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BAGDAD (AP) - The Iraqi central bank announced on Saturday that it would devalue the Iraqi dinar by over 20 percent in response to a severe liquidity crisis
. . (Bloomberg) - Iraq has devalued its currency by nearly 20% against the dollar, which is the highest as the financially troubled government faces an economic crisis caused by low crude oil prices and cuts in oil production. The central bank set the official course on Saturday 1. Reduced 450 dinars per dollar, the first devaluation since 2003. That is from about 1. 190 previously. Dollars are priced at 1. 460 dinars each sold to local banks. The devaluation of the world's third largest oil exporter threatens to bring some goods beyond the means of ordinary Iraqis and spark unrest in a country that is heavily importing and still teetering from deadly protests against the government last year. Finance Minister Ali Allawi said a main reason for this move was to activate the private sector and local production while avoiding a severe budget deficit. "What has been done is a preventive step," Allawi said in a television interview on the Iraqi state channel. Without this step, inflation will rise and “we will hit the wall. Cash-strapped Iraq is seeking $ 2 billion upfront for OilIraq to keep its foreign currency reserves from being depleted after coronavirus weakened energy demand and prices fell. Without the devaluation, the reserves would have been depleted within six to seven months and the budget deficit could reach 100 trillion dinars ($ 84 billion) in 2021, Allawi said. The International Monetary Fund estimates that the Iraqi economy will contract by 12% this year, more than any other OPEC member on a production quota, and that its budget deficit will reach 22% of gross domestic product. The government last month requested advance payments in exchange for a long-term crude oil supply contract to ease the financial situation. What Bloomberg Economics Says. . . “The devaluation was inevitable given the collapse in oil prices and budgetary pressures Iraq is facing. The government says this is a one time and will not be repeated, but we'll see if it does. It is also important to watch the population's reaction to the resulting rise in the cost of living and the government's austerity program. ” - Ziad Daoud, Emerging Markets Chief EconomistThe economic crisis is hurting a nation that has been in chaos for most of the time since the US. S.. . -led invasion of 2003 that overthrew Saddam Hussein, civil war, uprising of the Islamic state and a striving for independence by the Kurds in the north, an important oil-producing region. All major oil producers have been hit by the coronavirus-induced collapse in crude oil prices. But Iraq, in which oil accounts for almost all government revenues, is worse off than most of the others. Quotas agreed with other oil exporters to stabilize the market mean there is a limit to the number of barrels Iraq can pump. Prime Minister Mustafa Al-Kadhimi, who came to power in May, has warned that as a result, the authorities will struggle to pay officials without incurring more debt. This threatens to repeat the upheaval that toppled the government last year and killed hundreds of protesters. The crumbling Iraqi economy becomes a threat to OPEC demonstrators at a rally in Tahrir Square in late October denounced corrupt politicians, daily power outages, run-down hospitals, crumbling streets and job shortages, and urged the government to ignore OPEC's production cuts. (Updates with political context, graphic from third paragraph) For more articles like this, please visit us on Bloomberg. comSubscribe now to stay one step ahead with the most trusted business news source. © 2020 Bloomberg L. . P. .
. . The Iraqi central bank announced on Saturday that it would devalue the Iraqi dinar by over 20 percent in response to a severe liquidity crisis caused by low oil prices. This move has sparked public outrage as the government fights for payments.
. . Iraqi Prime Minister Mustafa al-Kadhimi warned on Saturday of the collapse of the social and political system in Iraq and the overwhelming chaos if the country fails to implement financial reforms.