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Agency: The devaluation of the Iraqi currency eases the liquidity shortage only temporarily

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Agency: The devaluation of the Iraqi currency eases the liquidity shortage only temporarily Empty Agency: The devaluation of the Iraqi currency eases the liquidity shortage only temporarily

Post by claud39 Thu Jan 07, 2021 5:29 pm

Agency: The devaluation of the Iraqi currency eases the liquidity shortage only temporarily




07/01/2021





Agency: The devaluation of the Iraqi currency eases the liquidity shortage only temporarily %D8%B1%D9%88%D8%A7%D8%AA%D8%A8-696x464







The information / translation ...

Moody's Investor Surveys for the Management of American Economic Risks confirmed in a report, Thursday, that the devaluation of the Iraqi currency will alleviate the liquidity pressures in the short term only, and that in the event that the Iraqi government does not undertake structural reforms, this reduction will be only temporary.

"Reducing the value of the Iraqi dinar will strengthen the country's financial position in the near term by increasing oil revenues in the local currency, which will help it reduce the deficit," the British newspaper The National quoted in a report translated by Al-Maaloumah.

He added that " Iraq, which is the second largest oil exporter in OPEC, depends in 90 percent of government spending on oil revenues. Most of the borrowing was by purchasing short-term US government papers, which led to the erosion of its foreign currency reserves."

He continued, “According to the institution, the Iraqi government’s revenues declined by more than 40 percent during the first ten months of 2020 compared to the same period in 2019, while the fiscal deficit expanded to $ 12.5 billion. The sharp decline in oil prices also weakened the current account balance of Iraq and led to a significant decrease in the Central Bank's foreign exchange reserves to $ 50.1 billion in November of 2020 from $ 63.5 billion in April 2020.

The agency stated that “the short-term impact of devaluation on Iraq's debt will be mixed. It is expected that the debt-to-GDP ratio in Iraq will increase by about two percentage points, but it will reduce the debt-to-income ratio by 6 percentage points.

And that “a depreciation of the currency is likely to lead to an increase in inflation, given that Iraq imports a lot of food and consumer goods, however, any rise in inflation carries with it the risks of political and social stability.

Moody's analysts said that “if Iraq does not implement structural reforms to reduce the size of public sector wages and pension bills, reduce energy subsidies and increase non-oil revenues, the relief provided by the devaluation may be only temporary,” noting that “if the government is unable to control Spending this year, the central bank will face pressure to devalue the dinar further, threatening an inflationary spiral.

It is noteworthy that the World Bank said earlier last year that "millions of Iraqis may be forced into poverty due to the dual shocks of the epidemic and the collapse of oil prices." The Washington-based bank said that even in the "benign scenario," about 5.5 million Iraqis could be pushed into poverty. 


End / 25 z






https://www.almaalomah.com/2021/01/07/514167/
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