Dr.. Mazhar Muhammad Salih *: The National Development Fund for Iraq: a renewed perspective and a promising future

by **claud39** on Tue Apr 21, 2020 9:51 am

04/20/2020

Dr.. Mazhar Muhammad Salih *: The National Development Fund for Iraq: a renewed perspective and a promising future Mudher-image-new-2

The balance of government economy has undoubtedly entered a clear deficit due to the deterioration of growth rates in its dominant rentier sector, starting from the second half of this year until the second half of next year to drag the private economy into a point that is more stagnant due to the interlocking between the rentier and private sectors and the dominance of government activity On components of GDP estimated at least 63% ؜.

With the degree of growth in the annual growth rates of the Iraqi population estimated at 2.6% (without discipline) and the growth in the country's gross domestic product (due to the global economic recession) and the other is estimated at (negative 4.5% annually), the total stagnation will inevitably affect the economy The entire country and causes a decrease in the per capita share of the gross domestic product, which we currently estimate at no less than one thousand dollars annually per capita. At the same time, the economic balance in the private sector still represents the side of potential strength and the financial capabilities of (savings and liquid or semi-liquid funds) remain high, but they are stagnant in value equivalent to nearly half of the oil revenues lost in the year 2020 in Iraq.

In light of the decline in the total financing leverage in the national economy due to the global economic recession and the pandemic, there is no way for economic policy makers in Iraq except to start the compulsory and strategic solutions possible together to gradually restructure the national economy and according to fixed participatory goals that draw its operating lines immediately, and begin its first step from the term Short and medium to reach optimal solutions for the long term, that is to fold the rentier page of the economy, which will remain the main economic killer of our economy (unilateral)

The question that exists in the renaissance of the national economy starts from the current financial leverage available to the country and is how to move the private sector surpluses through a smooth and guaranteed financial mechanism and with tools that include the highest levels of certainties to be mobilized as risk-free financial resources and guarantees that possess the power of sovereign guarantees at the same time.

How to mobilize the accumulated surpluses of the Iraqi private sector currently and not moving in the income cycle and strive to recycle them within the national economy requires a condition of the necessary condition, which is the condition that the borrowing recycling aims to surplus that these financial resources are directed outside the public budget and exclusively towards the activities of the private sector.

Here, the priority of investment will appear in a dual option towards highly operational production fields, achieving high added value in the national income at the same time, such as the housing and agricultural sectors, and some important possible crafts and industrial activities. And that the above-mentioned necessity condition requires the availability of two parallel and supporting main factors to run the national program for financing development.

The first factor is how to maintain the purchasing power of money borrowed from the people and protect them by employing them with debt instruments and guarding them from potential price fluctuations (inflation) by issuing a indexed bond to be the principal of the bond as a debt instrument defined by fixed-value assets, whether by choosing a foreign currency, gold, or other Of stable value assets with balanced annual interest. The second factor is the adoption of a fund directed at sustainable financial levers to finance productive private sector activities and targeted by those funds borrowed from individuals, the National Development Fund for Iraq.

Here, the financing priority is given to investment activities that target, as mentioned, the use of labor intensive production factors and at the same time maximize added value in the formation of gross domestic product. Another condition will be the responsibility of the state, which is a sufficient condition for its job to be limited this time towards operating the National Development Fund for Iraq in partnership with the private sector in terms of capital and property rights. This participatory relationship will take two complementary directions as well.

The first is that the state provides the loan guarantee as a leverage and protects it from any exposure or loss until the due date and the other direction is to provide the necessary security to maintain the purchasing power of the loan’s principal and its returns to the due date as well.

The function of development financial policy here is to preserve the purchasing power of the loan and its proceeds from issuance to amortization and to prepare the necessary deliberative climate in adopting the secondary market to take bonds and liquidate them by their holders when necessary.

And as it relates to the fund’s capital and property rights, which will be based on joint ownership between the state and the private sector, it will receive a serious contribution from some international financial institutions that support and support private sector activities when establishing as equities capital, such as the International Finance Corporation.

And some of the contributions of European Union organizations and funds, including the acceptance of the indirect contribution to the fund by accepting the principle of exchanging the imported equipment and equipment from a European, European or other origin for the benefit of the recipients of the fund in the Iraqi private sector.

Finally, the establishment of the National Development Fund for Iraq will form the core nucleus of macroeconomic restructuring toward gradual financing from various sources, whether from the oil revenue rent itself, and with a share of the oil export revenues committed to it or any future raw materials from the returns of phosphate, sulfur, silicon, and other economic activities.

Iraq’s raw materials, stapled economy (the future, not the distant) and its promise as capital shares invested by granting soft loans from the Development Fund directed to finance the activities of the private sector, being the main operator of development and the advancement of the national economy and the antidote to upcoming rentier developments.

The establishment of the National Development Fund as a path to diversify the national and harmonious economy and the private sector development strategy currently adopted (without wide implementation) comes to raise the contribution of civil activity to the gross domestic product from its current low reality in the composition of the gross domestic product of 37% to become 50% or more during the next five years.

This transformation will represent the basic task and economic approach of a post-oil Iraq, and it will be the responsibility of the national planning and public financial bodies and the private sector council to move immediately towards a common strategy to structure and diversify the national economy and gradually eliminate its rentier aspects.

The project, in its entirety, promised an ideological shift to build the basics of recasting the national economy from its central rentier features to the central social market responsible for diversifying productive activity. This is accompanied by a legislative system that establishes a strong pace to establish the necessary legal infrastructure for such a pattern of productive market economies promising to compete with them.

Finally, to the extent that the state contributes to protecting the national economy and proceeding with the belief of renewable development perspective, the social market pattern as an economic option comes to protect the labor market and the Iraqi working class and producers from the scourge of unemployment and waste of their human energies as well as providing a national economy with truly sustainable development and leaving the rentier of the unilateral economy through comprehensive diversification And with competitive market tools and social principles.

(*) Researcher, economist, and financial advisor to the Iraqi government
Copyright reserved for the Iraqi Economist Network. Republishing is permitted provided the source is indicated. April 20, 2020

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