Iraq News Highlights and Points to Ponder Sunday AM 12-29-24

Iraq News Highlights and Points to Ponder Sunday AM 12-29-24

What Will Happen On Sunday?

Goodbye Dollar Auction.. Central Bank Announces The End Of 20 Years Of Billions And Suspicions

Maysoun Al Shaheen – 964   The matter has been settled.. Iraq will no longer offer its precious dollars in the controversial dollar auction, or what was called the foreign currency sales window and the electronic platform. After 20 years since the start of this procedure, Ammar Khalaf, Deputy Governor of the Central Bank, confirmed in a statement to the 964 Network that the dollar platform has become closed in compliance with the date set by the governor to close it at the end of 2024. Khalaf denied all rumors about the possibility of extending the platform’s work, and spoke with great positivity, reassuring the market and consumers that the overwhelming majority of traders have already adapted to the new system in which the Central Bank does not provide direct dollars to traders. But what will happen?!

The sale of the dollar was a mechanism adopted by the Iraqi government after 2003 during the era of Governor Sinan Al-Shabibi, for several goals mentioned in a study by the bank official, Dr. Walid Aidi Abdul Nabi , including controlling the exchange rate and raising the purchasing power of those with limited incomes, among others. It aims to provide hard currency to traders in order to finance their imports of goods from abroad, but the idea was later subject to much skepticism and suspicion, and the auction became one of the most frequently mentioned files in discussions about corruption, fictitious import invoices, and currency smuggling to neighboring countries, among others.

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According to the new system after the window closes, traders will have to deposit their money in dinars in Iraqi banks that have entered into partnerships with foreign banks (called correspondent banks). These correspondent banks with American banks will undertake all verification and compliance procedures, while the Central Bank will only be tasked with strengthening the dollar balances in the accounts of banks that are able to pass all these procedures. Many experts believe that this step has relieved the Central Bank of responsibility for any potential manipulation of invoices or attempts to smuggle currency, and the Central Bank has thus protected itself from any potential American sanctions with their dangerous implications for the country’s economy.

Khalaf said, “The date for closing the platform is fixed, it will not change and will not be extended. The banks have been preparing since the beginning of this year when Governor Ali Al-Alaq announced his intention to close the platform.”

According to Khalaf, “transfers are made by strengthening the balances of Iraqi banks, and 97% of transfers are now made according to the new mechanism.

This will be noticeable during the first days of the new year, as the Central Bank’s transfers to banks that are operating at full capacity will not change by strengthening the balances with correspondent banks.”

However, he left the door open to the possibility of a very slight and ineffective decline in the Central Bank’s sales.

He pointed out that “the majority of banks in Iraq have correspondent banks and have been operating according to the new mechanism since the beginning of this year, and traders will not face any problem unless their money is in banks without correspondent banks.”  https://964media.com/492488/

Economist: The Decrease In The Actual Value Of The Dinar Will Lead To Inflation

12/28/2024   Economist: Economic expert, Munar Al-Abidi, confirmed that “the value of any currency is determined based on two basic factors: the amount of currency issued, which is the total cash pumped by the central bank, and the size of reserves, which includes foreign currencies, investments, and gold held by the central bank.”

Al-Obaidi said in a tweet seen by (Al-Masry - Today, Saturday), that “at the end of 2023, the amount of currency issued reached 101 trillion dinars, and the value of official reserves reached 145 trillion Iraqi dinars.”

He added, "As for the situation at the end of 2024, the amount of currency issued remained at the same level of 101 trillion Iraqi dinars, and the value of official reserves decreased to 139.7 trillion Iraqi dinars."

He pointed out that "the continued decline in the actual value of the dinar will lead at some point to an increase in inflation as a result of the decline in the strength of the dinar compared to reserves alone. All this while the average price of Iraqi oil was high, so how will things turn out in the event of a decline in oil prices?"

He continued, "The impact on the value of the Iraqi dinar, despite the stability of the issued monetary mass, the decrease in the value of official reserves by 5.3 trillion Iraqi dinars led to a decline in the purchasing power of the dinar, and as a result of this decrease in reserves, the actual value of the Iraqi dinar decreased by 5.3%."   https://almasra.iq/113717/

124 Trillion Dinars Iraq's Revenues In 10 Months And An Expert Warns Of "Oil"

2024-12-29 Shafaq News/ The Iraqi Ministry of Finance revealed on Sunday that the size of revenues in the federal budget during ten months exceeded 124 trillion dinars, while an economic expert considered that the "excessive" dependence on oil may expose the country to economic fluctuations.

Shafaq News Agency followed the data and tables issued by the Ministry of Finance in December of this year for ten months starting from January until October of the current fiscal year, which showed that the revenues from oil decreased slightly to 88%, but it still constitutes the main resource for the general budget, indicating that the rentier economy is the basis of the country's budget.

The financial tables indicated that the total revenues for ten months of the current year amounted to 124 trillion, 659 billion, 47 million, 830 thousand, and 362 dinars, indicating that the total advances amounted to 18 trillion, 74 billion, 75 million, 887 thousand, and 751 dinars.

According to the tables, oil revenues amounted to 110 trillion, 220 billion, 945 million, and 501 thousand dinars, which constitute 88% of the general budget, while non-oil revenues amounted to 14 trillion, 438 billion, 778 million, and 884 thousand dinars, which constitute 12% of Iraq’s general budget.

For his part, economic expert Mohammed Al-Hasani said in an interview with Shafak News Agency, "This excessive reliance on oil will expose the country to macroeconomic fluctuations, and will limit any opportunity to develop policies to confront expected fluctuations."

He added, "Iraq needs to raise growth rates in the non-oil sector in order to absorb the shocks of oil prices when they decline," indicating that "in order to reduce dependence on oil, a major adjustment of the public financial situation is required based on increasing non-oil revenues, reducing current spending, and reviewing the customs tariff structure."

In March 2021, the Prime Minister's advisor for financial affairs, Mazhar Muhammad Salih, confirmed in an interview with Shafaq News Agency that the reasons for the economy remaining rentier are due to the wars and the imposition of an economic blockade on Iraq during the past era and the political conflicts we are witnessing today, which led to the dispersion of economic resources.

The continued reliance of the Iraqi state on oil as the sole source of the general budget puts Iraq at risk from global crises that occur from time to time due to the impact of oil, which makes the country turn every time to cover the deficit through borrowing from abroad or domestically, which thus indicates the inability to manage the state’s funds effectively, and the inability to find alternative financing solutions. LINK