."
And our hypothesis about the devaluation of the dinar against the dollar; From the standpoint of political economy, it revolves around the logic of US economic hegemony over the countries of the Middle East, within various economic tools such as controlling energy sources, oil prices and currency rates, adjustments to the rates of trade exchange to the detriment of some countries, and the use of methods of impoverishment, blockade and sanctions, and the circulation of oil revenues to the outside...
You have loaded the "white paper"; Which were presented recently yesterday, clear introductions to the measures presented and planned to be implemented today, under the pretext of economic reform according to the liberal logic,
and among those introductions is the focus on the risks of the cheap dollar and the necessities of reducing the value of the dinar on the pretext of competitiveness and budget sustainability.
The government, its advisors and some specialists also focused on the policies of the Central Bank of Iraq throughout The previous years did not serve the position of the Iraqi trade balance in exchange for strengthening the balance of payments of neighboring countries, which have become a net exporter to the country, taking advantage of the decline in Iraqi non-oil GDP, loopholes in customs and tax laws, and the weakness of the rule of law ...
Going back to the beginnings of the formation of the Al-Kazemi government and his team; After the hijacking of the October 2019 revolution, it is self-evident to say that the coming of this group to the top of the Council of Ministers came in a clear part of it as equivalent to curbing Iranian influence and confronting the growing forces of non-state, given the need to create “local policemen,” as Chomsky put it, represented in our case by a man. Al-Kazemi Intelligence and his team, by "world policeman", America.
The decision to change the dollar exchange rate cannot be read far from the kitchen of Al-Kazemi’s policy and his local and international advisory team and its implementing tools that have been chosen to manage the Central Bank and the Ministry of Finance, and which have been promoted as the main ribs of the "Golden Triangle" carrying the pillar of financial and monetary reform ... Measures to reduce provisions, raise tax rates, increase fuel prices, and change the exchange rate at a high rate;
Although it aims primarily to bridge the budget deficit and address the problems of financial sustainability and debt intolerance, it naturally aims to improve the Iraqi trade balance, which was in favor of the neighboring countries (Turkey, Saudi Arabia, Kuwait, Jordan and Iran ...) over the past years.
From the political economy point of view, all neighboring countries could be affected by the decision to change the exchange rate, to its disadvantage,
but countries such as Saudi Arabia and Kuwait have many buffers of protection so that their damages will be the least, as they are countries that have high oil shares in OPEC, as they have secured their economies With sovereign hedge funds against crises,
the situation is no different for Turkey, a rising country that has great economic diversity,
while the decision to manipulate exchange rate meters could be more harmful to neighboring Iran, which has been exhausted by successive US administrations with embargoes and sanctions, making the decision to raise The value of the dollar is another tightening in the field of sanctions that Iran has long been able to evade from, and leads to a set of negative effects expected on it, whether by moving the balance of payments in favor of the Iranian economy, as well as the expected negative effects of activating customs taxes on the decline of Iranian exports to Iraq, which is also driven by expectations The decline in aggregate demand and stagflation in the Iraqi economy as a result of imposing multiple taxes on incomes and cutting proportions of salary allocations.
The weakness of such an analysis stems from the question about the future of the Al-Kazemi government and the contradiction in its supposed support by the American administration, and the possibilities of failure of its next electoral project, as it fell into the trap of confronting economic reforms with positive results that are inconclusive in the long term and that depend on improving the competitiveness of the economy Al-Iraqi, and among confirmed negative results in the short term, as it faces cutting salaries and raising prices and the resulting reduction in the purchasing power of money, which is something the Iraqi street will not forgive, which represents live ammunition that this government delivered to the voters who would use it against it during the election days to topple it.
Most of the political parties opposed to the Al-Kazemi government and his team rejoice over him ... which are now watching comfortably for this dilemma.
Perhaps the answer to this contradiction requires a return to the starting point of this article, related to the "Monroe" model, which is the logic of American economic hegemony that is not related to the interests of the Middle East countries or their people, as much as it relates to the American supreme interests, and this principle is not strange to American policy.
America in the nineties, for example, is contributing to the siege and starvation of the Iraqi people through the imposition of sanctions, in exchange for its support and continuation of Saddam's regime.
When Madeleine Albright was asked about her feelings about the killing of half a million Iraqi children under sanctions, she replied, "It was a difficult choice, but we believe The price was worth it."
Who is Al-Kazemi and his team, for example, so as not to be overthrown, in exchange for weakening the Iraqi economy and continuing its fragility, or considering it merely a stick to strike the economies of rogue neighboring countries and weaken them, overthrowing him and his team later, or granting him in the best case a few seats in the next elections, and joining him to the choir of client politicians The role of the neighborhood and the outside, and the continuation of the fragile and fractured political system, sectarian, ethnic and national...