An Iraqi seller sells Iranian currency on a street in Najaf.
Photographer: Haidar Hamdani / AFP / Getty Images
Photographer: Haidar Hamdani / AFP / Getty Images
Follow us @Middle East for more news about the region.
Iraq devalued its currency by about 20% against the dollar, the largest decline in record, as the government with cash problems faces an economic crisis caused by low oil prices and cuts in oil prices. crude oil production.
The central bank cut the official rate to 1,450 dinars per dollar, the first devaluation since 2003, it said in a statement. That’s about 1,190 earlier. Dollars will be sold to local banks at 1,460 dinars per piece.
Iraq, which has cash, is seeking an initial payment of $ 2 billion for oil
The world’s third-largest oil exporter is taking the necessary steps to prevent the depletion of its foreign exchange reserves after the coronavirus has undermined energy demand and caused prices to collapse. Last month the government sought initial payments in exchange for a long-term crude oil supply contract to help mitigate its dire financial situation.
What Bloomberg Economics says …
“The devaluation was inevitable given the fall in oil prices and the budgetary pressures facing Iraq. The government says this is a on time and it will not be repeated, but we shall see if it will be so. It is also important to see the popular response to the resulting increase in the cost of living and the government’s austerity program. “
– Ziad Daoud, chief economist of emerging markets
Prime Minister Mustafa Al-Kadhimi, who came to power in May, has warned that the government will fight to pay public officials without increasing debt. This threatens the recurrence of the unrest that last year brought down the government and killed hundreds of protesters.
Iraq’s destroyed economy is becoming a threat to OPEC
Protesters at a rally in Tahrir Square in late October lamented corrupt politicians, daily power cuts, dilapidated hospitals, dilapidated roads and lack of jobs and urged the government to ignore production cuts. ‘OPEC.
The International Monetary Fund expects Iraq’s economy to shrink by 12% this year, more than any other OPEC member that has a share of production and a budget deficit of 22% of output. gross interior.
The Iraqi prime minister is committed to economic reforms: Bobby Ghosh
(Updates with comments from Bloomberg’s leading emerging market economist from the fourth paragraph.)