politicsMinister of FinanceIraqi parliamentexchange ratedollar exchange rate
Shafaq News/ The Iraqi parliament hosted, on Monday, in its second session of the fifth electoral cycle, Finance Minister Ali Allawi, and discussed the dollar exchange rate and its repercussions on the local market, in the presence of 288 deputies.
The council discussed with Allawi, according to a statement received by Shafak News Agency, the repercussions of the high dollar exchange rate on the market, the damage to the poor segment, and the discussion of public debt and the financial policy of the Ministry of Finance and the proposed treatments.
Allawi reviewed, in a detailed explanation, “the reasons for changing the exchange rate and its relationship to economic reform, which was according to an extensive study in which concerned parties participated and was not an individual decision by the Ministry of Finance,” noting that “the exchange rate change at that time was against the background of the deterioration in global oil prices due to the impact of a pandemic.” Corona and the decline in the volume of Iraqi oil exports, according to the International Monetary Fund, amounted to (4.9%) as well as the failure to approve the 2020 budget due to the resignation of the government, which led to a stifling financial crisis that prevented the payment of salaries of employees and retirees, which prompted the House of Representatives to pass a legal deficit financing amounting to 27 trillion dinars.
The Minister of Finance pointed out that “the 2021 budget, which was developed according to reform plans, contributed to developing solutions, addressing the financial situation, and working to develop the long-term financial strategy by presenting the white paper that restored balance to the Iraqi economy, provided economic stability for people with limited income and corrected local investment.”
And he indicated that “the imbalance in the Iraqi economy is due to the negative accumulations and the direct and indirect state control over the economy since the seventies of the last century,” noting that “reconsidering the exchange rate of the currency in an unstudied manner leads to financial chaos similar to some countries, so the trend was to set the price of Exchanging the Iraqi dinar comfortably to protect it from any external changes in a proactive and correct step in coordination with the Central Bank and studying it with the Prime Minister, heads of political blocs and other parties, in addition to the support of the International Monetary Fund regarding changing the price at a reasonable rate.
The minister explained, “The draft budget law for the year 2021 focused on protecting vulnerable groups in society, applying some elements of the white paper, increasing non-oil imports, and the ministry’s treatment of these groups by allocating more than 9 trillion dinars to help increase social protection allocations, improve the effectiveness of the ration card and support projects. In addition to increasing the pensions of retired people and the allocations for martyrs and political prisoners.
Allawi added, “The benefits of devaluing the Iraqi dinar increased government revenues by 23 percent, including maximizing the funds allocated to finance reconstruction projects, allowing the government to respond to the increase in citizens’ needs and contributing to strengthening the balance of payments for the country and avoiding risks.”
He pointed out that “the rise in prices in the Iraqi markets was not only due to the decrease in the exchange rate of the dollar, but rather as a result of the increase in global food prices since 2020,” explaining that “the rise in global oil prices is beneficial for Iraq and at the same time affects its needs of foodstuffs and oil derivatives. And importing gas that is used to generate electricity by 30%, in addition to reducing the Iraqi external debt by 4 billion dollars in 2021.”
The Minister of Finance spoke of a global imbalance in the economy and a flaw in the commercial, import and institutional situation in Iraq, especially the uncontrolled outlets, as well as the weak absorption of the agricultural, industrial and private sectors of the economic changes taking place in the world, noting that “the rate of payment of farmers’ dues amounted to 65 percent with the presence of many accumulations. for 2019 and 2020”.
And he indicated that “the financial crisis that occurred in 2021 affected the possibility of implementing some of the items contained in the budget law,” stressing that “the completion rate of the white paper, which included 322 axes, reached 61%, especially since” 60% of the border crossings are not controlled. including those located in the Kurdistan Region.
According to the Parliament’s statement, a number of deputies demanded to know the possibility of restoring the dinar exchange rate to its predecessor to reduce price inflation, address currency smuggling outlets and delay payment of farmers’ dues, in addition to the demand for the automation of border crossings and the reservation on the government’s reliance on foreign loan policy and overburdening the country with debts, and setting steps Actual reform without overburdening the citizen, and asking the financial authorities to manufacture small denominations of currency to avoid price hikes due to the lack of middle classes.
The First Deputy Speaker of Parliament, Hakim Al-Zamili, called on the government to “work to impose its control over the financial sectors and to put a basic solution to the commitment of the Ministry of Finance to support the simple classes in society.”
In turn, Al-Halbousi indicated that “the background to the exchange rate change was due to the Corona pandemic, the decline in oil prices, the scarcity of Iraqi imports, and what caused a financial crisis, at which time the Iraqi government was unable to pay its obligations towards employees and retirees.”
The Speaker of Parliament said, “The proposed solutions were identified by several options, including reducing employees’ salaries by 30 percent, demobilizing a number of employees and referring them to compulsory retirement, but the parliament chose to amend the exchange rate, which generated state revenues of 22 trillion dinars and found a solution to the problem.”
Al-Halbousi demanded, “finding effective solutions to maximize financial revenues that enable the state to restore the value of the Iraqi dinar,” noting that “the largest corruption deals that occurred in Iraq were in 2012 when the dollar exchange rate was changed.”
He also called on the Ministry of Finance to “work to present a new vision to address the negative effects that resulted from the exchange rate change, to be presented to the Council within a period of two weeks.”
But the Minister of Finance indicated that this matter is not possible at the present time, as changing the exchange rate is difficult now, as it has achieved stability in the Iraqi economy, and its change is linked to the rise in financial abundance that meets ambition.