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Iraq saves the dollar and invests in gold
Immunization of the economy from global fluctuations
Jabbar Zidan is an Iraqi journalist @jabarzed
Saturday, June 3, 2023 5:27
The Central Bank of Iraq seeks to convert cash reserves into gold (AFP)
"Gold is an adornment and a treasury."
This saying represents what international banks have reached in terms of storing and buying tons of gold as a result of global price fluctuations,
as the Central Bank of Iraq worked to purchase a new amount of the yellow metal in order to guarantee the country's economy, which depends mainly on oil.
Specialists indicate in an interview with "Independent Arabia" that monetary gold is considered a guarantee to avoid the risks of fluctuations in currency exchange rates in which the investment portfolio of foreign reserves varies, stressing that
it is an essential guarantor to protect the investment portfolio of the Central Bank of Iraq against fluctuations in the risks of the exchange rate of the local currency, the interest rate, and others..
30 worldwide
And the Central Bank of Iraq announced, last Wednesday, the purchase of new quantities of gold of approximately 2.3 tons,
which resulted in an increase in its holdings of this metal by 1.79 percent,
bringing its total to (132.74) tons, maintaining its sequence in the thirtieth rank in the world ranking. Gold holdings of the countries of the world.
The Investments Department stated, according to a statement by the media office of the Central Bank of Iraq, that the purchase came with the aim of increasing its holdings of gold in light of the economic and political conditions the world is witnessing.
Gold is considered one of the most important components of the reserves held by banks and international financial institutions, as
they continuously increase their reserves of this metal, because of this procedure’s positive impact on the financial solvency of these institutions and the creditworthiness of their countries.
gold guarantee
In the context, the financial advisor to the Iraqi Prime Minister, Mazhar Muhammad Salih, said that
monetary gold occupies within the base of diversifying sovereign foreign reserves an estimated rate of between 7 to 10 percent of the total components of the investment portfolio represented by various currencies as foreign assets, and managed by central banks.
In the world, including the Central Bank of Iraq, according to international standard evidence, in investing that portfolio in various currencies.
Saleh explained that despite gold no longer playing a direct role in the international monetary system today, "central banks and governments around the world, including Iraq , seek to keep record quantities to protect against economic instability," pointing out that
"it is characterized by less fluctuations in its prices." compared to other individual commodities, trading stocks and currencies, across the world's various asset cycle chains.
investment stability
For his part, Mahmoud Dagher, a specialist in financial affairs and former director general of financial operations at the Central Bank of Iraq, said,
"The increase in the gold balance means the stability of Iraq's foreign investments that belong to the Central Bank," continuing to say that
"currencies are now imitating each other,
so it is better That our reserves in gold are the only effect," denying the existence of an impact on the domestic economy.
financial transformation
On the other hand, economic researcher Nabil Jabbar Al-Tamimi said that
the process of buying gold is driven by financial transformation policies in the midst of the international conflict and expectations of large economic fluctuations in it or fears related to the expected recession,
which is what drives investors to buy gold as a substitute for stocks, currencies and other assets.
read more
Gold is a haven for investors in the storm of turmoil
Gold is recovering above $2,000 amid existing economic risks
Iraq is searching for its looted antiquities abroad
Al-Tamimi referred to the contracts signed by the Central Bank of Iraq to buy gold two years ago, during which reserves increased from 98 tons to 132 tons, pointing out that
it will not exceed 9 percent of its total reserves today in US dollars, with investments in US Treasury bonds.
critical risks
On Thursday, the International Monetary Fund issued a pessimistic statement for the Iraqi economy after recovering from the Corona pandemic last year, as he mentioned a number of fund experts who met in Jordan from May 24 to May 31 to discuss with the Iraqi authorities about recent economic developments and expectations as well as policy plans.
In the coming period, the growth momentum of the Iraqi economy has slowed in recent months, reaching a level lower than before the pandemic.
Experts said that
"oil production is set to shrink by 5 percent in 2023 due to a cut in production (OPEC +) and the
interruption of the (Kirkuk-Ceyhan) oil pipeline, in addition to
fluctuations in the foreign exchange market in the wake of tightening control over combating money laundering as well as financing terrorism." by the Central Bank of Iraq, which
negatively affected foreign currency sales.
growth estimates
And the fund’s experts stated in their statement that
“estimates indicate that the real non-oil GDP contracted by 9 percent (on an annual basis) in the last quarter of 2022, which cancels its growth during the previous three quarters, with the continued stability of the foreign exchange market with the help of the bank’s measures.”
The Iraqi Central Bank, as it is expected that the growth of real non-oil GDP will resume and reach 3.7 percent in 2023, after rising to 7 percent in January.
The fund noted that "inflation has begun to moderate, reflecting a decline in international commodities, in addition to a 10 percent revaluation of the dinar, and
it is expected that the average will reach 5.6 percent in 2023."
The experts pointed out, according to the statement, that
"favorable conditions for the oil market supported Iraq's financial and external situation,
but structural imbalances continued to widen, and
in 2022 current account surpluses in public and external finances reached 7.6 and 17.3 percent of GDP, respectively, on the back of revenues." record high oil prices, and the CBI's foreign exchange reserves rose to $97 billion (11 months of imports), including $16.3 billion (6 percent of GDP) in financial savings accumulated by the government, at the time
At the same time, the large fiscal expansion expanded the non-oil primary deficit from 52 percent to more than 68 percent of non-oil GDP during 2022.
financial relief
And the statement added that
“the largest fiscal easing envisaged in the draft budget law of 2023 would widen the primary non-oil fiscal deficit to 75 percent of non-oil GDP and bring the total fiscal balance to a deficit of 6.5 percent of GDP.
The combined effects of
increased government spending, a
revaluation of the exchange rate, and
lower oil production have
raised the fiscal breakeven price of oil to $96 per barrel.
Experts stressed that
"in the short term, the implementation of the authorities' financial plans could lead to a re-ignition of inflation and fluctuations in the foreign exchange market, and
in the medium term, the continuation of current policies in the presence of a great deal of uncertainty about the future course of oil prices poses critical risks to the stability of the economy."
If there is no significant increase in oil prices, the current fiscal situation may lead to an increase in the deficit and intensification of financing pressures in the coming years.
Experts emphasized that
"a tougher fiscal policy is needed to enhance flexibility and reduce the government's dependence on oil revenues while protecting critical social spending needs.
Supporting the government's plan to increase social assistance, the mission recommends stronger targeting to ensure it is directed at the most vulnerable.
https://www.independentarabiacom/node/458411/اقتصاد/أخبار-وتقارير-اقتصادية/العراق-يدخر-الدولار-ويستثمر-بالذهب
Immunization of the economy from global fluctuations
Jabbar Zidan is an Iraqi journalist @jabarzed
Saturday, June 3, 2023 5:27
The Central Bank of Iraq seeks to convert cash reserves into gold (AFP)
"Gold is an adornment and a treasury."
This saying represents what international banks have reached in terms of storing and buying tons of gold as a result of global price fluctuations,
as the Central Bank of Iraq worked to purchase a new amount of the yellow metal in order to guarantee the country's economy, which depends mainly on oil.
Specialists indicate in an interview with "Independent Arabia" that monetary gold is considered a guarantee to avoid the risks of fluctuations in currency exchange rates in which the investment portfolio of foreign reserves varies, stressing that
it is an essential guarantor to protect the investment portfolio of the Central Bank of Iraq against fluctuations in the risks of the exchange rate of the local currency, the interest rate, and others..
30 worldwide
And the Central Bank of Iraq announced, last Wednesday, the purchase of new quantities of gold of approximately 2.3 tons,
which resulted in an increase in its holdings of this metal by 1.79 percent,
bringing its total to (132.74) tons, maintaining its sequence in the thirtieth rank in the world ranking. Gold holdings of the countries of the world.
The Investments Department stated, according to a statement by the media office of the Central Bank of Iraq, that the purchase came with the aim of increasing its holdings of gold in light of the economic and political conditions the world is witnessing.
Gold is considered one of the most important components of the reserves held by banks and international financial institutions, as
they continuously increase their reserves of this metal, because of this procedure’s positive impact on the financial solvency of these institutions and the creditworthiness of their countries.
gold guarantee
In the context, the financial advisor to the Iraqi Prime Minister, Mazhar Muhammad Salih, said that
monetary gold occupies within the base of diversifying sovereign foreign reserves an estimated rate of between 7 to 10 percent of the total components of the investment portfolio represented by various currencies as foreign assets, and managed by central banks.
In the world, including the Central Bank of Iraq, according to international standard evidence, in investing that portfolio in various currencies.
Saleh explained that despite gold no longer playing a direct role in the international monetary system today, "central banks and governments around the world, including Iraq , seek to keep record quantities to protect against economic instability," pointing out that
"it is characterized by less fluctuations in its prices." compared to other individual commodities, trading stocks and currencies, across the world's various asset cycle chains.
investment stability
For his part, Mahmoud Dagher, a specialist in financial affairs and former director general of financial operations at the Central Bank of Iraq, said,
"The increase in the gold balance means the stability of Iraq's foreign investments that belong to the Central Bank," continuing to say that
"currencies are now imitating each other,
so it is better That our reserves in gold are the only effect," denying the existence of an impact on the domestic economy.
financial transformation
On the other hand, economic researcher Nabil Jabbar Al-Tamimi said that
the process of buying gold is driven by financial transformation policies in the midst of the international conflict and expectations of large economic fluctuations in it or fears related to the expected recession,
which is what drives investors to buy gold as a substitute for stocks, currencies and other assets.
read more
Gold is a haven for investors in the storm of turmoil
Gold is recovering above $2,000 amid existing economic risks
Iraq is searching for its looted antiquities abroad
Al-Tamimi referred to the contracts signed by the Central Bank of Iraq to buy gold two years ago, during which reserves increased from 98 tons to 132 tons, pointing out that
it will not exceed 9 percent of its total reserves today in US dollars, with investments in US Treasury bonds.
critical risks
On Thursday, the International Monetary Fund issued a pessimistic statement for the Iraqi economy after recovering from the Corona pandemic last year, as he mentioned a number of fund experts who met in Jordan from May 24 to May 31 to discuss with the Iraqi authorities about recent economic developments and expectations as well as policy plans.
In the coming period, the growth momentum of the Iraqi economy has slowed in recent months, reaching a level lower than before the pandemic.
Experts said that
"oil production is set to shrink by 5 percent in 2023 due to a cut in production (OPEC +) and the
interruption of the (Kirkuk-Ceyhan) oil pipeline, in addition to
fluctuations in the foreign exchange market in the wake of tightening control over combating money laundering as well as financing terrorism." by the Central Bank of Iraq, which
negatively affected foreign currency sales.
growth estimates
And the fund’s experts stated in their statement that
“estimates indicate that the real non-oil GDP contracted by 9 percent (on an annual basis) in the last quarter of 2022, which cancels its growth during the previous three quarters, with the continued stability of the foreign exchange market with the help of the bank’s measures.”
The Iraqi Central Bank, as it is expected that the growth of real non-oil GDP will resume and reach 3.7 percent in 2023, after rising to 7 percent in January.
The fund noted that "inflation has begun to moderate, reflecting a decline in international commodities, in addition to a 10 percent revaluation of the dinar, and
it is expected that the average will reach 5.6 percent in 2023."
The experts pointed out, according to the statement, that
"favorable conditions for the oil market supported Iraq's financial and external situation,
but structural imbalances continued to widen, and
in 2022 current account surpluses in public and external finances reached 7.6 and 17.3 percent of GDP, respectively, on the back of revenues." record high oil prices, and the CBI's foreign exchange reserves rose to $97 billion (11 months of imports), including $16.3 billion (6 percent of GDP) in financial savings accumulated by the government, at the time
At the same time, the large fiscal expansion expanded the non-oil primary deficit from 52 percent to more than 68 percent of non-oil GDP during 2022.
financial relief
And the statement added that
“the largest fiscal easing envisaged in the draft budget law of 2023 would widen the primary non-oil fiscal deficit to 75 percent of non-oil GDP and bring the total fiscal balance to a deficit of 6.5 percent of GDP.
The combined effects of
increased government spending, a
revaluation of the exchange rate, and
lower oil production have
raised the fiscal breakeven price of oil to $96 per barrel.
Experts stressed that
"in the short term, the implementation of the authorities' financial plans could lead to a re-ignition of inflation and fluctuations in the foreign exchange market, and
in the medium term, the continuation of current policies in the presence of a great deal of uncertainty about the future course of oil prices poses critical risks to the stability of the economy."
If there is no significant increase in oil prices, the current fiscal situation may lead to an increase in the deficit and intensification of financing pressures in the coming years.
Experts emphasized that
"a tougher fiscal policy is needed to enhance flexibility and reduce the government's dependence on oil revenues while protecting critical social spending needs.
Supporting the government's plan to increase social assistance, the mission recommends stronger targeting to ensure it is directed at the most vulnerable.
https://www.independentarabiacom/node/458411/اقتصاد/أخبار-وتقارير-اقتصادية/العراق-يدخر-الدولار-ويستثمر-بالذهب
