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Excessive issuance of new currency: Will it push the Iraqi economy towards the abyss?

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Excessive issuance of new currency: Will it push the Iraqi economy towards the abyss?
July 8, 2024 Last updated: July 8, 2024
Hussein Al-Falluji*
In light of the economic challenges facing Iraq, the importance of issuing new currency appears as an important tool of monetary policy that can be used to achieve economic growth and financial stability.
Unfortunately, these funds have been ineffectively directed over the past twenty years towards consumer sectors instead of productivity, in addition to using this tool to fill the budget deficit to cover salaries and the operational budget.
This ill-advised directive, coupled with the dominance of the public sector and neglect of the private sector, led to increased inflation and depletion of the hard currency balance.
Hence, there is a need to reconsider the use of this important tool and adopt a new strategy that focuses on directing funds towards productive sectors that generate income in hard currencies and supporting the private sector.
The economic situation in Iraq
According to available statistics, the volume of cash issued at the end of 2017 amounted to more than 44 trillion Iraqi dinars, while the volume of the monetary mass exceeded 103 trillion Iraqi dinars at the end of 2023.
All of this money was directed towards the salaries and subsidies sector instead of being directed towards productive sectors.
If this money had been dealt with wisely and scientifically and pumped into the industrial, agricultural, tourism and mining sectors, the economic situation in Iraq would have been much better than it is now.
Focusing on productive sectors such as tourism, industry, and agriculture can contribute significantly to increasing GDP and improving living standards.
For example, investing in tourism infrastructure development and tourism promotion can attract foreign tourists and increase hard currency revenues.
Likewise, supporting industry and agriculture to meet the needs of the local market contributes to increasing the gross domestic product and preventing the exit of hard currencies by adopting modern technologies and improving the quality of products, which enhances competitiveness in global markets.
Reconsidering and scientifically dealing with the new monetary issuance instrument could help in restructuring the national economy effectively and sustainably.
Improving the balance of payments and reducing inflation
This strategy can contribute to improving the balance of payments by increasing exports and reducing dependence on imports.
Supporting the agricultural sector to meet the needs of the local market and exporting the surplus using advanced technology and developing storage and transportation facilities can improve the quality of crops and increase the volume of exports.
In addition, the development of local industries reduces the need to import goods, which preserves hard currency within the country.
Directing funds towards productive rather than consumer sectors also helps reduce inflation resulting from increased demand without a corresponding increase in production.
Increasing the flow of hard currencies into the economy enhances the stability of the local currency and reduces exchange rate fluctuations.
In this way, sustainable economic stability can be achieved that strengthens the national economy and achieves tangible improvements in the standard of living.
Implementation and monitoring
To ensure the success of this strategy, it is necessary to develop a comprehensive plan and economic feasibility studies to determine priorities and target projects.
There must be a monitoring and evaluation system to ensure that funds are used effectively and that desired objectives are achieved.
Cooperation with international financial institutions and strategic partnerships with the private sector can enhance the effectiveness of implementation.
On this occasion, we demand stopping the issuance of cash for the purposes of filling the deficit in the operating budget, and emphasizing strict commitment to directing any new funds issued towards the productive sectors instead of pumping them into the consumer sectors.
This wise channeling of funds will contribute to achieving sustainable economic development and improving the economic situation in Iraq.
*Independent politician   

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