Regional events are shaping Iraq’s economic trajectory: a financial crisis, rising prices, and a change in the value of the dinar.
Regional events are directly impacting Iraq’s economic situation, as the country lies at the heart of the turmoil engulfing the so-called Middle East. Following the war instigated by the US and its Zionist ally against the Islamic Republic and its repercussions on the Strait of Hormuz, these factors may lead governments, particularly in Iraq, to adopt decisions that mitigate the damage but ultimately burden the people. This could manifest as salary reductions if the dinar is devalued, austerity measures implemented, and increased fees across various sectors, all of which will negatively affect citizens.
Imran Karkoush, a member of the State of Law Coalition, told Al-Maalouma, “Everyone in Iraq, including its government and the rest of the world, is monitoring the unfolding events in the region and awaiting the outcome of the indirect negotiations between the US and Iran.”
He added, “The Iraqi economy has been affected by the regional developments and military escalation. Iraq is anxiously awaiting the results of the negotiations between Washington and Tehran to restore the status quo in the Strait of Hormuz.”
He explained that “Iraq has been directly affected by the ongoing war in the region. The government is waiting for this conflict to end and for the government to work on strengthening relations within the region and building robust economic ties through rail and trade links between the countries of the region, Iraq, and the world, as Iraq is currently at the heart of the storm and directly affected by current events.”
For his part, economic expert Diaa al-Muhsin explained to Al-Maalomah that “Mustafa al-Kadhimi’s government was the first to take the step of raising the exchange rate of the dollar against the Iraqi dinar under the pretext of providing financial liquidity and addressing the pressures on public revenues resulting from the repercussions of the Coronavirus pandemic. Therefore, any new economic measures must be in line with the requirements of the local market and take into account the living conditions of citizens.”
He added that “raising the exchange rate will lead to a decrease in the purchasing power of citizens and weaken the real value of employees’ salaries, in addition to causing an increase in the prices of goods and foodstuffs, which will negatively affect the standard of living of Iraqi families.”
Al-Muhsin pointed out that “addressing the financial crises should not rely on placing additional burdens on citizens, but rather on revitalizing productive economic sectors, primarily agriculture, industry, and manufacturing, thereby contributing to diversifying income sources and reducing dependence on oil revenues.”
He noted that “the government may resort to other measures beyond raising the exchange rate, including reducing or eliminating some forms of subsidies for fuel, food, and medicine, with the aim of increasing public revenues,” emphasizing that “such steps will directly impact citizens because they target their daily spending and living standards.”
In a related context, political analyst Qasim al-Tamimi told Al-Maalouma that “Iraq has internal debts amounting to $90 billion and external debts of around $30 billion, which Iraq obtained through borrowing due to the decline in domestic cash liquidity.”
He added that “the government will face difficulty in controlling the dollar currency in local markets, especially since this currency is directly linked to the US Federal Reserve, as Iraq depends on oil sales that reach the aforementioned bank before being sent to Baghdad.”
He added that “Iraq is suffering from many problems caused by the current situation in the region after the significant decline in oil sales, and this has clearly affected the availability of funds. Therefore, the al-Zaidi government faces a major challenge regarding the financial and economic situation.”
Almaalomah.me