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What are the implications of raising the value of the dollar against the Iraqi dinar?
Wednesday 10 June 2021
Today, countries are built on several foundations and sectors, the most important of which is the economic sector, and the value of the country’s local currency and its strength against the currencies of other countries are included in this framework, and since the currency of the United States of America is the one that dominates the currencies of other countries and their economies, the Iraqi economy and its local currency ( The Iraqi dinar) must be affected by any increase or decrease in the exchange rates of the dollar, and this requires knowing the extent of its impact on all classes of society, especially the poor ones.
The rich class with high salaries and many economic projects will have a small impact on it, while the middle class with reasonable salaries is affected by a higher percentage than the affluent class, but members of the toiling class with daily incomes (workers and earners) are the most affected and most harmful than others.
Since Iraq is a rentier country that depends on one resource for its economy, which is oil, all other commodities are largely insured and competitive with local commodities, to the extent that it led to the closure of many local factories and the cessation of national production, and with the rise in the exchange rate of the dollar against the Iraqi dinar, prices must rise Consumers by merchants and various outlets, so the difference in price and the high cost of materials became a burden that burdens the simple-income citizen.
In Iraq, one in five citizens falls below the poverty line according to a specialized study, and this percentage was before the implementation of the decision to raise the dollar exchange, but now the percentage has increased and this has led to an increase in crimes and attempts at theft, and accordingly the state must develop real plans and convincing methods of In order to change the conditions of the poor, and help them to obtain a decent life that every human being on this planet deserves.
For the purpose of knowing the repercussions of raising the value of the dollar against the Iraqi dinar on the poor class, we involved a group of writers and academics in this survey, and we asked them the following question:
- What are the repercussions of the rise in the value of the dollar against the Iraqi dinar on the low-income working class, and what are the ways to remedy the risks of this procedure?
Dr. Haider Hussein Al Tohme/ College of Administration and Economics/ Holy Karbala University answered us by saying:
Raising the dollar exchange rate has generated multiple economic and social costs, the most important of which is the loss of monetary stability, speculation on the dinar, and the weak investment-incubating environment, as well as the decline in aggregate demand rates and the deepening of the existing economic stagnation as a result of the repercussions of the Corona pandemic. The rise in the exchange rate of the dollar in a country like Iraq that depends on imports to feed the local demand for various types of goods and services has generated inflationary pressures that have reduced the real incomes of the middle and poor classes, especially with weak government control over traders and suppliers of various types of goods imported into the Iraqi market.
All of this requires the Central Bank of Iraq to fulfill its promises through strict procedural policies and flood the market with dollars in order to achieve a sustainable rapprochement between the official price and the market price, ensure monetary and economic stability, and limit the illegal activity of banks and exchange companies in the local exchange markets. The Iraqi government should also activate the text of Article (16/ Fourth) of the Federal Budget Law 2021, which requires the collection of customs duties on the basis of what was sold of foreign currency through the foreign currency window in order to reduce dollar sales for speculative purposes, reduce demand for the dollar and maintain reserves. The foreigner on the one hand, and maximizing the customs revenues as a result of linking the customs duties with the purchases of traders from the dollar on the other hand.
Academic Professor Hamid Abdul-Hussein Al-Jubouri answered us by saying:
First of all, we must bear in mind that the Iraqi economy is a rentier economy by virtue of its dependence on oil to a large extent, and given the characterization of oil as a capital-intensive industry, not labor-intensive on the part of the state’s dominance of it in particular and the Iraqi economy in general, on the other hand, the lack of Job opportunities and increased unemployment were the inevitable result.
What made the matter worse was the Corona pandemic, as it led to a halt in movement due to the lack of treatment and the speed of its transmission from one person to another, which prompted the government to impose a curfew to reduce its severity, which led to the cessation of economic activity and the increase in unemployment again.
In addition, oil is characterized by fluctuating prices, and due to the Corona pandemic that hit the global economy, oil prices fell, and then its revenues and public revenues with a slight decrease in public expenditures because the latter is characterized by weak flexibility towards the decline, due to the society’s refusal to reduce the expenditures that it is accustomed to.
In light of the cessation of economic activity, which is mainly weak due to its dependence on oil on the one hand and the decline in oil prices on the other hand, the deficit in the public budget increased, which prompted the government to raise the price of the dollar against the Iraqi dinar in the hope of providing the necessary funds to cover the deficit and the financial situation of the state.
This decision, raised the price of the dollar; It is also not without positive effects on the long-term level, as it is not without negative effects on the short-term level, as it led to a decrease in the purchasing power of citizens and an increase in prices. Those who were most affected by this decision are those with low incomes, as they became unable to purchase the goods and services that they acquired. Previously, due to high prices, which meant a reduction in the level of luxury they enjoyed.
It is worth noting that the low-income people are not limited to those outside the state and its public sector, as most of the employees are from this category, as the rise in the price of the dollar means more suffering.
In the context of alleviating this suffering, the state must work to provide material and monetary aid until the effects of this decision are overcome and the economy recovers.
As raising the price of a dollar will lead to the movement of economic activity in the medium and long term, because it will make production more feasible for businessmen, and this leads to creating opportunities, increasing demand, decreasing unemployment and reducing the size of this category.
Dr. Al-Fatlawi phone charter/ College of Administration and Economics/ Karbala Holy University, said:
Countries as a whole are constantly working on maximizing the value of their currency against other currencies, with the aim of achieving the general economic welfare of the people, especially the lower middle class in terms of purchasing power, and the option of devaluing the currency is the last possible solution for the state when it exhausts all means to improve the economy by making way for tourism. The arrival of the arrivals and this talk to countries that do not have goods such as Iraq, but in Iraq, the devaluation of the Iraqi currency is an unsuccessful step and carried with it an increase in the suffering of the lower middle classes, and even the middle classes were greatly affected, especially since the rise in the basic needs of living is in proportions that exceed the rate of change in the price of the currency This is economically clear, in addition to the decrease in spending for the most important category that supports internal economic activity, namely the employees. The wheel of the economy inside the country darkens a large percentage on those with fixed incomes in spending and moving the market towards recovery and reducing their purchasing power means an increase in the suffering of the working class, meaning that the working class receivedAn economic strike from several sides directly through the devaluation of the currency and indirectly through the tributaries that were part of the increase in their income such as employees, knowing that the results of the devaluation of the currency will extend for a long time and its impact includes all aspects of life, even security ones, as for ways to get rid of The country’s economic problems to boost the value of the currency again are clear if there is an honest government in it, which is to invest everything in the country from the sun to generate energy in the desert to the reclamation of millions of hectares for agriculture to the investment of the Iraqi airspace and the wilderness because Iraq is a center of the global economic movement to tourism and it is a very strong tributary to Organizing work in the private sector and supporting it to be the focus of investing all the country’s bounties in the same patriotism and benefiting from the Iraqi human energies in all of that.
Dr. Qahtan Hussein, an academic and writer on politics and economics, replied:
The increase in the value of the dollar against the Iraqi dinar came as a precautionary measure to prevent the collapse of the Iraqi economy and to maximize the state’s imports after the Iraqi economy was subjected to the shock of low oil prices and an ill-considered increase in state expenditures on consumer sectors and the prevalence of corruption in determining the aspects of public government spending.. And if the decision to raise the value of the dollar was Against the Iraqi dinar, it has fortified the Iraqi economy from collapse, but on the other hand, it had a very negative impact on the living situation of the citizen in general and the poor in particular, because this decision resulted in negative results on the purchasing power of the citizen due to the high prices of materials, especially imported ones, as it confused the labor market and negatively affected The self-employed who earn their living from the income of their simple daily work, which began to suffer from the fluctuations of the market.I think that the continued rise in prices resulting from the rise in the value of the dollar against the decline in the imports of the poor class will increase their suffering and will increase the size of the differences in income between a rich and poor class, and this will cause a clear social imbalance that may put the overall situation in Iraq on the brink of a great danger that may threaten the situation Economic, political and social.. Therefore, the government must address the negative repercussions of raising the value of the dollar on the living situation, especially the poor.
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