Mustafa Al-Saffar (a pseudonym) lost 400 thousand dollars in one day, after the decision of the Central Bank of Iraq and the Ministry of Finance to reduce the value of the local currency against the dollar by about 20 percent, in a decision that many described as sudden and “bad timing.” Al-Saffar, who requested that his real name not be revealed, told Al-Hurra that the Central Bank of Iraq calculated the new prices of the dollar on the old deals to buy the currency, which caused great losses to the banks and banking companies, one of which Al-Saffar owns. Al-Saffar asserted that “a decision like this could not be issued overnight. This reminds us of Saddam’s random financial policies. They should have attended the market for this decision months ago.”
The Iraqi government says that the decision to change the exchange rate of the Iraqi dinar from 1190 dinars per dollar to 1450 dinars is “necessary for economic reform” and that “the reason for the deterioration of the economy is due to years of wrong policies,” according to two statements by the Ministry of Finance and the Iraqi Central Bank.

‘Timing problem’
The Iraqi expert in economic affairs, Manar Al-Obaidi, says that “the eternal problem in Iraq, especially in the economic side, is at the time when the decision is taken,” adding to the Al-Hurra website that “the crisis is caused by the sudden timing of the decision, regardless of the positive or negative points of the process.” Change the exchange rate. ” Al-Obaidi believes that the impact of the devaluation will be negative at the beginning of the stage, which will “last for six months or a year”, and after that “it will contribute to improving the GDP from various sectors such as the industrial, agricultural and service sectors, because it will increase the activity of these sectors.”
According to Al-Obaidi, Iraq is ready for the growth of the economic sector, and that “the infrastructure does not need more than a competitive environment, to revive hundreds of existing projects, but they are stalled or not operating at full production capacity as a result of the imported product controlling the local market.” An informed source from within the Iraqi government told Al-Hurra website that “the low oil price and the impact of the Corona pandemic encouraged the government to take the difficult decision,” according to his description. The source, who requested anonymity, added that “the government plan is based on the assumption that the devaluation of the Iraqi currency will make imported goods more expensive and give locally manufactured Iraqi goods the ability to compete, which will develop the economy after some time.”

According to the source, who participated in the 2021 budget discussions, “the large Iraqi operational expenditures in dinars will decrease in real value, which will lead to the provision of necessary funds that Iraq needs,” adding that “the government is still supporting the Iraqi dinar through the currency auction, but the support is reduced.” Iraqi industry In fact, Iraqi industrialists say that the talk about the decision to devalue the Iraqi currency will lead to the encouragement of local industry “is too simplistic.” The Iraqi industrialist, Moataz Kammouna, told Al-Hurra website that “the industry needs infrastructure such as electricity, sewers, water lines, transmission lines, import and export facilities, and all of these are not available.

Al-Iraqi, Muhammad Al-Maamouri, an agricultural investor from Baghdad, says that “the government supported the import of agricultural materials and neglected to support local agriculture,” adding to the Al-Hurra website that there could not be enough Iraqi agriculture to compensate for the rise in currency prices in a few months. The issue needs years and investments. big”. The Iraqi economic expert, Hassan Al-Asadi, says that “the correlation of devaluation to the improvement of local industry is true in industrialized countries whose prices for manufactured goods decrease while reducing their currency, which encourages their export.”And he adds that “the raw materials have increased in value after the devaluation of the dinar because it is imported, which means that costs have increased, and the years of Iraqi industrial inactivity have made Iraq lose the advantage of keeping pace with other countries with technology and destroying old infrastructure.” According to Kamouneh, the Iraqi state “has been supporting imports for many years, while it should have invested in providing infrastructure and raw materials in order to push the Iraqi industry forward and control the bleeding of hard currency.” Kamouneh also refers to “the control of militias and armed groups over politics, economy and weapons, which gives them a great opportunity to compete and deprives Iraqi manufacturers of any advantage.”

Future scenarios

The Iraqi economic expert, Hassan Shawkat, believes that “the government took part of the right decision at a very dangerous time.” He added to Al-Hurra website that “this decision should have been taken in 2003 to encourage self-sufficiency and work at a time when the government has funds to help the affected groups so that the wheel of the economy can move.” Shawkat believes that “the current conditions are not prepared for such a decision,” adding, “but it is an inevitable result that the Iraqi government has not been able to avoid due to mistakes in economic policy for many years.” According to Shawkat, Iraq is likely to slide into a major economic downturn that will last for years before the economy regains its equilibrium, and this is a “risky matter in an armed and unstable country like Iraq. The salaries paid by the state were one of the most important factors of its relative stability.”
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Also, “the stability or rise of oil prices may enable the government to take mitigating measures for the consequences of this decision on citizens if it is serious about providing assistance, or international loans can be allocated to support the local industry.” However, “this scenario faces the obstacle of corruption that has stopped all possible economic solutions.” Previously, it has stopped it now, “according to Shawkat. Shawkat says that “the third scenario is that the owners of capital return to Iraq to invest in it, benefiting from the devaluation of the currency, but achieving this scenario is difficult because the funds required are enormous, and the security situation and the militia’s control make any investor think several times before entering Iraq.”