Iraq is moving towards applying the principle of monetary sovereignty. What does that mean

Moaz Fraihat – Washington

November 30, 2023

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Monetary policy in Iraq faces many challenges, especially in light of the existence of an irregular currency exchange market managed by networks that manipulate prices for a dollar against the dinar, according to local media reports.

In the face of “monetary doubleness” that has harmed the country’s economy, Iraq is moving to apply the principle of “monetary sovereignty”, according to what the Prime Minister’s financial adviser Mazhar Mohammed Saleh revealed, in statements to the Iraqi News Agency “Wa“.

Applying the “principle of monetary sovereignty,” according to Saleh, “the Iraqi dinar becomes the only refuge for exchange, pricing and coverage of internal transactions.”

The Iraqi authorities are struggling in an attempt to adjust the exchange rate of the Iraqi dinar against the US dollar, which is witnessing fluctuations that led to the decline in the value of the dinar, accompanied by compliance with international rules in financial transfers, which affected the presentation of the dollar in the market.

What does the application of the principle of “monetary sovereignty” mean?

In a research paper published by the Iraqi Economists Network last October, economic adviser Saleh explains that monetary sovereignty is called “Westphone,” which expresses “the state’s authority to exercise exclusive legal control over its currency through the functions of the central bank as the exclusive authority to determine the quantities and value of the process as a means of payments.”

He added that the name “Westphalia” comes from the “Westphalia” system, which represents a principle in international law that each state has exclusive sovereignty over its territory, which is explicitly stated in the UN Charter.

The research states that this sovereignty is based on: the independence of cash management, its issuance and the exchange system.

Why now Iraq needs to apply such a principle?

According to the paper, Saleh believes that Iraq needs to apply the principle of monetary sovereignty in order to enhance the ability of monetary policy to “adjust the levels of domestic liquidity through the strength of the central bank’s intervention in the monetary market.”

He warned against the continuation of what he called the “real reality of the colored noise that allows the black market to remain for the cash dollar” and its ability to affect the price system, not to mention the greater availability of the state to manage inflation by influencing it through interest rates.

Saleh stressed that the Iraqi state’s adoption of the principle of monetary sovereignty will lead to “maintaining a fixed exchange rate that allows free capital flows and countering cheap cash.”

The General Directorate of Iraqi Intelligence and Security had announced the overthrow of a network that manipulated the exchange rates of the dollar in Baghdad, according to a report published by the “Wa’a” agency.

Last August, Prime Minister Mohammed Shia al-Sudani announced the arrest of a network of “majorators” in currency that collects dollars and send them to the Kurdistan region in northern Iraq, and then smuggled abroad, without specifying the destination, according to an AFP report.

Factors of applying the principle of monetary sovereignty?

The Iraqi economist, Salam Simsim, identified the most prominent factors that allow the application of the principle of “monetary sovereignty”, stressing that they are not linked to the existence of a political decision to implement it, but economic factors and determinants.

In an interview with Al-Hura website, Simsim outlined a package of factors that must be available: “the strength of the economy, the stability of exchange rates, the strength of the national currency itself, the existence of a truly productive economy that is not only dependent on imports.”

Despite the attempts of the authorities to control exchange rates, the irregular market has been accounting for about 10 percent of the trading rate, in what adviser Saleh described as “the uncontrolled market and controlled by speculators and adds noise to the economy of Iraq as a whole.”

Will it affect deposits in foreign currencies?

The Iraqi economist, Mahmoud Dagher, explains that the principle of monetary sovereignty “does not mean that the savings of citizens or any legal person who has funds deposited in foreign currencies will be affected, as they can still deposit and withdraw funds in dollars or other foreign currencies that may be deposited in them.”

In a response to Al-Horra’s inquiries, he pointed out that the majority of countries seek or aspire to reach “monetary sovereignty” by making “their national currency the base currency to be used in payments and transactions within the country.”

Applicability of the principle of monetary sovereignty in Iraq?

Iraqi economists agreed that the application of the principle of monetary sovereignty needs to be provided several factors, the most important of which is “bridge the gap between the exchange rate of the national currency against the dollar.”

“Whenever the exchange rates of the national currency against foreign currencies stabilize, the principle of monetary sovereignty is applicable,” said expert Dagher, a former official in the Central Bank of Iraq, which should be accompanied by “the absence of a gap or differences between exchange rates in the official market and the parallel market and preventing speculation in this regard.”

Expert Semmism confirms that each country has the right to resort to the principle of “monetary sovereignty” in order to control the “monetary market”, noting that “this is not only related to desire or ambitions, but also to the strength of the national currency in real, as the currency is not only paper, it must express a corresponding value to the GDP, and its ability to store value in real, with it is associated with different strength indicators on several levels.”

Iraq has begun applying the standards of the international transfer system “Swift” since mid-November 2022 to reach Iraq’s reserves of dollars in the United States, which are estimated at tens of billions of dollars, according to AFP.

Iraqi banks should currently register their dollar transfers on an electronic platform, scrutinize requests, and the US Federal Reserve examines them and if it has doubts it is stopping the transfer.

https://www.alhurra.com/business/2023/11/30/العراق-يتجه-نحو-تطبيق-مبدأ-السيادة-النقدية-يعني-؟

Baghdad launches the third batch of salaries of the region’s employees next week

  • Time: 2023/11/29 22:25:42
  • Read : 1,105 times

  

{Policy: Euphrates News} The federal government is preparing to launch the third batch of salaries of employees of the Kurdistan region next week.

“The federal government will send the third batch of the 700 billion dinars allocated to pay the salaries of employees of the Kurdistan region during the next week,” said the leader of the Kurdistan Democratic Party, Wafa Mohammed Karim {for Firat News}.

He added that “the Council of Ministers will direct in its next session the Ministry of Finance to send the third batch of the amount of 700 billion dinars to the Kurdistan region.”

A delegation from the Kurdistan Regional Government arrived in Baghdad last Monday to discuss the files of “salaries, budget law, oil and gas.”

The meeting of the Kurdistan Regional Government delegation with Federal Prime Minister Mohammed Shia al-Sudani ended.

The Ministry of Finance and Economy in the Kurdistan Regional Government announced the start of the meeting of the Kurdistan delegation with the Sudanese at 3:10 p.m.

The delegation of the Kurdistan Regional Government, headed by the Minister of Finance of the Region, Awat Sheikh Janab Nouri, consists of the President of the Cabinet Office Omid Sabah, Secretary of the Council of Ministers Amanj Rahim, the Head of the Coordination and Follow-up Department Abdul Hakim Khosrow, and Advisor in the Council of Ministers Hadi Jaushli, headed towards Baghdad.

From: Raghd Daham

During his meeting with Prime Minister Mohammed Shia Al-Sudani, the delegation of the Kurdistan Regional Government called for sending three salaries to the region worth 700 billion dinars each, until a political agreement was reached.

The delegation’s meeting with Al-Sudani was followed by another meeting with the technical team of the federal government, to discuss the issue of resuming the export of Kurdistan oil.

https://alforatnews.iq/news/بغداد-تطلق-الدفعة-الثالثة-من-رواتب-موظفي-الاقليم-الاسبوع-المقبل

Pending points” to resume Kurdistan oil exports.. Expectations of its flow with half the energy

Reports And AnalysisKurdistan RegionBreakingThe Federal GovernmentJihan Line

2023-11-29 04:19Font

Shafaq News / A website specialized in shipping news revealed, on Wednesday, the possibilities of the start of the flow of oil in the pipeline between the Kurdistan Region of Iraq and Turkey after its closure for months, between the need to settle a range of political and commercial issues and address obstacles in this regard, it is likely to resume exports with half of its recorded production capacity during next month.

“There is a long history of conflict to control oil production, exports and revenues between the Iraqi authorities and the Kurdistan Regional Government,” Helenek Shipping said in a report translated by the agency Shafaq News, noting that the oil pipeline between Kirkuk and the port of Jihan was a pivotal part of this conflict.

The report recalled part of the history of this case, saying that “an agreement was reached between Turkey and Iraq to extend a pipeline from the Kirkuk fields to the port of Ceyhan on the Mediterranean Sea in 1973, a line consisting of two pipes with a diameter of 40 inches and 46 inches, and the first pipeline was operated in 1977, while the second was operated a decade later, but the line was damaged and neglected.”

“The year 2010, an amendment to the original agreement was signed by both sides to use the remaining pipeline for the transportation, loading and storage of Iraqi crude oil,” the report said. “The second pipeline was not ready for work, and the agreement temporarily suspended guarantees that Iraq would pump the minimum amount of oil through the pipeline network,” he added.

After questioning about the reason for the closure of the pipeline, the report said that “the Kurdistan Regional Government in 2013 activated the abandoned pipeline with a diameter of 40 inches, and then began to export oil through it from the fields of Khurala Dom, Tawke and Sheikhan under its control, which raised the objection of the federal government, considering that the region does not have the right to export its oil through Turkey and that this constitutes a violation of the terms of the original agreement, which was the beginning of a 9-year legal battle between Baghdad and Ankara.”

The report continued that “the International Court of Arbitration in Paris ruled in March 2023, in favor of the federal government, and Ankara recognized the ruling and closed the pipeline immediately, and as a result, the local storage capacity in Kurdistan was completely completed, forcing the operating companies to reduce production in light of the saturation of the local market.”

The report stated that “the significant decline in oil production imposed unprecedented pressure on the financial resources of the regional government, which agreed in April that the sale of oil from the fields under its control is carried out by the Iraqi state oil marketing company “SOMO”, provided that the financial revenues are placed in a special bank account controlled by the Kurds and exposed to the federal government.”

The report continued that “in June, a new law was issued that significantly limits the region’s control over the proceeds of oil sales, and imposed on Erbil to deliver 400,000 barrels per day of oil to Baghdad in exchange for a share of the federal budget, which the regional government reluctantly agreed to partially, as it initially delivered about 50,000 barrels per day, and increased by August to reach 200,000 barrels per day.”

The Iraqi government, according to the report, for its part, approved “limited temporary funding for three months for the region worth 538 million US dollars, which is enough to pay the salaries of public sector employees, but the main issues remained unresolved.”

What is the situation now?

The report said that the recent talks between SOMO, the Kurdistan Regional Government and the Turkish State Pipeline Company Potash have made “some progress towards restarting the pipeline,” noting that “the issues addressed in the negotiations deal with pipeline fees, the quality and quantity of oil exports, minimum productivity, and re-exports.”

“In theory, it is now possible to start allowing the flow of oil through the pipeline again, but for this to be achieved, a number of political and commercial issues must be resolved,” the report said.

Sumo must first sign purchase agreements with oil traders who previously bought crude from the region’s fields (although even without these agreements, SOMO can still resume exports and sell spot shipments), the report continued.

Second, the report said that “legal issues between Ankara and Baghdad must be addressed and future terms and tariffs of the pipeline must be agreed upon.”

Third, the report pointed out that “an agreement must be reached regarding how the federal government will pay the revenues of the regional government from oil exported through the pipeline.”

The report pointed out that “the estimates of the Union of the Oil Industry in Kurdistan speak of the loss of $ 7 billion in export revenues since the closure of the pipeline in March 2023.”

What happens next

The report quoted official sources as saying that “Turkey, after retreating from the procedures that it had to apply for technical reasons, and decided to reopen the pipeline, it can now start charging fees on the Iraqi government in exchange for pipeline tariffs under the terms of the 2010 amendment.”

He explained that “the total customs duties will reach about 25 million dollars per month, which creates a financial incentive for Baghdad to settle competing compensation claims with Turkey, solve budget problems and share revenues with the Kurdistan Regional Government and resume oil exports, as it is estimated that the federal government incurs daily more than one million dollars in financial penalties for not fulfilling its obligations.”

The report of the shipping site concluded by saying that “it is believed that the pipeline could return to work at half of its production capacity registered in January 2023, about 500,000 barrels per day, including 130,000 barrels per day coming from the Khurmala field and another 100,000 barrels per day from the fields managed by the North Oil Company, but it is expected that oil companies will hope to obtain clearer guarantees related to payments.”

https://shafaq.com/ar/تقارير-وتحليلات/نقاط-معلقة-لاست-ناف-صادرات-نفط-كوردستان-توقعات-بتدفقه-بنصف-الطاقة

The Central Bank of Iraq announces the arrival of dollar shipments from Baghdad airport

Economy – 29-11-2023 01:08 PM – Readings: 2107

The Central Bank of Iraq announced on Wednesday the succession of the arrival of dollar shipments through Baghdad International Airport and imported by Iraqi banks to meet the requests of their customers.A source at the Central Bank said that “dollar shipments, continue to arrive, through Baghdad International Airport and imported by Iraqi banks to meet the requests of their customers.”“It is hoped that additional shipments will arrive within the next few days,” he added.

https://www.dijlah.tv/index.php?page=article&id=338712

Al-Rasheed Bank sets the date for opening the platform for travelers wishing to buy dollars

  • Time: 11/28/2023 16:38:39
  • Read: 1,118 times

{Economic: Al-Furat News} Al-Rasheed Bank has set the platform to open for travelers wishing to buy the dollar at eight o’clock this evening, Tuesday.

The bank statement, a copy of which {Al-Furat News} received, indicated: “The new mechanism requires advance reservation for the traveler by entering the link on the bank’s official page to obtain the reservation that enables him to visit the branch to deliver Iraqi cash and receive the dollar from the bank branch inside Baghdad International Airport.” .

He added, “This procedure will facilitate the citizen’s purchase of the dollar smoothly, and we confirm that the data is entered in the fields correctly so that the reservation process is completed successfully.”

For the purpose of reservation, click here

https://alforatnews.iq/news/%D9%85%D8%B5%D8%B1%D9%81-%D8%A7%D9%84%D8%B1%D8%B4%D9%8A%D8%AF-%D9%8A%D8%AD%D8%AF%D8%AF-%D9%85%D9%88%D8%B9%D8%AF-%D9%81%D8%AA%D8%AD-%D8%A7%D9%84%D9%85%D9%86%D8%B5%D8%A9-%D9%84%D9%84%D9%85%D8%B3%D8%A7%D9%81%D8%B1%D9%8A%D9%86-%D8%A7%D9%84%D8%B1%D8%A7%D8%BA%D8%A8%D9%8A%D9%86-%D8%A8%D8%B4%D8%B1%D8%A7%D8%A1-%D8%A7%D9%84%D8%AF%D9%88%D9%84%D8%A7%D8%B1

Finance announces the launch of the second issuance of reconstruction bonds worth more than one trillion dinars

logo of the Ministry of Finance

reconstruction and construction

   


Economy News – Baghdad

The Ministry of Finance announced on Tuesday the launch of the second issue of reconstruction bonds worth more than one trillion dinars.

The ministry said in a statement received by “Economy News”, that “due to the high demand for the trading of national bonds (age bonds) and the completion of the subscription of the amount of the first issue in full, the ministry, represented by the Department of Public Debt and in cooperation with the Central Bank of Iraq, intends to provide the second issue of reconstruction bonds worth 1.5 (trontn Iraqi dinars) and with the same mechanism of the first issuance.”
She added that “this measure comes in implementation of the paragraphs of the government program related to the promotion of development and investment aspects represented by the reconstruction and construction movement witnessed by our dear country, in addition to developing financial and monetary policies and providing opportunities for citizens to contribute to the overall economic activity through investment in bonds,” noting that “these bonds are issued by the guarantee of the Ministry of Finance, and the bond can be acquired by submitting the application to one of the official banks licensed and registered with the Central Bank.”
The ministry called on “investors and citizens to seize the offer and take the initiative to take advantage of this investment opportunity,” noting that “the size of this issuance will be limited.”
She added that “the second issuance of bonds worth one and a half trillion dinars is tradable in the Iraq Stock Exchange, and is available in two categories:
– The first is at a price of (500,000) five hundred thousand dinars, with an annual interest rate of 6% for two years.
– The second at a price of 1,000,000 one million dinars, with an annual interest of 8% for four years.”
She pointed out that “the purchase and trading of the bonds offered are exempt from taxes, according to the Federal Budget General Law No. 13 of 2023.”


32 views

Added 2023/11/28 – 9:41 AM

https://economy-news.net/content.php?id=37911

Nechirvan Barzani: Erbil and Baghdad hold technical talks to resume Kurdistan oil exports

Kurdistan WomenBreakingPresident Of The Kurdistan RegionNechirvan BarzaniErbil And BaghdadResumeOil Exports Of The Region

2023-11-28 03:04Font

Shafaq News / Kurdistan Region President Nechirvan Barzani said on Tuesday that Erbil and Baghdad are conducting technical talks to resume oil exports to the region through the Turkish port of Ceyhan, which has been suspended since last March.

The Presidency of the Region said in a statement that President Nechirvan Barzani received this morning the Turkish Ambassador to Iraq Ali Reza Konai, where the two sides praised during the meeting the level of Turkey’s relations with Iraq and the Kurdistan Region, and stressed their development and joint cooperation, especially in the commercial and economic fields.

The statement added that with regard to the resumption of the region’s oil exports, the ambassador renewed his country’s readiness to export, and in this regard, the President of the Kurdistan Region thanked Turkey for its position, and noted that Erbil and Baghdad are currently holding technical talks for this purpose.

On March 25, Turkey halted the shipment of KRG oil to the port of Ceyhan, following an international arbitration decision that obliged Ankara to pay damages to Baghdad, for violating the 1973 pipeline agreement to allow the export of KRG oil without the approval of the Iraqi government.

The oil pipeline, which runs from Kirkuk province to the port of Ceyhan, is the only export route for crude produced from oil fields in northern Iraq.

The Iraqi government and the Kurdistan Regional Government signed an interim agreement on April 4 that paves the way for the resumption of oil exports, but this has not materialized after Turkey’s refusal to re-export oil from the north through the Turkish port of Ceyhan.

But Baghdad and Ankara recently agreed to wait until the maintenance assessment of the pipeline crossing an earthquake zone is completed to resume flows, while continuing their legal battle over arbitration awards.

On October 5, Turkish Energy Minister Alp Arslan Birqdar said that the pipeline carrying oil from the Kurdistan Region and Kirkuk is ready to work from Wednesday, stressing that his country is preparing to start shipments after a hiatus of nearly six months.

https://shafaq.com/ar/كوردســتانيات/نيجيرفان-بارزاني-اربيل-وبغداد-تجريان-مباحثات-فنية-لاست-ناف-صادرات-نفط-كوردستان

Parliamentary Finance: Baghdad will continue to pay the salaries of Kurdistan employees without interruption



The Finance Committee in the House of Representatives confirmed today, Tuesday, that the federal government, headed by the Sudanese, will continue to pay the salaries of Kurdistan employees from the region’s share in the budget, and will not be interrupted.
A member of the Financial Committee, MP Moeen Al-Kazimi, said in a special statement to the Insider Agency, that: “The salaries of the region’s employees will continue without interruption, as salaries will be paid in the region directly by the Iraqi government, and this will remain until the data is completed, and this procedure needs time and not easy, so it will be paid from next year’s budget and from the region’s share.”

https://almutalee.com/news/المالية-النيابية-بغداد-ستستمر-بدفع-رواتب-موظفي-كردستان-دون-انقطاع

Al-Rasheed starts launching the electronic card for the procurement committees and determines the mechanism

  • Time: 2023/11/27 21:52:31
  • Read: 1,339 times

  

{Economic: Euphrates News} Al-Rasheed Bank announced, on Monday evening, the launch of the electronic card for the procurement committees.

The bank’s media said in a statement that {Euphrates News} received a copy of it, that: “In line with the government’s directions and the shift to electronic dealing in financial transactions, Al-Rasheed Bank began issuing the electronic card to the procurement committees and all localized state institutions have their accounts with the bank in addition to private sector institutions, according to the mechanism included:

– Not withdrawing cash and not being able to transfer from the card and being used for purchase purposes only and its work inside Iraq, knowing that the shopping commission is zero.

https://alforatnews.iq/news/الرشيد-يباشر%C2%A0باطلاق-البطاقة-الالكترونية-الخاصة-بلجان-المشتريات-ويحدد-الالية

In the presence of the Sudanese.. The framework receives the candidates for the post of speaker of parliament and stresses the resolution of his election

  • Time: 2023/11/27 23:45:19
  • Read: 1,313 times

  

{Political: Al-Furit News} The coordination framework held today, Monday, its periodic meeting in the presence of Prime Minister Mohammed Shiaa Al-Sudani.

A statement by the Information Department of the framework {Al-Furat News} received a copy of it said that “during the meeting, the file of local elections and the ongoing preparations for them were discussed, as well as the names nominated for the post of new Speaker of the House of Representatives, as well as reviewed the developments of the political situation in Iraq and the region.”

The coordination framework stressed “the importance of preserving the upcoming entitlements, especially the electoral entitlement, and the attendees unanimously agreed on the need to resolve the issue of electing the Speaker of the House of Representatives by choosing a figure commensurate with the nature of the task and the challenges facing the country at the current stage.”
According to the statement, the coordination framework “officially received by the forces of the Sunni component the names of the candidates for the post of Speaker of the House of Representatives and the framework will study them and take a position on them.”

The meeting also stressed “the sustainability of the preparations necessary to hold the elections on time.”

The coordination framework called for competition to be based on service programs and providing realistic visions to serve the governorates.

Regarding the Palestinian issue, he urged the coordination framework to “perpetuate the current truce in order to reach a comprehensive ceasefire, the reconstruction of Gaza and the relief of the displaced.”

https://alforatnews.iq/news/بحضور-السوداني-الإطار-يتسلم-مرشحي-منصب-رئيس-البرلمان-ويشدد-على-حسم-انتخابه