Is the strategic balance of the Central Bank of Iraq is in danger?
Is the strategic balance of the Central Bank of Iraq is in danger?
June 1, 2015
Iraq faces in light of security and economic situation many challenges spawned many of the economic problems, especially the war against state regulation “Daash” , And a liquidity crisis in the country, and its impact on the financial budget suffered a deficit exceeded $ 25 billion this year.
On the other hand affected by oil infrastructure, facilities and cut transport routes as well as the displaced file are all factors that have led to a decline in the economic situation a lot in recent years, with fears that remains the decline continues, especially with the Iraqi economy’s dependence on oil primarily.
financial situation of Iraq and severely worsened by the collapse of oil prices since last year, as well as state regulation “Daash” attacks.
Hence the loss of Iraq to tens of billions of hard currency needed to maintain the economic recovery and achieve more economic growth.
The Central Bank of Iraq has confirmed earlier that the stability of the foreign reserve near $ 76.3 billion, which is a good index enhances the ability of Iraq to face the repercussions of lower oil prices
and is considered the Central Bank of Iraq, this stockpiling well despite the deterioration World oil prices, expected to Iraqi cash reserves rise to 70 trillion end of this year.
Several factors led to the decline in liquidity and the deterioration of the financial situation in the country was the most important:.
• war on “Daash”
I’ve drained the war against the state regulation “Daash” huge funds of Iraq’s money in arming, training and funding the Iraqi army and the crowd folk and others, in addition to material losses caused by the organization Daash in cities and regions that have taken place under his control, a loss estimated at tens of billions of dollars.
Low oil prices
have caused a collapse in oil prices, significant breakdown in the structure Iraq’s economy just as it is commonly known Iraq is a country very heavily dependent on oil imports up to 95% In this context, the IMF announced that the Iraqi Central Bank’s foreign exchange reserves fell from $ 78 billion at the end of 2013 to $ 66 billion at the end of last year, which indicates the magnitude of the impact brought about by the decline in oil prices on the Iraqi economy.
The estimated losses, neglect and mismanagement in the oil sector by about $ 14.5 billion between 2011 and the end of 2014, ie the last three years to the era of former Prime Minister Nuri al-Maliki. Commented and current oil minister, Adel Abdul Mahdi, on these losses, saying: «This is the real corruption. These are real losses and waste. This is the real lack of planning and good governance ».
• displacement crisis and deciduous infrastructure
comes the suffering of Iraq, from the control of the “Islamic state” of large areas of the country, which led to the displacement of much of the population, and the destruction of infrastructure, and increased military expenditures dramatically.
According to a study of the International Energy Agency and consultants who prepared the study energy strategy for the benefit of the advisers in the Cabinet, heavy casualties to the overall energy sector, especially in the field of electricity. extends
According to the study, it estimated the economic damage resulting from a lack of electricity production, estimated at $ 40 billion annually due to lack of the availability of electricity to the task of sectors of the Iraqi economy.
The estimated number of local government in Baghdad lagging projects in the capital, only 750 projects attributed the breakdown to a lack of financial resources. And it excluded the completion of the majority of this year or the implementation of new projects.
• Corruption file
either for corruption is endless, the Finance Committee in the Iraqi Parliament revealed the country’s loss of about $ 360 billion, due to corruption and money-laundering operations, held for 9 years and in the period between in 2006 and 2014.
According to reports, the eligibility of banks to buy currency and transfer abroad under the pretext of buying goods and goods does not reach them to Iraq so little that there will be any investment returns on the reality of the Iraqi service.
Reports say that there are remittances worth billions of dollars have been transferred to Syria and Iran, which which reflected on the release of the foreign currency in the Iraqi financial market decline and the decline of the Iraqi currency level in the markets for the benefit of the dollar.
And here says former governor of the Iraqi Central Bank, Sinan al-Shabibi, that price stability in the area of foreign currency requires that supply matches every demand, to achieve price a fixed exchange rate, can be changed by inflation and circumstances ratios, and interview presentation of the request fully capable of preventing the creation of a parallel market exchange rate (black market), and thus the stability of the exchange rate and the lack of plurality. ”
size of the national reserve
and refers Shabibi that “the size of the reserve that has been built for years is the one who ensures exchange rate stability, and this should not be disposed of for purposes other than this. ” Shabibi and asserts that “the dollar when the central bank to leave does not finance commercial operations only, but also used to finance all international payments.”
and concludes that “any determination of ceiling supply and compel the central bank it, will hurt the law of supply and demand and lead to currency instability, and this applies to determine the central exhibit in the daily auction $ 75 million, “and that” must instead strengthen supervision conditions and the fight against corruption and money laundering. ”
It is noteworthy that the central bank confirmed, during the month of January 2015, that the reserves will exceed the $ 80 billion during the half The first of the same year, but will not reach $ 100 billion due to weak retail Iraqi oil revenues and through which access to the dollar to strengthen reserves.
and here we refer to a previous study of the Deputy Governor of the Central Bank of Iraq at the time d. The appearance of Mohammed Saleh, says that Iraq is still subject to the so-called specific types of risk are called risk countries, a country risk arising from economic changes and political risks of any country. Which comes on top of those risks subject (the shortage of foreign currency reserves). And that this factor is one of the most dangerous factors to be considered to Iraq from outside the economic entity. And that any reserve fluctuation or change in the formula or decreasing or devote controls to restrict foreign exchange and foreign transfers and confusion to this subject, is the Association sensitive indicator of risk countries and puts the country in the lowest credit rating in terms of its worth outside world and deal financially with him properly and naturally, and indeed is still Iraq live This situation to this day.
The mismanagement of the Central Bank reserves to the country’s economy suffered a major economic crisis, so must be the central bank to link with all the international banks and should be efficient and transparent management of currencies and is gaining considerable experience in the management of foreign currencies “.
Sovereign wealth fund
put up sovereign wealth fund before a period of not Balgaribp but talking about it began after exposure Iraq to the financial crisis, sovereign wealth fund and be by calculating the sums of money accruing to previous years because when approving the budget, there is a difference between the budget and the actual price, which is sold by the barrel of oil.
The The purpose of the fund is the existence of a financial reserve of the state and is used in emergency situations that occur as a result of circumstances beyond the control of the State and the fund can help the stability of the Iraqi dinar exchange about the foreign exchange rate, and the interest from this fund can not be collected in the short term.
What needs Iraqi economy?
economic institutions in Iraq need today to competencies and national based on technocrats, who dominate the country’s interests on the political affiliations and sectarian, ethnic, and work in a spirit of Iraqi country and away from the sub affiliations foreign loyalties and optimum exploitation of national resources equally without as well as the search of new sources to supplement the Iraqi economy to reduce dependence on oil as the sole source of revenue for the country, and change the Iraqi Central Bank’s policy in favor of Albullad.
of the Iraqi economy live moments critical less what can be described as a move toward the abyss, and is still suffering greatly, because of the weakness of government programs in all regulatory, administrative, and financial planning and the lack of genuine will in the fight against corruption and the corrupt who they had delivered the country into this case joints.
Has to be the central bank reserve management official away from foreign interference and that there be harmony with all the international banks and should be efficient and transparent management and considerable experience in the management of foreign exchange currencies.