Zebari: America supervises the transfer and transfer of Iraqi funds. Pompeo sent a message to Baghdad and Erbil

614 Policy 01/2021/07 22:01

Baghdad Today _ Follow up 

The leader of the Kurdistan Democratic Party, Hoshibar Zebari, said that most of Iraq’s money is in American banks for oil sales, while Washington is transporting the money “cash” to Baghdad by aircraft.

Hoshibar Zebari said in a televised interview that she followed (Baghdad today), that “Iraq is on a hot plate due to the US-Iranian escalation,” noting that “the period until January 20 is tense and troubling until the transfer of power from the current President Donald Trump to the elected Joe Biden.”

Zebari added, “Iran does not want escalation, and this is auspicious, but we fear undisciplined groups,” noting that “what is currently being targeted are logistical convoys of Iraqi contractors with the international coalition.”

He continued, “US Secretary of State Mark Pompeo informed Baghdad and Erbil that the continued attacks against the American embassy in Baghdad will push Washington to close it,” indicating that “the closure of the American embassy will perhaps pave the way for the closure of foreign embassies and the United Nations mission, which will create a dangerous diplomatic vacuum.”

The leader of the Kurdistan Democratic Party asserted that “Iraq is going through an economic crisis, and the embassy closure will pave the way for investment to leave and prevent investors from coming,” suggesting that there will be “2,500 American diplomats in Iraq after reducing the number of embassy cadres.”

Regarding the US military moves in the Gulf region, Zebari said, “The massive US military moves in the Gulf region sent a message to Iran that it should not consider any action as the anniversary of the assassination of the Quds Force commander Qassem Soleimani arrives.”

In the file of Iraqi funds in the United States, the former minister said, “The majority of Iraqi funds are in American banks for oil sales, and are transported through planes as cash money to Iraq, and this matter is continuing, and I was briefed on it by Estzari days of the Ministry of Finance,” pointing out that “the states The United States could do a lot that would harm Iraq economically if targeted. ”

Regarding the devaluation of the Iraqi currency, he stressed that “the option to go towards raising the value of the dollar against the dinar is not new, and when I was in the government, we used to hesitate to go towards it due to fears that it would harm citizens, but now there is no option in front of the government, as you say.”

And the leader of the Kurdistan Democratic Party stated that “the change of the exchange rate took place in consultation with the leaders of the political forces,” noting that “the government white paper is ambitious and good, and it was written to reform the economic situation and convince the international community to help Iraq, but it will only be applied with boldness and correct leadership.” .


Exchange rate concepts

Dr. Muhannad Talib Al-Hamdi


Dr. Muhannad Talib Al-Hamdi


Use works that are open and operating in one country , the local currency to pay for the costs of production and wages of employees, and accrued interest on loans, and perhaps the distribution of profits to partners. However, companies that operate in multiple countries may sell their products in different currencies and pay their suppliers spread across distant countries in the currencies of those countries, and therefore they need to change the local currency to many foreign currencies.


It is also known that companies and countries use the international financial system to borrow in foreign currencies. The best example of this is the Iraqi government issuing treasury bonds denominated in dollars that it sells in the American and European financial markets to borrow amounts in dollars to fill the Iraqi budget deficit. When countries and companies use foreign currencies, they have to deal with changes in the exchange rate.


In this article, we will review some basic concepts related to the exchange rate, the change in the currency rate, the nominal and real exchange rate, as the beginning of a series of articles related to this vital matter, so that the reader is better informed about concepts that have been mixed in the media, which causes distortions in the understanding of the topic and its effects on the economy.


The nominal exchange rate

Also called the exchange rate for convenience, it is the price of one unit of one currency in the equivalent in another country’s currency. For convenience, we express the nominal exchange rate as the ratio of the number of units of foreign currency against one unit of local currency. For example, we say one dollar for 1,450 Iraqi dinars. On the other hand, we express the nominal exchange rate in Iraq by saying that every Iraqi dinar can be exchanged for 0.0007 dollars.


Fluctuations in the exchange rate can play an important role in determining the ability of companies to sell their products to other countries and on the prices that local consumers pay for imported goods and commodities. Take, for example, a bag of rice that is exported from the United States to Iraq. If the price of a bag of rice in the United States was 50 dollars, then its price in Iraq would be  72,500   dinars, if the exchange rate was 1,450 dinars per dollar. But if the exchange rate of the dinar decreased against the dollar and became 1,600 dinars per dollar, the price of a bag of rice would be 80,000 Iraqi dinars. Although the price of a bag of rice in the United States has not changed, the decrease in the Iraqi dinar exchange rate (about 10%) will cause the American exporter to lose some of his sales in the Iraqi market due to the high domestic price of the goods he exports to Iraq.


Likewise, due to the depreciation of the dollar’s exchange rate against the Japanese yen between 2008 and 2012, many Japanese automakers faced a decrease in their sales of cars exported to the US market. In order to avoid the risks that include selling cars against the dollar while bearing the cost of production in Japanese yen, these cars have established factories to produce their cars in the United States itself.


As exports have become a large part of the gross domestic product of most countries of the world, fluctuations in the exchange rate increasingly affect local economies. It can result in any increase in the exchange rate resulting in a significant decline in exports to reduce domestic production companies and laying off some workers. It is not surprising that important economic publications around the world publish exchange rate data and articles on the effect of exchange rate movement on corporate sales and production. Economists and policymakers are closely watching the movement in the exchange rate due to its effect on the economy in general.


The immediate exchange is made between two currencies according to the current exchange rate or what is called the spot exchange rate. Buyers and sellers of currencies can also agree today to exchange currencies at a later date based on a forward exchange rate. The agreements to exchange currencies in future times are called futures swaps and futures swaps.


Forward swap contracts are negotiated between two financial institutions, usually commercial banks. For example, the Bank of Baghdad agrees with a US bank today that after 90 days, it will buy $ 100 million for Iraqi dinars at an exchange rate of 1,450 dinars to the dollar. Whereas futures exchange contracts are made to exchange financial products such as stocks and bonds by people in the markets for exchanging those products, such as the Chicago Mercantile Exchange. Details of futures contracts, such as the amount of currency that each contract contains and the time that the contract expires, are formulated by the management of the market in which the contract is made. The existence of futures and futures contracts allows companies to hedge or reduce the risk of losses that can result from exchange rate fluctuations.


For example, the Iraqi Oil Export Company (SOMO) might suffer some losses if the exchange rate of the dinar rose against the dollar. Suppose that SOMO sells an oil shipment to an American company for an amount of 50 million dollars, and it is agreed that the American company will pay the amount after 90 days when the shipment is delivered. SOMO faces some risks, or the so-called exchange rate risk, as the exchange rate of the dinar may rise against the dollar in the ninety-day period between the agreement to sell and when the payment is received. If that were to happen, SOMO would receive less Iraqi dinars for the $ 50 million. By entering into a forward exchange rate contract at the time of the sale agreement, SOMO can fix the exchange rate to a certain percentage in which it can exchange the dollars that you will receive after 90 days for it, and accordingly reduces the exchange rate risk. Usually companies do not write forward exchange contracts themselves, but rather rely on specific banks to provide these services for a fee.


Each currency has an instant exchange rate against every other currency, or what is called the binary exchange rate. Economists and policymakers see more benefit in looking at a multiple exchange rate, which shows the price of one country’s currency against a group of other countries’ currencies. This group of currencies is called the basket of currencies and usually includes the US dollar, the British pound, the euro, the Swiss franc, the Japanese yen, the Canadian dollar, and possibly other currencies. Each currency in this basket is given a weight according to the amount of trade exchange between the countries of those currencies and the country of origin. In this case the exchange rate is referred to as a semantic number, not a direct price. And like any other indicator, what matters is the movements of the multiple exchange rate over time rather than its value at a specific time.


The exchange rate of the dollar fluctuated greatly since 1973. It witnessed a rise during the eighties against many other currencies, which created great difficulties for American companies to export their products to other countries of the world. However, since 2001, the exchange rate of the dollar in the market witnessed a decline compared to other currencies, which helped US exporting companies to increase their sales around the world.


Real exchange rate

The nominal exchange rate tells us how many units of foreign currency can be exchanged for one unit of local currency. But economists and policymakers are more interested in the prices of foreign commodities and goods as opposed to domestic goods and goods. In other words, they are concerned with the terms of trade, that is, the ratio in which domestic goods and goods can be exchanged for foreign goods and goods. That exchange ratio is called the real exchange rate. The real exchange rate provides a better measure of the change in the prices of a country’s goods and commodities in comparison to foreign goods and commodities than the nominal exchange rate provides. Therefore, when economists and policy makers try to estimate the effect of a change in the exchange rate on exports and imports, they rely on the real exchange rate and not the nominal exchange rate.


Measuring the real exchange rate using a single commodity: the PVC Mac Index

The Economist in Britain introduced the use of the PCMAC index in September 1986 as an index of purchasing power parity of currencies. The index is based on the logical premise that two different processes should naturally adapt until the cost of an identical basket of goods and commodities is the same in the two currencies. Accordingly, the McDonald’s company called Your Mac sandwich was chosen to represent the basket of goods and those similar goods because it is available in a largely identical way in many countries of the world. Therefore, the index helps to compare the currencies of two different countries.


If we take, for example, the price of a sandwich in the United States is five dollars, for example, and in Iraq, seven thousand dinars. Meanwhile, the nominal exchange rate between the two currencies is 1,750 dinars to the dollar. In order to calculate the real exchange rate, we have to find the number of Iraqi sandwiches that can be exchanged for one American sandwich. We can achieve this in two steps. First, we use the nominal exchange rate to convert the US sandwich price into Iraqi dinars. The second step is to divide that by the price of the sandwich in Iraq in Iraqi dinars, to get to the number of Iraqi sandwiches that buy one American sandwich. Which:



The real exchange rate = 1750 dinars per dollar * 5 dollars for the American sandwich / 7000 dinars for an Iraqi sandwich = 1.25 Iraqi sandwiches for every American sandwich


That is, your Mac sandwich in the United States, given the prices in the two countries and the nominal exchange rate in mind, can buy a sandwich and a quarter of similar sandwiches produced in Iraq. It is worth noting that the real exchange rate tells us how much foreign goods and commodities one unit of domestic goods and commodities can buy. That is, we can measure the real exchange rate through the exchange of goods and commodities instead of currencies.


Usually we do not measure the real exchange rate using the price of a single commodity but using the average price, or general price level, in each country. Accordingly, a simple equation can be constructed to compare the local rate and the average prices in the other country with the nominal exchange rate to determine the real exchange rate as follows:

Real exchange rate = nominal exchange rate * (domestic rate / foreign rate)


For example, if the real exchange rate of the Iraqi dinar is 1,500 dinars per dollar, then that value indicates that an ordinary commodity produced in the United States could buy 1,500 units of a similar ordinary good produced in Iraq.


The real exchange rate and the nominal exchange rate move symmetrically only if the ratio of the domestic price rate to the foreign rate rate is nearly constant. This clearly indicates the risks of a significant rise in domestic prices, that is, inflation, compared to inflation in the other country on a change in the real exchange rate.

* Professor of Economics and Political Science, Kansas State University, USA.


Kurdistan Regional Government: Preparations are underway to pay employees’ salaries soon

Kurdistan Region



2021-01-07 07:35

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Shafaq News / The Kurdistan Regional Government confirmed on Thursday that it is continuing its efforts to provide salaries and disburse them to employees as soon as possible.

Government spokesman Gutiar Adel said in a press conference held today and attended by Shafaq News Agency, that the regional government will do all its efforts, and when the preparations are completed by the Ministry of Finance, we will announce the salary distribution schedule.

He stressed that the distribution of salaries is a priority, and we assure those who receive them that we will announce their disbursement soon.


Electricity: The US exemption from sanctions against Iraq will help improve energy


Thursday 7 January 2021 | 12:06 PM

| Views: 160

The Ministry of Electricity confirmed, on Thursday, that the government is serious about taking a set of steps to improve the energy sector, indicating that it is actually proceeding with electrical interconnection projects with neighboring countries. The US exemption from sanctions against Iraq is considered an energy improvement factor.

“The government and the ministry are serious about taking a set of steps, confirming that the government is determined to rehabilitate the gas fields and ensure the fuel plan, in addition to that there is an intention to diversify energy sources, and thus adopt alternative energies such as solar energy, and recycling Waste, wind energy. ”

He added, “The ministry is actually proceeding with electrical interconnection projects with neighboring countries, whether with the Gulf, with the Hashemite Kingdom of Jordan, or with Turkey, under these payments that need time ceilings according to the stages of work. The American side is convinced to extend the exemption for Iraq for an additional 90 days.”

He pointed out that “the American exemption will be an element that will help Iraq to complete the infrastructure and restore the energy situation.”


Saleh and the US ambassador affirm the respect for sovereignty and reject interventions and attacks

Time: 01/07/2021 15:07:22 Read: 403 times

(Baghdad: Al Furat News) The President of the Republic, Barham Salih, received today, Thursday, at the Peace Palace in Baghdad, the US ambassador to Iraq, Matthew Toller, affirming the respect for sovereignty and rejecting interventions and attacks

According to a statement issued by the Media Office of the Presidency of the Republic, Al-Furat News received a copy of it, “During the meeting, relations between the two friendly countries were discussed, and the prospects for cooperation in various fields were developed in the context of the existing strategic dialogue between the two countries, in a way that achieves common interests, in addition to discussing developments.” Conditions in the country. ”

The statement added, “The meeting discussed the latest developments on the regional and international arenas, stressing the importance of reducing tensions and rejecting escalation, supporting efforts to enhance security, stability and peace in the region, using the language of dialogue in resolving outstanding issues, respecting sovereignty and rejecting interventions and attacks.” Forgiveness Al-Khalidi


Kurdistan government publishes details of oil and money negotiations with Baghdad

Kurdistan Region


Kurdistan Region


The Iraqi budget

2021-01-07 06:03

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Shafaq News / The Kurdistan Regional Government published, on Thursday, a number of documents that it said belong to negotiations with the federal government, regarding oil, border crossings revenues and the region’s entitlements from the federal budget.

For details click  here

The deputy head of the regional government, Qubad Talabani, announced on 22.12.2020 to reach an agreement with the federal government regarding the region’s share in the federal budget for 2021, after rounds of negotiations.

The Iraqi government approved the 2021 budget of 150 trillion dinars (about $ 103 billion), with a total deficit of 63 trillion dinars (about $ 43 billion), to be discussed in the Iraqi parliament early next week.

In April, the previous government headed by Adel Abdul Mahdi stopped paying the region’s monthly salaries of 453 billion Iraqi dinars (about 380 million dollars), because the region had not delivered its oil to Baghdad.

Baghdad and Erbil reached an agreement at the end of 2019, stipulating that the Kurdistan Region will hand over its oil to the government company, SOMO, as of the beginning of 2020, at a rate of 250 thousand barrels per day, in exchange for the region’s share in the federal budget.


The agenda of the parliament session for next Saturday

Time: 01/07/2021 12:10:50 Read: 1,963 times

{Baghdad: Al Furat News} Parliament will hold its regular session next Saturday.

Parliament has allocated its session to read the draft federal budget bill for 2021.

The Parliamentary Finance Committee announced yesterday, Wednesday, that it formally received the draft budget bill.

It is noteworthy that the Speaker of Parliament, Muhammad al-Halbousi, announced on the 29th of last month the arrival of the government’s 2021 fiscal budget bill and the extension of the current legislative term for one month, in order to complete many important legislations for the coming period, including the budget.

His deputy, Bashir Al-Haddad, affirmed that “the legislative procedures to complete the federal budget law may take 20-30 days, and that the parliament will begin the first reading of the bill in early January.” 

“There will be serious and intense discussions towards reducing unnecessary expenditures in the budget law, and reducing the deficit ratio for the benefit of the middle classes, the poor and those with low incomes,” he added. 

Ammar Al-Masoudi



The Central Bank sets special controls for exchange companies in the Kurdistan Region



The Central Bank of Iraq


2021-01-07 05:05

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Shafaq News / The Central Bank of Iraq called on Monday, exchange companies in Kurdistan Region to obtain work licenses.

The bank said in a statement received by Shafaq News that “companies mediating the sale and purchase of foreign currencies in (Kurdistan Region) wishing to obtain a work license and register them as a banking company licensed by this bank, based on the amended Companies Law No. (21) of 1997, and the Bank Law Central No. (56) for the year 2004. ”

He added, “Obtaining the license entails advantages that are commensurate with the size of the category in which the company falls into the categories (A, B, C) classified by this bank.”

He explained that “the companies wishing to register in category A must have a capital of not less than five billion dinars, while companies of category B will have the capital of one company not less than two billion and 500 million dinars, while companies represented by category C must not be less than the capital of the company.” One is about 500 million dinars. ”