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Iraqi News Highlights Early Monday Morning 8-21-23

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The Relationship Of The Exchange Rate With The Power Of The Economy

Economical 2023/08/21  Yasser Al-Mutwali  believes that the general public, who are not specialists in economics and finance, believe that the criterion for the strength of a country’s economy is the exchange rate of its currency against the dollar, or any other currency or means.

While most economists in the world unanimously agree that this theory is not valid, we are often faced with a question; Does the value of the currency reflect the strength of the economy of that country?

What concerns me as a specialist in economic affairs is to show the reality of the strength of the Iraqi economy and that the fluctuation of exchange rates does not mean the reality of the country’s economy, as

financial and economic experts agree that the exchange rate for any currency is an accounting number agreed upon between global central banks and does not reflect the strength of the country’s economy.

To analyze the facts of this theory, let’s take a comparison between the Saudi currency and the Jordanian currency, to verify the correctness of the theory from its error.

With regard to the Saudi riyal, for example, (one dollar equals 3.75 riyals), 100 dollars equals 375 riyals), and as for the Jordanian currency (one dollar equals 70 piasters, every 100 dollars equals 70 Jordanian dinars.

The question is: Does this mean that the Jordanian economy is stronger than The Saudi economy?

Of course not, because the volume of Jordan’s GDP is 50 billion dollars, while the volume of the Saudi GDP is nearly a trillion dollars.

From that we conclude that the exchange rate does not reflect the strength and durability of the economy.

Therefore, fixed exchange rates are a purely administrative government decision, not It is related to the strength of the economy, and

if we follow international experiences in dealing with the size of their currencies, Argentina, Turkey and Italy have worked to delete six zeros from their currencies, which is a treatment to regulate currency circulation and reduce its volumes in dealing, and

this proves that the exchange rate is an accounting number, nothing more, and a government decision.

There are trends in some countries that work to liberate the value of their currencies by floating them because the exchange rate of the dollar is floating and liberalized, and

here the estimates of governments remain with such a decision.

Finance and economic experts attribute the reason for the floating to the inability to fix the exchange rate indefinitely, and

this is related to the extent of economic and political stability.

The closest example of this is the Lebanese currency, in which the exchange rate has remained constant for decades, every 100 dollars equals 1,500 pounds, but it was soon exposed to chaos and instability until the exchange rate collapsed, unfortunately, which is what is happening to it now.

In conclusion, the Iraqi economy is strong and solid,

but the fluctuation of the exchange rate is caused by the political and economic instability in the country.

Parallel Market

Economical 2023/08/15  Muhammad Sharif Abu Maysam  The statement issued by the Central Bank on the third of August, regarding the rise in the exchange rate, is among the most important statements issued by this bank in this regard.

The statement clarified all the circumstances that stood behind the speculation market in exchange rates over the years, and presented the motives of monetary policy and its tools aimed at achieving monetary stability. before the law.

The media and many specialists in economic affairs used to call the black market the “parallel market” in which foreign currencies are traded as a market that operates away from government control, as the price in it is much higher than the official price.

What is new in this matter is that the Central Bank confirms, for the first time, that

“no party or person has the right to trade in dollars issued by the Central Bank, and that trading and trading with it outside the licensed authorities is a prohibited activity according to the law, according to the text of Banking Law No. (94) of 2004.”

This matter, if applied on the ground, could contribute significantly to achieving monetary stability as soon as possible, without underestimating the importance of other monetary policy tools referred to in the statement.

The parallel market must have its own sources of foreign currency, as it is.

In many countries, the demand for foreign currency is met by private sector exports, domestic tourism, remittances from residents abroad, or other market activities governed by legal market relations.

While the central bank intervenes in cases of imbalance in the exchange rate between the official market and the parallel market with the aim of creating stability in exchange rates, as in cases of “managed floating of the currency”, not that the source of foreign currencies traded in the local markets is from one source, the central bank, and the market is black market parallel.

Accordingly, and as stated by the Central Bank, such a market is a “speculative market,” and

the Central Bank has the right to follow legal methods to sue speculators and those who promote them through the media or through social networking sites, as long as it is its only source, and whoever proves otherwise has the right to trade at the prices it decides.

Because legitimizing illegal practices through these media tools has contributed over the years to shuffling the cards and harming the national economy.

An Expert Proposes Solutions To Limit The Rise In The Dollar In The Parallel Market

Economical 2023/08/19   Baghdad: Haider Fleeh Al-Rubaie,  the economist, Munaf Al-Sayegh, proposed a set of solutions to control the parallel exchange rate and undermine the dollar, pointing out that

the presence of two different exchange rates could confuse the local market and lead to a kind of imbalance in economic performance, while

he praised the targeted measures In order to limit the rise of the green currency in the parallel market,

he called for “liberalizing the exchange rate” in accordance with the levels of supply and demand and foreign trade activity, as well as working to change the pattern of the balance of payments and the trade balance.

According to specialists in economic affairs, the Central Bank succeeded in controlling the exchange rate of the parallel dollar, and put an end to the booms that that currency witnessed in previous times, indicating that

the packages of decisions issued by the monetary authority led to strengthening confidence in the national currency, stressing at the same time,

The fluctuation of the exchange rate is no longer an influencing factor in the prices of goods and materials that are now imported at the official price of the Central Bank.  Al-Sayegh told “Al-Sabah”:

“The presence of two different exchange rates leads to a negative impact on economic performance,

especially if it is linked to the pattern of consumption activity and thus will undermine government efforts aimed at enhancing its ability to provide quality services,” stressing the

need to “establish development paths that work on Diversifying economic activity in line with the urgent requirements of society, such as continuous energy, efficient education, health institutions, as well as the provision of high-quality services, indicating that

these steps are sufficient to achieve an active and flexible economy capable of constantly diversifying while creating sustainable development opportunities and diverse and renewable job opportunities within the requirements of economic performance and its obligations. local and international.”

In order to find remedies for the economic effects of the existence of two different exchange rates for the local currency, the jeweler believes that the exchange rate must be liberalized in a flexible manner, according to the levels of supply and demand, as well as the levels of commercial activity of foreign trade, in addition to the need to work to change the pattern of the balance of payments and the trade balance in a way that leads to its transformation Gradually from negative to positive.

Al-Sayegh also stressed the importance of changing the spending pattern in the budget towards the productive investment that leads to serious development paths, taking into account the change in foreign trade patterns from consumer goods to productive goods linked to a specific economic activity, as well as the trend towards making a fundamental change in the pattern of performance and activity.

Finance for public and private banks, enhancing the efficiency of government programs aimed at pushing development projects that support economic activity in general, and expanding small and medium entrepreneurial projects among young people.


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