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Mazhar Muhammad Salih, the financial advisor to the Iraqi prime minister, Mustafa Al-Kazemi, revealed the reasons for stopping the implementation of the Iraqi-Chinese agreement "Oil for Reconstruction".
Saleh said in a press statement that Al-Kazemi's assertion was clear and clear that the agreement signed between the Iraqi government and the Chinese government credit guarantee institution (Sinosure), which has been in effect since mid-October 2019, is still effective and comes under the title ( oil for reconstruction ), especially Reconstruction in the infrastructure because Iraq badly needs it.
He pointed out that the current year 2020 has witnessed a stumbling block in the implementation of the agreement with Beijing , the first is the closure of the Chinese economy itself and its isolation from the world due to the Corona pandemic , and the other is the non-approval of any new government projects in Iraq (except for ongoing projects) during the current year 2020, and that Because of the lack of legislation of any federal budget, including the investment budget.
Saleh added that the failure to implement the agreement, with regard to Iraq, comes as a result of the exceptional and difficult financial conditions due to the deterioration of oil markets, low budget revenues, and the rise or birth of an unexpected large deficit funded through two borrowing laws, and the matter changed the priorities of government spending this year Extraordinary Finance.
He explained that it is certain that the next federal budget, 2021; It will include important investment projects that will be implemented and financed at the expense of the Iraqi-Chinese agreement.
The advisor to the prime minister emphasized that the agreement extends for twenty years, and that the source of funding is part of Iraqi oil exported to China, whose money is placed in an investment fund, and the Chinese government will contribute to providing credit facilities when needed to complete the projects to be approved.
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A government advisor warns of continuing borrowing policy
Economy News - Baghdad
The financial advisor to the Prime Minister, Dr. Mazhar Muhammad Salih, warned against continuing the borrowing policy to meet the government's operating expenses instead of going to investment projects that generate revenues for the state.
Saleh said in an interview with the Kuwaiti newspaper An-Nahar, which was reviewed by "Al-Iktissad News", "There are two restrictions on the federal budget for 2021, which are the continued decline in oil revenues and the continuation of operational spending at its high levels, and this will inevitably push to borrow to fill the actual deficit gap in this case, and in order for us to have financial space, i.e. the ability to borrow and pay, operational expenditures should be reset. Again, he directed borrowing to be related to income-generating projects.
Otherwise, what is called debt exhaustion and entering into very worried financial failures will occur, and therefore I see that the fiscal policy in light of the white paper will take the following path, as the 2021 budget was built on an actual and not hypothetical deficit financed from differences Oil prices when the oil market improves in the interest of exporters, then the deficit will only be financed by borrowing, and perhaps the role of external borrowing will be greater this time, and perhaps internal borrowing this time will be directly from individuals or the public, but it will require substantial improvements to the secondary market that handles buying and selling.
The Iraq Stock Exchange has a fundamental role in expressing the secondary market and promoting dealing with financial debt instruments among the public directly as individuals and institutions..
He pointed out that there is a large financial surplus among the public, concentrated in the form of hoarding disconnected from the income cycle, and the national economy is urgently needed to move the real material and human resources through investment and its financing from Iraq's internal financial energies. The borrowing policy for investment and employment is the change that will dominate the policy. Finance in the next stage to avoid the risk of unproductive debt exhaustion
He pointed out that the extent of the matter related to the transformative industrial sector, which today constitutes the components of the gross domestic product and includes 16% of the workforce, has been the victim of the transformation in the economic policy climates in the last two decades of time.
The year 2003 and the launch of the freedom of external transfer without restrictions supported by a financial leverage represented by the availability of unilateral oil revenues funded for economic activity easily and easily through budget expenditures that constitute 40% of GDP, has transformed the national economy in general and national capitalism (industrial, agricultural and real estate) in particular to To be attracted by a non-productive pattern of rentier capitalism called finance capitalism, which is represented by the capacity for capital transfer in order to invest in banks, financial companies, banking and financial transfer offices, and commercial (finance) companies..
He added, "As the national capital as a whole has turned into the phenomenon of searching for accumulation and achieving rapid profit through coexistence on the role of oil rents in financing consumer activity without production due to the inflation of the government operating budget and the increase in spending in it in low-productivity services that generate incomes for a large, almost idle work force.
The coexistence of the source of the parasite parasitism with financial capitalism or capitalism rentier RENTAL capitalism , opted money towards the operational investment generating rapid profit capital which is the establishment of community banks rentier attracts easy savings and the remains of rents oil, to take over the consumer trade finance and in the integrated commercial capital cycle financial, but integrated into the economy of globalization and functions Its production abroad as a heavy-consuming commercial financing power is a double that is driven by domestic consumption .
The advisor to the Prime Minister of Iraq said, “The contribution of agriculture and manufacturing industry as an activity that constitutes nothing in the gross domestic product is only 6% and 37% of the Iraqi labor force works in it with very low productivity, while the government production function, especially the governmental manufacturing industry, has shrunk to an almost production force.
Today, it includes more than half a million unemployed workers who receive a monthly salary from the Ministry of Finance in the form of monthly grants in exchange for providing nothing from work since 2003 until now, and more than 100 state-owned enterprises that include hundreds of factories and production units, the majority of which are idle industrial, in return we find an expansion Massive in the government service sector, to include more than 3 million more than odd employees (except for the number of unemployed workers in the aforementioned state-owned companies), and they only provide 1,200 services that are supposed to be with a small digital force after their number two decades ago did not exceed 750 A thousand employees, and receive wages and salaries that are currently twice the per capita shareThe gross domestic product and productivity is said to not exceed 17 minutes out of eight hours of work per day.
Saleh added that the liberal economic rentier economic model disrupts production and the bulk of consumption supported by the import sector and dumping policies that suppressed national economic activity and inflated the unemployment figure, which exceeds 20% of the current work force and is constantly increasing with the growth of the population of one million people annually, and the labor market receives about 400 thousand new workers annually and they are added to the army of the unemployed because the capacity of the private sector has become limited and that the financing capital has moved away from real production and its work was limited to commercial, financial and marketing services activities, all linked to the strong availability of government oil revenues, so employment opportunities in the private sector have become stagnant. And marginal after the government is saturated with jobs and semi-unemployed professions . ”
Saleh explained that “there are 50,000 licensed companies, most of them from industry activities in the private sector, and only 9% of them work in the best case, as the private sector suffers from a distortion in the laws to guarantee workers upon retirement, and out of 7 million workers in the private sector, the insured of them do not More than the quarter million, which disrupted private activity and resort to government employment that provides retirement and unemployment insurance. I see it as the social dilemma that comes after the disruption of the real production function and the transformation of capital into a rentier force that serves the economic consumption pattern .
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