A burning economic debate.. Is raising the exchange rate the magic solution for the Iraqi economy?
An ongoing debate among economists in Iraq about the effects of adjusting the exchange rate of the Iraqi dinar against the US dollar on the national economy, especially in the fields of agriculture and industry.
The opinions of experts and officials vary between supporters and opponents of changing the exchange rate, with a focus on how this will affect the productive sectors and the overall economy.
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In 2020, the Central Bank of Iraq decided to adjust the exchange rate of the dollar against the dinar, as the purchase price of the dollar from the Ministry of Finance reached 1,450 dinars, while its selling price to banks was set at 1,460 dinars, and to citizens at 1,470 dinars per dollar.
In February 2023, the Central Bank of Iraq announced another adjustment in the exchange rate, to become 1,300 dinars per dollar, as the decision came in an attempt to control inflation and achieve stability in the general price level.
Protecting the Iraqi Dinar
In turn, economic expert Alaa Al-Fahd believes that “the current exchange rate represents a balance that protects the value of the Iraqi Dinar and maintains the general price level, which helps protect the poor classes.”
“The main reason behind the rise in production costs is due to the rise in energy prices, not the exchange rate,” he told Iraq Observer.
“The real problem that hinders the rise of productive sectors, especially agriculture and industry, is related to the energy crisis, especially electricity, as this crisis leads to higher production costs, which prevents the development of these sectors,” Al-Fahd added, noting that “countries like China have a low exchange rate for their currency, and despite that, their industry is thriving, which means that the decline in the currency may be an opportunity for the growth of local production, and not necessarily an obstacle to development.”
Historically, the Iraqi dinar has witnessed fluctuations in its value. In 1980, the dinar was equivalent to 3.3 US dollars, but its value deteriorated during the Iran-Iraq war, falling to about 4 dinars to the dollar in 1988. After the invasion of Kuwait and the imposition of an economic blockade in the 1990s, the value of the dinar deteriorated significantly, reaching about 3,000 dinars to the dollar in 1995.
Raise the exchange rate
On the other hand, Deputy Governor of the Central Bank of Iraq, Ihsan Shamran, believes that “industry will not rise unless the state finds itself in it, and neither will agriculture unless the exchange rate is changed, as the current rate is unfair, and the Iraqi exporter sells goods at any price and makes a profit because the dollar is very cheap.”
Shamran added in a press statement that “the cheap dollar is pushing some exporters to sell any commodity inside Iraq in exchange for the dollar, as the exchange rate should be between 2,000-2,500 dinars per dollar, considering that the Iraqi currency is very strong due to its high balance.”
He pointed out that “Iraq has reserves of nearly 120 billion dollars against a trading source estimated at 103-104 trillion dinars, which gives the Iraqi currency a cover of nearly 170%, which is not a small matter, but the relationship with the dollar requires adjusting the exchange rate to achieve the required balance.”
Experts have differed on the impact of these amendments on the Iraqi economy. While some believe that devaluing the dinar enhances the competitiveness of local products and reduces the budget deficit, others believe that it leads to higher living costs and negatively affects low-income groups.
Economists believe that the real problem lies in the structure of the Iraqi economy and its heavy dependence on oil, in addition to challenges related to energy and infrastructure, which hinder the development of other productive sectors.
Financial Deficit Document" Turns the Table... Will Baghdad Ask Washington for Help?
/ A circulated document signed by the Iraqi Minister of Finance, Taif Sami, indicating the existence of a "large financial deficit" in the Iraqi state treasury, has raised questions, if true, about the possibility of Iraq requesting financial assistance from the United Nations and the United States of America, especially with the large financial spending in addition to the issuance of American sanctions on Iraqi banks and preventing them from dealing in dollars in external financial transfers.
The document, while addressing the Prime Minister's Office on February 9, showed that "the treasury suffers from a large deficit in financing the salaries of employees, retirees and social care."
However, the ministry returned in a statement saying, "There is no financial deficit affecting salary expenses," noting that "work continues to ensure the stability of the financial policy and provide dues according to the approved plans," according to its statement.
In this context, legal expert Ali Al-Tamimi said in an interview with Shafaq News Agency, "According to the United Nations Charter and under Article 50 thereof, countries fighting terrorist organizations placed under Chapter VII of the United Nations Charter may request economic assistance from the United Nations under the above article of the United Nations Charter."
Al-Tamimi explained, "It is known that ISIS was placed under Chapter VII by virtue of UN Security Council Resolution 2170 of 2014, and various countries have announced their readiness to provide economic assistance to Iraq, including Britain. Therefore, Iraq can request assistance from the international community and the United Nations to rebuild destroyed cities, confront the consequences of the war on terrorism in accordance with the above, and recover the smuggled funds estimated at 350 billion dollars."
Al-Tamimi added, "According to Articles 26 and 27 of the Iraqi-American Strategic Agreement of 2008, Iraq can request economic assistance from America, as this article requires, and it is available accordingly, and the agreement is binding on both parties under Article 102 of the United Nations Charter."
The legal expert explained that "the 2005 International Convention against Corruption issued by the United Nations, which Iraq signed in 2007, allows Iraq to request the United Nations to recover smuggled funds as money laundering and financial corruption, as many countries have done, including Nigeria, the Philippines and Singapore."
Al-Tamimi concluded by saying, "The current global situation and changes in oil prices and the dollar allow for this, and I do not think this is hidden from the Iraqi government."
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Parliamentary Finance hosts the Governor of the Central Bank regarding the increase in electronic payment card taxes
The Parliamentary Finance Committee will host the Governor of the Central Bank today, Tuesday, regarding the increase in electronic payment card taxes.
The head of the committee, Atwan Al-Atwani, said in a statement to the Iraqi News Agency (INA): "The Finance Committee will host today, Tuesday, the Governor of the Central Bank, Ali Al-Alaq, along with the three government banks, Rafidain, Rashid and the Iraqi Trade Bank."
He pointed out that "the hosting is about the Central Bank's letter and the increase in electronic payment card taxes and the extent of its negative repercussions."
He added that "this increase is not small, but nevertheless it is necessary to review the circumstances and motives of the decision, and what are the results achieved through its implementation and enforcement," noting that "these amounts constitute a great burden on the citizen, and we do not want to burden the citizen with additional amounts, but if there are benefits achieved and have a clear benefit and service to the citizen and provide some clear services, we can review them, but if there is nothing new added and provides a real service to the customer, then the citizen cannot be burdened."
Government advisor stresses importance of gold trade governance to support current account of balance of payments
The financial and economic advisor to the Prime Minister, Mazhar Muhammad Salih, told Al Furat News Agency that “adopting advanced industrial protection policies will have a positive impact on the quality of the national gold product and the stability of its prices.”
He pointed out that "this step will enhance the protection of one of the most important pillars of the national and household economy, with a direct and positive impact on the current account of the balance of payments."
Saleh explained that "regulating the import and re-export of unprocessed gold will contribute to achieving added value for the national economy," stressing "the importance of close supervision by the competent authorities to ensure that the movement of gold is limited within the framework of an economically organized trade with high returns and sound governance."
The Industrial Coordination Council had approved in its meeting the day before yesterday, Sunday, the localization of the precious metals industry, including gold and jewelry, in addition to cosmetic products, with instructions to provide all necessary facilities for those wishing to establish their own factories. It was decided to monitor the quantities of gold exported abroad, through controls that determine the quantities remanufactured, and to submit documents to the Central Bank that secure the value of the exported quantity, and to return the quantity after completing its manufacture to the country, under the supervision of the Central Bank.
British Ambassador: Our view on Iraq has been fixed for 30 years, but now it has changed for the better
The British Ambassador to Iraq, Stephen Charles Hitchcock, confirmed today, Monday, that Iraq is a country of opportunities and investments, while expressing his optimism about the future of Iraq, due to the creativity, courage, dignity and endurance of the Iraqi people .
Hitchen said in a speech during the economic conference of the Iraqi-British Business Council, "My mission will end in two weeks, and it is natural for us to start thinking about what conclusions we can offer, and I share with you several ideas after a beautiful experience with you in Iraq. I am optimistic about the future of your country, and the source of optimism is the creativity, courage, dignity and endurance of the Iraqi people ."
He added, "Despite the challenges and problems, you can see that the trend towards the future is more positive in the current year 2025, and this is better than the situation in 2020, which was better than 2015, which was better than 2007, and the trend towards the future is clear and the existence of challenges cannot be ignored or denied, and you know the size of the challenges ahead of you ."
He continued, "For 30 years, British ministers viewed Iraq as a country of crises, a dangerous region and a security challenge. Now, for the first time, we have changed our ideas and see Iraq as a country of opportunities and investments," indicating, "The presence of our embassy in Iraq is not because of the past, but because of the future, and this is a turning point in our ideas ."
He explained, "The Iraqi government is responsive to our ideas and we have a contact group for the Iraqi economy which includes the G7 and the World Bank," explaining, "We spoke with government advisors with the aim of unifying economic ideas ."
He added, "Prime Minister Mohammed Shia al-Sudani's recent visit to London was to renew trade relations and announce projects worth 12 billion pounds sterling, and we have coordination and cooperation with the Prime Minister's Office to implement these projects in the coming period ."
Hitchen concluded by saying, “The most important existential challenge is not ISIS or regional problems, but the demographic and economic situation before you. We expect, over the next 15 years, a decline in the price of oil and an increase in the population, as in 2003 there were 23 million people, now there are 46 million people, and in 2040 the number will reach 70 million people, and this is a big challenge.”
MP expects 150 laws to be postponed to next session
Independent MP Kazem Al-Fayyadh said on Tuesday that many laws would likely be postponed to the next parliamentary session, and explained the reason for that.
Al-Fayadh said, “There are many laws with the various parliamentary committees, and the number of those laws exceeds (150) laws,” expecting that “most of those laws will be postponed to the next parliamentary session, and will not be legislated during this session due to political differences, as well as the disruption of sessions and the absence of most representatives from the sessions.”
He added, "Most of the blocs and representatives are already working on arranging their electoral situation early, and for this reason the House of Representatives will fail to hold many of its sessions during the remaining months of its life, and for this reason most of these laws will be postponed to the next parliamentary session."
Abdul Ghani: We sent a delegation to the Kurdistan Region to agree on the mechanism for delivering and exporting oil
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The Minister of Oil, Hayan Abdul Ghani Al-Sawad, announced today, Tuesday, that a delegation from the ministry has been sent to the Kurdistan Region to agree on the mechanism for receiving and exporting the region's oil through the Turkish port of Ceyhan.
The Minister of Oil said in a statement to the Iraqi News Agency (INA): "A delegation from the Ministry of Oil headed by the Undersecretary of the Ministry for Extraction Affairs, the Legal and Economic Department, and the Oil Marketing Company is visiting Erbil to negotiate the mechanism for receiving the region's oil."
Abdul Ghani added that "contact was made with the Minister of Natural Resources in the region, Kamal Muhammad Salih, to negotiate with the delegation on the mechanism for receiving and exporting oil through the Turkish port of Ceyhan."
The Minister of Oil confirmed earlier this month the move with the regional government to deliver oil in a legal manner to the Marketing Company (SOMO)," in addition to taking measures with the Turkish government to prepare the Iraqi-Turkish line to export oil through the port of Ceyhan.
Expert: Al-Sudani government expenses cost Iraq 10% of foreign reserves
Economic expert, Manar Al-Obaidi, revealed that Iraq's official foreign reserves will decrease by 10% during the year 2024, as a result of the increase in government expenditures compared to the revenue deficit.
Iraq lost 15 trillion Iraqi dinars over the year, equivalent to 10% of its official reserves, according to expert Manar Al-Obaidi.
Al-Obaidi said in a tweet followed by "Ultra Iraq", "During the year 2024, Iraq witnessed a noticeable decline in its official foreign reserves, as they decreased to 130 trillion Iraqi dinars by the end of the year, recording a loss of 6 trillion Iraqi dinars during the month of December alone, which represents 4% of the total reserves."
According to Al-Obaidi, Iraq lost 15 trillion Iraqi dinars over the course of the year, equivalent to 10% of its official reserves, reaching “its lowest level in more than two years, as reserves were at this level at the end of 2022, before rising to 147 trillion Iraqi dinars in November 2023, and then declining again at the end of 2024.”
Al-Obaidi pointed out that this decline "is due to several main factors, most notably the increase in government expenditures, as revenues were unable to achieve sufficient levels to cover the increasing expenses, which necessitated resorting to reserves to cover the financial deficit and finance operational and investment expenses, which are still on the rise."
He also pointed out that "there are other factors that contributed to this decline, which imposes economic challenges that require reviewing financial policies to ensure the stability of monetary reserves in the future."
Al-Obaidi had previously warned of the "danger" of the rise in internal debt in Iraq, which he confirmed had witnessed an increase in one year, equivalent to 4 years from 2020 to 2023.
Iraq's domestic debt witnessed a significant increase of 13 trillion Iraqi dinars in one year, which represents 4% of the gross domestic product," Al-Obaidi said, adding that "this increase in the domestic debt in just one year exceeded the increase recorded during four full years from 2020 to 2023, as the domestic debt increased during that period by only 6 trillion dinars, equivalent to 2% of the domestic product."
Al-Abidi pointed out that "it is noteworthy that this increase came despite the rise in oil prices in 2024 compared to the previous four years, which was supposed to reduce the need for domestic borrowing, but the increase in domestic debt raised the debt-to-GDP ratio to 25%."
According to Al-Obaidi, “Although this percentage is still within the economically acceptable limits, the continued annual growth of the debt at the same pace, along with the possibility of a decline in oil prices in the future, may lead to the debt ratio exceeding 60% of the GDP, which is a dangerous level that would negatively affect Iraq’s credit rating, and may expose it to a reduction in its international credit rating.”
The danger, according to Al-Obaidi, lies in “how the domestic debt is directed, as most of this money is spent on operating expenses instead of directing it towards productive investment projects,” stressing that “these operating expenses do not create added value for the national economy and do not contribute to improving the GDP, which makes the process of repaying this debt more complicated in the future,” indicating that “13 trillion Iraqi dinars as an annual increase in the domestic debt is not just a number, but an alarm bell that requires decision-makers to reconsider spending strategies. It is necessary to direct this money towards investment projects that can strengthen the national economy and raise the GDP, instead of relying on it to cover the increasing operating expenses.”
Al-Obaidi said, “All these economic challenges are due to the rise in public expenditures, which requires rationalizing spending and directing it in the right direction. If immediate steps are not taken to control spending, we will face unexpected levels of debt in the near future, which will put the Iraqi economy in an undesirable situation.”
He pointed out that "addressing the problem of domestic debt requires strong political will and sustainable economic plans, because the continuation of the current situation may lead to a deeper economic crisis that cannot be easily overcome
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Head of the Finance Committee: There are no sanctions on any Iraqi financial or banking institution
The head of the Finance Committee in the House of Representatives, Atwan Al-Atwani, confirmed today, Tuesday, that there are no sanctions on any Iraqi financial or banking institution.
Al-Atwani stated in a statement - received by the Iraqi News Agency (INA) - that "the Parliamentary Finance Committee hosted the Governor of the Central Bank, Ali Al-Alaq; to review the financial and monetary policy."
The head of the Finance Committee confirmed that "there are no sanctions on any Iraqi financial or banking institution, and that salaries are secured and there are no concerns in this regard."
Member of Parliamentary Finance: Budget deficit accumulates to 20 trillion dinars
Kocher told Al Furat News Agency, "This deficit has accumulated over the past years, especially during the years 2023 and 2024, reaching unprecedented levels ranging between 15 and 20 trillion dinars.
Koger pointed out that "the current financial indicators reflect major challenges facing the Iraqi government in managing financial resources and public spending."
He explained that these figures call for a review of financial policies and government expenditures to ensure economic stability.
Parliamentary meeting with the Governor of the Central Bank and officials from the Ministry of Finance
The Parliamentary Finance Committee held a closed meeting today, Tuesday, with the Governor of the Central Bank, Ali Al-Alaq, the directors of Rafidain Bank and the Trade Bank of Iraq (TBI), the Director of the Anti-Money Laundering Department at the Ministry of Finance, and other officials, to discuss the file of financial sanctions on some banks. /
Iraq, China discuss strengthening bilateral relations in economic, trade and investment fields
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