Samir Abbas Alnasiri *: the financial crisis in Iraq - and the implications of the proposed reform policies

- PUBLISHED IN 12/17/2015

International reports and recent indications of continuing decline in world oil prices suggest that the range is the average price between (37-39) dollars a barrel and this means that Iraq within the state of the current market prices and glut in supply will can not selling point of more than $ 30 Apenma passed the House of Representatives Iraqi budget in 2016, based on the oil price estimates of $ 45 and an average of Marketing (3.6) million barrels a day is an indication of the extent of the great damage that would be his Iraqi economy and the worsening of the financial crisis afflicting during 2015 and will continue in the previous analytical reading us until 2017 light or even a year 2018.

In the face of this reality, which can not be bypassed quickly and easily with high war on terrorism, the costs and the inability of the other such as agriculture and industry sectors of the economy and tourism to contribute to the extent required to boost non-oil revenues, the Article 25 of the Budget Law, which was approved by the House of Representatives and for the imposition of new taxes on mobile phone and on the import of some commodities and goods will not change in the subject anything with a trace clear in achieving good revenue, so we believe that the implications and challenges facing the Iraqi economy over the next year will be significant and requires find treatments and solutions to mitigate the coming impacts.

Challenges and implications

That the expected fallout of the current financial crisis on the Iraqi economy can be identified, including the following:

1. Continuation and worsening of the sharp decline in global oil prices, which dropped by more than 60% compared to price levels a year ago and despite the fact that OPEC will try to reduce daily production rates in order to maintain the rates ranging between (40-50) dollars per barrel, but that is uncertain and will remain glut in the supply falls within expectations only into which the government will be forced by clicking on the spending heavily to great rates and ratios as the budget deficit that rates will rise and we expect to more than 35 trillion dinars to 2016.

2. The decline in oil prices led to the reduction of state plans in the reconstruction policy and affecting the continuity of investment projects, particularly in the development of the oil industry in order to develop the revenue from the sale of crude oil and industries different lives despite the government's announcement of economic reforms package in this area.

3. Since Iraq from countries that import most of its food and intermediate and consumer goods the recession and depressed economic will reflect the existence of difficulties in the supply of easily the Iraqi market and in particular the ration card which creates psychological problems, economic and Mashah citizens, which will exacerbate the crisis of displaced people who number more than ( 3.2) million displaced people inside Iraq and increase the poverty rate to more than 25%.

4. Unemployment rates will rise manpower capable of working more than the current ratio of 31% and will rise and unemployment rates of inflation if there is no finding of economic policies and ways to address the expectations of the above notes that Iraq is facing numerous and severe economic problems if it were not current processors and economic reforms radical and effective so it requires from the Commission on the crisis in the Council of Ministers and the Central Bank of Iraq and the Ministry of Finance and Planning and Development Cooperation to take pre-emptive and precautionary measures necessary to do so.

5. Media economic campaigns to the media is competent and private defamation and charges for the banking sector of the Iraqi government, both the National and dissemination of the charges on all banks with the knowledge that the number of index banks violating the instructions and took punitive measures against it by the Central Bank of Iraq of not more than (5-10) banks of the total 57 government bank and my family and this is reflected clearly on the abuse of the Iraqi economy and adding another problem to the problems afflicting originally.

Fiscal and monetary policies and the proposed treatments:

1. Reconsider the policies of the Iraqi Central Bank's control over monetary policy in the government banking and Ahli system support and reconsider the policies of lending and the mechanics of credit risk management and adopt diversity in the granting of credit and investment in productivity and investment sectors that achieve cash flow is clear and calculated according to the most accurate standards in the assessment of Monetary policy currently adopted.

2. Support of private banks by allowing them to carry out operations and banking tools all of the projects and activities undertaken by the ministries and departments affiliated and non-identified and equated with government banks effectively and practically and to allow domestic banks to open current accounts and fixed deposits of the ministries and public companies and mixed belonging to the state by the financial efficiency of domestic banks and their ability to invest these deposits in the banking tools contribute to supporting the national economy.

3. Reconsider the allocation of bad debt reserves according to the list of guidance issued by the Central Bank of Iraq and give the elasticities and Mddd extra time for banks to be able to liquidate these debts, most of which go back to earlier periods and most owners have migrated outside Iraq and displaced inside for security reasons beyond their because the ad hoc rates Current reserves for bad loans lead to a reduction in profits actually realized and hamper its activities, financing new investment.

4. Speeding up the establishment of the company to guarantee deposits, including making the state contributes to the control and participation in risk management.

5. Aimed at encouraging small and medium enterprises with economic and development feasibility, which produces goods and services competition, which reflected on the reduction of inflation and building the national economy in a new line with the financial situation requires immediately begin to activate the implementation of the Central Bank of Iraq for the allocation of 6 trillion dinars for banks specialized and civil and not implemented initiative effectively reducing its history.

6. Study the development and support and stimulate the Iraq Stock Exchange and shred the means and tools that push up prices for the market and companies index in line, assets and standard output and profits by at least certainly for the nominal value of stocks and prevent speculation that harm Iraq's asset-which does not fit the true and actual value.

7. Reconsider what is stated regulation guidance issued by the Central Bank of Iraq with respect to policies, procedures and credit rating, considering that the application of this regulation is linked to the development of a stable economic and without acute crises as experienced by Iraq at the present time with a focus on executive and regulations which enhances the supervisory role of the Overnmh Bank Iraqi Central Command in monetary policy and profiling.

8. Restructuring and conversion of some public companies (production, real estate, industrial, agricultural, commercial, service (electricity, water, fuel and medicine)) and government banks to companies and banks mixed especially contributed by the private and the private activity of the banking sector both and competence balanced proportions with the state shares with the stipulation that State quotas are not be higher than the private sector rates for the purpose of giving the private sector sufficient flexibility in the administration and to act and make decisions without limitation or restriction with a margin contentment and guarantees provided by the state make them bear the ratio of not less than 50% of the potential risks that remain to import food and Insurance (paragraphs ration card), medicine (life-saving drugs and chronic diseases) confined to the state only and support prices to the end consumer while allowing private activity import and distribution of food and medicine, except as noted above that the administration remains under the leadership of the private sector step by step transition to Aguetdsad market.

9. CBI adoption of new applications and tools of monetary policy steady and planned and in a manner consistent with the reality of the Iraqi economy with the departure of the currency auction sale and the Ministry of Finance to carry out its role in providing the foundation of the local currency through the control of foreign currency transactions.

10. Reduce the unemployment rate currently amounting to more than 31% through the expansion of state support for small and medium productive projects and give the role of the private sector and enable it to contribute to the economic construction and the reduction of high unemployment through the operation of graduates from various disciplines.

11. The Central Bank of Iraq to re-evaluate all government and private banks based on the World Bank report and the observations and analysis of her previous years and work to restructure and re-classify and identify banks that continue operating and functioning in the banking sector or not.

(*) Researcher and economist
Copyright network of Iraqi economists. Permission to quote and re-deployment, provided reference to the source. Network Iraqis economists