Abdul Basit Turki (Mashreq): The policy of external borrowing will lead to economic r
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    Abdul Basit Turki (Mashreq): The policy of external borrowing will lead to economic r

    Abdul Basit Turki (Mashreq): The policy of external borrowing will lead to economic recession



    Mashreq - Special:


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    Date Posted 16/05/2017 03:58 PM


    Abdul Basset Turki stressed that the continued clinging to resolve the economic crisis through Iraq through borrowing and reducing public spending without changing the exchange rate of the Iraqi dinar in securing revenues to cover the current spending of the state will quickly lead to further economic recession and erosion of foreign assets, especially the reserve of the Central Bank of Iraq.

    He added in an important article about the Mashreq that "all the problems of public indebtedness and the disadvantages of external indebtedness in particular, especially that resorting to administrative decisions (imposing customs tariffs, increasing fees, tax collection) under an administrative system (incompetent), indicates that this device will find these decisions opportunity for further personal enrichment at the expense of economic activity and the income of the private sector, which is being transferred to the subsequent burden on the shoulders of the ordinary citizen. "

    The General Budget for 2017 ((what it has and what))
    Dr.. Abdulbaset Turki Saeed

    What does the 2017 budget indicate? And where is the Iraqi economy heading?

    What are the dimensions of his current crisis? What are the mechanisms that deepen this crisis?

    As is the previous budgets, the 2017 budget was planned indicate a deficit reached 21.66 trillion compared to 24.2 trillion and 25.4 trillion Iraqi dinars for the years 2016 and 2015 , respectively , as the following table indicates (billion dinars):

    Taking into account the actual revenue generated from the sale of oil for 2014, 2015 and 2016 as the main source of budget revenues, the actual deficit (not planned) is expected to be more than in previous years. Oil revenue decreased from $ 79.3 billion to 43.1 billion and 28.1 billion dollars for those years (2014, 2015 and 2016, respectively).

    To get closer to this problem, the average price per barrel in the first three months of 2016 was less than $ 25 and at the cost of production per barrel currently shows the size of the expected rent gap, it is known that the deficit comes either from a decline in revenue or increased spending for the general budget or the two together.

    And because the revenues of oil source often form a proportion of funding exceeding 90% of this budget and for the purposes of characterization of the problem, the decline in revenue is the decisive factor in the existence of this deficit, which is actually happening continuously in Iraq either directly through the actual decline in revenue or indirectly through the failure The abundance of revenue is motivated by lack of rationality in spending.

    The traditional recipes in economic policies indicate that the deficit is being met by trying to maximize the alternatives and reducing public expenditure. This ready-made description is what was taken in the 2017 budget, either at the request of the International Monetary Fund or according to the visions of the Iraqi financial administration.

    Vtm build tables of financial amounts are not suitable at best not to fund the operation of the face of the government where he continued to consider the budget as the only public financing fund.

    Yes, everyone understands that the situation in Iraq is exceptional and talk about the magnitude of the challenges is no longer a secret to anyone, but not to pay until we realize that the most important to look at the budget not only the economic dimension, but also the social impact does not deserve the challenges of which everyone speaks either by mask or for the purpose of marketing that formulated the budget in public leads to the efficient operation of the resources available to push the economy out of its crisis and society away from some Totruth accompaniments of the recession, unemployment and disruption.

    The most problematic forms of treatment are the mechanisms adopted in the face of this deficit. In terms of finance, it was adopted in the face of increasing external indebtedness, in addition to the expansion of borrowing from commercial banks, both public and private, with the insistence on continuing to pressure spending. Any further unemployment and recession?

    When reviewing the development of this indebtedness, which is estimated (optimists) it amounted to $ 110 billion, it means that the Iraqi budget in a time not to be paid a year installments of this debt and interest and with the continuation of the same direction (which sees the budget is a government fund only ),

    This debt will continue to increase (monitored in the budget of 2017 to meet the debt service more than nine trillion dinars), strange that those who defend this policy completely disregard the words of their professors more than four hundred years of (religion is evil and public debt is evil in the sense Floor),

    there are no unconditional debts and talk about debt owed He is pleased to talk about the amounts of cash and not the implications of the granting of privileges and inducements to meet the lenders and the more the exceptional circumstance that Iraq lives in the complexity, the weaker the opportunity to bargain and negotiate to borrow.

    The world is aware of the future investment opportunities in Iraq, at the same time that knows the way to face the financial administration in Iraq for the crisis and may push for its adoption, there are no loans from international organizations without conditions, and through direct experience and readings of international experiences nearby, it depends on the strength of the national negotiator Which stems primarily from its credibility in the direction of financial and economic reform?

    When the IMF and the World Bank granted the latter loans to Iraq, some were not hoping for the loan itself, but because it would prompt other lenders to believe and conclude that Iraq was heading for a serious reform of fiscal and monetary policy that would be supervised and monitored by the International Monetary Fund.

    But the expectation is otherwise, (and I hope to be wrong, Iraq does not need more problems). We believe that the price of a barrel of oil will return to the pre-2014 level and thus exceed the funding crisis, while the most realistic expectations and requirements this year to pay for selling more than 42 US dollars a barrel, the price adopted when the budget estimates for 2017, which Is logical after the actual price of the barrel approached a lot in the last months of 2016, but will not return to what it was at the threshold of 100 dollars a barrel, and do not go optimists beyond the arrival of the price of selling Iraqi oil barrels to more than $ 55 this year,

    and if we consider Costing the production of the drum The net deficit that will enter the Treasury will be close to $ 35 per barrel and with the increased need for military and security spending, the actual deficit gap will continue, and with all the stated directions to increase the sources of non-oil revenues,

    the second sources of revenue now is the tariff and customs reality that the actual border crossings tend to move away from the public treasury fueled day after day is expected to decline Theseladtha, it has become the privilege of localities as being sovereign and every day to publish media stories and incidents point to a decline in federal control Li these ports, as well as for the matter of taxes and other important .valthesel tax administrations succeed in overcoming the disadvantages experienced by, it depends on the effectiveness and transparency of economic activity data generated by this activity.

    Everyone knows that economic activity is constantly declining, in addition to the serious pursuit of taxable establishments for the conduct of any available means of tax smuggling.

    The income streams of employees and regular employees remain a source of administrative verification away from the efficient sources of these taxes. IDPs become the possibility of the pressure of public spending is available towards the pressure of the investment plan for the public sector where the first takes the financing of the current budget (operational) of salaries, wages and international commitments the bulk of this funding .

    Thus , we continue to secure the money to spend A achieves, in light of the recession and the economic chaos of an economy open to the outside substantially, any significant return or return an influential future in the process of pushing the economy.

    We simply need to run the economy and manage the state apparatus to provide basic services to citizens under social, political and economic crises. What has been resorted to is more borrowing, which means assuming oil prices improve and economic management is developed.

    Iraq will be able to repay debt but at the expense of development opportunities. And building for the immediate future and for future generations. As the current exchange rate of the Iraqi dinar continues (adding to the prevailing security and administrative situation), the chances of attracting foreign investment are costly compared to other regions, including regional ones affected by prevailing tensions In its surroundings now.

    The continued adherence to the solution through borrowing and reducing public spending without changing the exchange rate of the Iraqi dinar in securing revenues to cover the current expenditure of the state will quickly lead to further economic recession and the erosion of foreign assets, especially the Reserve Bank of Iraq, in addition to all the problems of public indebtedness and the disadvantages of external indebtedness, , especially since the resort to administrative decisions ( the imposition of customs tariff, increasing fees, tax collection) under the administrative apparatus (incompetent). Where experience suggests that this device will find in these decisions chance for further personal enrichment at the expense of economic activity and the income of the private sector, which is being transferred to the subsequent burden on the shoulders of the ordinary citizen.

    In addition to the contribution of these decisions in the further administrative complexity under the situation is already complex, is expected to oppose the exchange rate change the first two groups based on the exchange rate change in all experiments is accompanied by high inflation rates up in some high levels may exceed The rate of more than ten years earlier and the resulting social disorder and perhaps political as the segment, which is affected by a large inflation is a segment of low-income where the erosion of the real entry, and when it says that all experiments indicate high inflation, it means that the harm before the decision-maker forced To overcome greater damage and promising him what is available In order to reduce the impact of this damage, economic policy is a choice between alternatives.

    In light of the crisis, it is a choice between a bad alternative and a more bad one. It is related to those who are affected by this crisis, especially as inflation rates in Iraq are constantly declining. Efficient economic resources for a decline in available markets.

    After the recent Egyptian experiment, other arguments failed to see that the IMF did not agree to change the exchange rate while the IMF welcomed Egypt's support when the exchange rate of the Egyptian pound was strengthened. This was reflected by the increase in the foreign exchange income to Egypt due to this flotation. other markets, particularly in the field of real estate investment and remittances from Egyptians abroad. the IMF calls for policies calling for price stability, but according to the real prices, how can we continue to defend the exchange rate is supported?

    To what extent can the central bank reserve continue to support this price ??

    The other group is the group benefiting from the continuation of the exchange rate as it is through the low prices and costs of imports of foreign products and services compared to the cost of the domestic product as long as the import is actually a subsidized exchange rate in addition to what the speculation achieved profits and returns to them through the difference between Exchange rates, and the arguments of these alone pay for the need to change the exchange rate in a serious and effective to ensure the short-term reconstruction of the artisanal and small sector and the agricultural sector and medium-term real estate and tourism services and in the long term to the stability of technology Beam medium and heavy industry and modernization of the existing ones through the economic feasibility of modifying the successor exchange rate and this represents the impact of the elimination of unemployment and consequent social problems reported.

    The economic recession has made public employment the only viable opportunity for labor force, and in the absence of the government in recent years to expand these opportunities either due to the pressure of public spending or at the request of the IMF, these government employment opportunities will continue to wane and continue unemployed youth groups Increasing.

    The return of the general budget will change the exchange rate will ensure the balance of public financial resources beyond the gap deficit actual without the need for this harmful amount of public debt, which must be seriously thought as long as it is influential now, while it may not be in another time and time.

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    Last edited by MadDScout; 05-17-2017 at 03:55 AM.



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