The IMF ranks Iraq as the fastest growing Arab... Is it an economic bubble or a reality that the citizen can touch?

Unusually, Iraq recorded positive economic indicators in the past weeks, as Iraqi Finance Minister Ali Allawi confirmed that the country's cash reserves are expected to rise to more than 90 billion dollars by the end of 2022, noting that this level is a record for Iraq, in the meantime. The International Monetary Fund expected the Iraqi economy to grow by 9.5% this year, to be the highest in the Arab world.

The Iraqi minister considered that the recovery in oil prices and the financial management, which he described as "wise", helped the reserves reach the level of 70 billion dollars last April, after the country's foreign exchange reserves decreased to an alarming level in 2020 when the Corona pandemic caused in the collapse of global oil prices.

Saleh: Iraq depends on oil to pay its expenses, which revived its finances in light of the rise in benzene prices globally (Al-Jazeera)

Reasons for growth

These positive figures for the Iraqi economy raise questions about their causes, as the appearance of Muhammad Salih, the economic advisor to the Iraqi Prime Minister, in his speech to Al Jazeera Net, indicates that the high volume of cash reserves in the country is due to the rise in global oil prices, with an estimated increase on average between 40% and 45% over last year.

Saleh added that the Iraqi government relies on oil to pay internal expenses after replacing it with the local Iraqi currency according to the dinar exchange rate issued by the Central Bank, which is equivalent to 1460 dinars per dollar.

Consequently, since the external financial flows are greater than the volume of internal spending, which adopts a ratio of 1 to 12 according to the decision of the financial administration due to the failure to approve the country’s federal budget, this led to the accumulation of foreign exchange at the Central Bank and an increase in the volume of reserves, as he put it.

And about the positives, he explained that the volume of foreign exchange is close to covering the value of the Iraqi currency and the volume of currency circulating locally, which constitutes a stabilizing factor for the dinar, which helps to face inflation inside the country due to the repercussions of the continuation of the Russian-Ukrainian war.

Dagher: The economic growth expected by the IMF reflects the growth of the oil sector, not the real economy (communication sites)

Is it real growth?

The data of the International Monetary Fund raise many questions about whether the growth of the Iraqi economy is real, especially with regard to the stability of the national currency, and in this regard, the financial expert Mahmoud Dagher says that the high growth rate in Iraq is currently due to the emergence of the oil sector as the only source of economic added value, While the non-oil economic sectors are declining.

Speaking to Al Jazeera Net, Dagher explains that the economic growth announced by the International Monetary Fund is considered growth for the oil sector and not for the real Iraqi economy, and without the oil sector, Iraq will not record any real growth at such a percentage announced by the Fund.

He added that the rise in the reserves of the Central Bank of Iraq is not a complete indicator of the economic situation, explaining that the volume of reserves does not cover the volume of Iraqi cash, which amounted to 80 trillion dinars, and therefore the proportion of the volume of reserves is less than it was two years ago when the size of the Iraqi monetary bloc was approximately 60 trillion dinars, explaining that the current reserves provide a sufficient volume of liquidity to import from abroad without providing financial stability for the local currency.

And this opinion goes to Professor of Economics at the Iraqi University Abdul Rahman Al-Mashhadani, who says that the increase in the volume of central bank reserves is due to the difference in the ratio between Iraq’s imports in dollars and what the Iraqi government sells in the currency auction, explaining that Iraqi imports amounted to 8 billion dollars per month, while the currency auction It sells a total of $4.5 billion per month.

Al-Mashhadani believes that Iraq needs real economic policies (Al-Jazeera)

Its reflection on the Iraqis

Despite this economic boom revealed by the numbers, the Iraqis are wondering about the reasons that prevent this from being reflected on the Iraqi people, who suffer from high rates of inflation, poverty and unemployment. Public finances after the expiry of more than 5 months of the fiscal year.

Because of this, according to Al-Mashhadani, a problem arose for the government in how it handled the financial surplus, commenting that the Iraqi government had limited employment in the public sector since 2014 in light of the fact that the private sector has many problems and depends heavily on the public sector, as well as He stated that the recently approved law criminalizing normalization with Israel includes legal articles that will cause great harm to foreign investment in Iraq, which will increase economic difficulties, according to it.

And financial expert Mahmoud Dagher adds other reasons, which are that Iraq is witnessing political problems that hinder the formation of the government and the approval of the country's general budget, which means a crisis in dealing with the Iraqi economy, which prevents Iraqis from benefiting from large financial returns.

Ahmed Rashid: Iraq is witnessing an increase in financial revenues, but with the continued decline of the productive economy (Al-Jazeera)

As for the former member of the Parliamentary Finance Committee, Ahmed Hama Rashid, he believes that the main reason for Iraqis not benefiting from the financial abundance is due to the lack of productive economy growth inside the country, which is the main driver of internal growth due to the provision of job opportunities, pointing out that Iraq is witnessing an increase in financial revenues with The continued decline of the productive economy, according to his opinion.

Rashid adds to Al Jazeera Net that there is no productive sector that contributed to the increase in the growth rate announced by the International Monetary Fund, and therefore Iraq can buy US treasury bonds or any other country with a small profit margin without being able to invest money internally, describing economic growth as a "bubble." economic”, which leads to Iraq remaining among the countries with a fragile economy unless it addresses its structural problems.

As for the government, the appearance of Muhammad Salih, economic advisor to the Iraqi Prime Minister, believes that there are no positive repercussions in the Iraqi street unless the country’s general budget is approved, which includes social and investment expenditures, especially since it is hoped that the value of the country’s general budget, if approved, will reach 200 trillion dinars, equivalent to $136 billion, up from $90 billion in the 2021 budget.

And the Iraqis remain hostages of political positions that keep them from benefiting from the large financial revenues that Iraq has enjoyed, especially with the rise in oil prices and the increase in the volume of Iraqi oil exports to a record level in the past months.