Iraq’s current cash crisis: bubble or fleeting appearance of a deeper economic crisis?

Date: Monday 14/05/2012 22:04

Karim Mustafa / Iraqi economic      promises to the economic policy in IraqNacher professionals starting to absence (Revelation) guiding and directing and as mentioned I understood (Revelation) that the transition to a market economy and neglected everything else and concluded (wrongly) that the role of the state should be neutral and interference limited in the areas of disgruntlement . Not Nhz opportunities to sit together to discuss our vision for the future Iraq. had a justification can be understood in the early years of the processor where the accumulations of the past and the state’s involvement in the fight against the scourge of terrorism, sectarianism and promote national peace. But that is no longer a concept, especially after the decline of terrorist threats and reverse the risk of strife sectarian. understanding of the business sector is in his own way and considered creative chaos foster capital accumulation initial (read rich quickly, regardless of any ethical standard) and achieved remarkable successes, a few of them and a limited range also represents a effort creative, but mostly Venajmh on trade fugitive not to mention corruption. become the international servers for venture capital and uncontrolled rather than become a servant of capital creative and creative Almnumei of national wealth and binoculars for employment. reflected in the fiscal policy focused mainly on operational expenditure, especially government employment, and Marie the other was the justification for that concept to attract unemployed and lift them out of temptation, crime and terrorism, but for how long? State can not continue employment is not required nor possible. have not seen so far, the best of my knowledge, for any real project most of the wealth and employment, but that the productive sector owned by the state has suffered from neglect deliberately led to the suspension of work, although its facilities capital status good or can be rehabilitated. There is no limit now plan for what we want from the projects this year and what we want in the next year and so in other words, do not have plans for five-year or decimal because of the absence of (the vision). Although the budgets of previous years have included a deficit of «catalytic» as is the concept of Keynesian, the impact on the economy The real was very limited for various reasons, most notably the failure to achieve the planned expenditure, lack of flexibility of the productive sector not only because of the lack of energy surplus, but because of external factors such as security and the lack of electric power and high local wages, etc., and also because of the extremely high marginal propensity to import associated with high values ​​of the Iraqi dinar against the dollar, which leads us to monetary policy. from the general strategy of the State, means the monetary policy by providing the appropriate environment to achieve economic goals envisaged through the monetary instruments accepted. In order to lead the Central Bank of the desired role away from volatility and narrow political passions, dating to grant independence from the executive branch of the state. Thus, the business sector builds his expectations, plans and behavior based on the monetary policy is known and stable, and hopes that the Central is able to address the imbalances immediate in a predictable manner and ensure that his work (effectively and efficiently). faced Central since 2003, significant challenges and serious was mainly the problem of accumulated debts of Iraq, relationship with international institutions, the relationship with international banks, organization and development of the domestic banking system, replacement of the currency, control of the exchange rate, the response to the requirements of the new economic policy and the transition to market economy. These functions constituted a significant burden on a central, but faced with courage and succeeded in the exam in general, although bumps here or there.the form of currency auction cornerstone of the work on the stability of the Iraqi dinar exchange rate, but the development quietly in the direction of constant direction of improving the rate of the Iraqi dinar until it reached the current price (1166 dinars / dollars) and this policy was considered a means of curbing the powers inflationary. met with currency auction general acceptance, especially by employees of any owners of limited income as long as the purchasing power of their salaries go up constantly as well as the acceptance of business / importers for obvious reasons, but the production sector negatively affected by this policy which is no longer able to compete with imported goods, which has producers conditions produce the best . also affected by the general budget of the State, as the state must spend the largest amount of hard currency for the same amount of the Iraqi dinar and coincided with the rise in operating expenses are rising, which led to the continuation of deficit financing is not a policy planned, but the result of the status quo with reference to the size of deficit would have been higher if not rise in oil prices and rising production. Although this policy is consistent with the recommendations of the International Monetary Fund but that it seemed desirable government to satisfy the general public under the conditions of political and social inflamed. continuation of this policy has strengthened consumer trends in Iraqi society and thwarted investment in the real sector faced economic situation a recession you real terms did not provide the government sector in the rehabilitation sectors of production did not provide the new investments distinct qualitative nor the minimum and shrank the productive sector sector. This coincided with the continuing chaos in the exchange market, and we mean mainly private banks and banking offices where there are hundreds of offices is approved that do not maintain any records are not subject to any controls or censorship, which led to the continued migration of capital abroad. seems to be prevailing idea behind raising the value of the dinar is a surplus in the balance of payments driven by higher oil prices without regard to that excluding the oil sector will show a huge deficit in the mezzanine of trade and payments and to what extent will the recession is rampant in the real sector. we can say that this is no longer acceptable from the standpoint of macroeconomic analysis and the scars are deep and growing over a long time.The productive sector should recommence its activities and can not be in the light of exchange rates dinar high. The continuation of this trend will increase the pressure on the reserves of the Central and are necessary and a guarantee for the economy as a whole is no doubt that betting on a continued increase in oil revenues represent the consecration of the nature of the rentier economy and increase the risk of crises in the case of the emergence of new trends in energy markets. There is no doubt that the increased integration of the Iraqi economy to the global economy increases the exposure and makes it vulnerable to speculation and crisis and the current crisis, an indication of what it can do speculative international and recall here that speculation on the pound which was led by an individual (George Soros) and speculation that hit Tigers Asian.objectives include the central (to stabilize domestic prices, maintaining the financial system fixed (f) promote development and job creation and prosperity) and seems to be the central activation of the second part of the goals and play a bigger role in guiding advice and guidance to the government as this part whatever completely. believe that the current exchange rate is high and the Iraqi dinar denominated in more than its true value, but the opposite direction will face resistance and opposition Shididtan by the citizens, importers and can therefore understand the course of severe central bank and its cadres after the high price of the dollar in the market is no doubt that the reflections and speculations political. that recognition from this fact should be translated into corrective policies and also a media campaign focused and wide to demonstrate the expected impact in reducing the exchange rate on domestic production and thus employment, can and must be accompanied by fiscal policy and business support for local production. no doubt that the public, if the touch and is convinced of the benefits of policy The new ease of his opposition, particularly if it is satisfied that the reduction will affect positively on employment. and professionals starting believe the need to identify the exchange rate and an average higher than the price announced by the central and defend it and then direction in quiet to modify more radical. This processing utensils and the accompanying regulation of import The foreign exchange market and the other will not bear fruit in the long run radically, but the adoption of the vision of a comprehensive national of the Iraqi economy. can Nacher that (the problem of stagnation of the real economy) is aware clearly by the most prominent researchers of the Central Bank (see the studies published on the Bank) and there are approaches to analytic processors and solid proposal worthy of consideration. Unfortunately, these approaches analytical does not reflect the opinion of the Central or his policies, but only reflect the view of researchers. the publication of studies on central signals the existence of convictions internal need for reform, but not translated into (policies) applied indicates the presence of pressure stronger than the central prevent it. argue that the Western view and its institutions like the IMF in particular, tend to address the recycling of surpluses and cash and Aaadah pumped into the U.S. and European economies to address the crisis and recessionary conditions of the economics of the first world. Any economic zone (or country) succeed in the formation of economic surplus means the other hand the growing trade deficit in another place (America basically and Western Europe in general), which requires work to absorb the surplus through trade policies and / or cash – financial, or wars and local conflicts. of Here we recall its knees Asian Tiger, constant pressure and growing on China to revalue its currency, dumping Gulf arms and consumer goods, entertainment, and wars of the Middle East multiple … etc.. As long as the resources of Iraq have been much greater after 2003 and in the absence (Revelation) sound economic reform – Social is the duty of international institutions is to impose trade policies – monetary working on customary among direct this surplus and absorbed not only in the short term any absorption of the surplus now, but seek to consolidate trade policies – cash to absorb surpluses of future cash through the deepening nature of rent-seeking – the consumer of the Iraqi economy.