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Dr.. The appearance of Mohammed Saleh *: savings imbalances in Iraq: vision diagnostic **
07/11/2015
1. When entering the country in crisis, the payments go to the fingers of suspicion that there is a constant fiscal deficit (internal deficit) or there is a deficit in the current account of the balance of payments (the external deficit). [...]
1. When entering the country in crisis, the payments go to the fingers of suspicion that there is a constant fiscal deficit (internal deficit) or there is a deficit in the current account of the balance of payments (the external deficit). Is correct that the main objective of economic policy in growth, balance and stability imbalances. In spite of the savings that the imbalance remains the foundation of the most difficult factor in economic policy and its equivalent in providing quick and easy solutions to cope with the double savings deficit above. As the flow of savings is tantamount to a surplus income after excluding consumption during a certain period, the savings could be confounded by himself and also referred to the amount of assets or assets held. Therefore, the stock of savings is an accumulation of savings inflows previous periods. Economies which suffer from low levels of national savings in the structure will inevitably dependent on inflows of external capital flows in order to promote investment and growth levels in the gross domestic product.
2. about what progress, Iraq has suffered since mid-2014 and up to the minute to violent jolt in the current account of its balance of payments due to the deterioration of the country's oil export prices and lower proceeds of oil revenues to more than 55% compared to the years of booming oil revenues, particularly the year 2013 as the current deficit in the current account of the balance of payments of Iraq in 2015, the proportion is estimated to gross domestic product estimated at more than (minus 8%). It is noted that the internal gap between desired savings and investment desired ratio to GDP is still more than the other to (minus 8%) cursor deficit Edjaraa internally similar to the external savings deficit, which confirms the unilateral intensity of the economy and focused overall economic activity on the export of crude oil returns . At a time when real GDP to shrink (minus 2.3%) in the year of economic tremor in 2014, the real growth of the gross domestic product is no more than (one-half of a percent) in the year 2015. In the face of the aspiration to external borrowing and the various flows Foreign risk waiting achieved in bridging internal and external twin deficits, the economy will gradually entity dependent on external flows but for the price prohibitively may lose an independent economic decision.
Also, falling domestic savings level not only strengthens the consumer the ability over time. And foreign currency inflows are also not only strengthen domestic demand to meet the needs of the total consumption and then lead to the erosion of savings and opportunities to deteriorate more and more. Vaanaattiyat Central Bank of Iraq, which is a form of savings sovereign servo for indoor and outdoor Astqrrarin are the other did not rise, despite the inflows of foreign currency from crude oil revenues during the past two years, but exposed to the relative decline because of growing consumerism import of the country. It was the same situation that hit him, other countries such as Brazil and Turkey over the last decade.
It is no secret that the savings deficit and the state of imbalance college (private and government sectors) have generated so-called deficit duo, any deficit in the current account of the balance of payments, due to the superiority of emerging on the cash flows of cash flows Dakhla (the external deficit) versus (internal deficit) is in the low desired savings and the weakness of its ability to meet the investment spending desired by the superiority of consumer spending, which is what happens in our country today.
In this sovereign debt accumulated rate recorded both domestic debt of or foreign relatively increase and not At least 59% of gross domestic product, up from 39% in the two fiscal couple of years. And the nation is still looking for additional opportunities for local borrowing and external which indicates the potential for a rise in the total sovereign debt to GDP to nearly 70%, which may flow funding from foreign markets or foreign sources because of low domestic capital market capabilities and limited leverage in financing the sovereign fiscal deficit. Federal Public The budget for 2016, for example, which is a total expenditure where 50% of the gross domestic product, according to the project, did not disturb the other is estimated at about 22% of the roof of the total spending in the deficit (of 106 trillion dinars) It increases 11% of the gross domestic product of Iraq. At a time when oil and some other important sovereign revenues revenues allocated in the budget to paragraph operational expenditures (consumer), we find that the investment budget expenditures are constrained by public financial ability to provide opportunities to borrow and finance the deficit, both internal loans available in the domestic capital market (weak financial leverage) or resort to external capital markets (Broaf high cost). The country is facing financial hardship and the plight of funding under the influence of ballasts or double bilateral deficit gap. Taking into account the difficulties of spending, while Iraq is still in the midst of a fierce war against local external sources of terrorism, who are a number of towns and cities. On the other hand, finance the budget deficit and under the influence of the exceptional financial circumstances may be exposed to growing operational spending and strengthen the domestic consumer demand, which reduces the savings opportunities and strengthens the savings imbalances Mtlahma with borrowings internal private sector or foreign, which leads to the strengthening of imports of high consumerism, and deepen again its effects backlash deficit in the current account of the balance of payments. Savings rates are slow to be to dock with low income levels and degrees of falling productivity and in particular small economic activities and income-generating activities, which can accommodate network horizontally. So what did you get those small activities extended horizontally on credits or sufficient cash loans, it will increase the degree of the worsening deterioration in productivity and operational capabilities, being a private economic activities providing for jobs for more than 4 million Iraqi man in the private sector, causing at the same time a decline in the income levels productivity due to faster deterioration and erosion in savings opportunities. As it offsets by a decline in the capacity of the banking system in the cash granting of credit, which is still only covers 11% of the needs of the public credit for the student. Cash credit, but did not quite live up to the achievement of a low percentage represents only 5% of the gross domestic product of the country which is at least globally. And such economic paralysis is that the Central Bank of Iraq has led to rectify the double gap and imbalances savings problems when it launched a credit program and a wide range of $ 6 trillion dinars for the development of savings capacity to market forces the product starting from microfinance and the end of large projects.
3. away from the school debate about demographic or population structure and accompanies it with saving issue, however, Milton Friedman, leader of the Chicago Alncodeh School, is the first to realize this dilemma when exposed to the Permanent Income Theory, where he found that the growing consumer spending and low savings opportunities and the growing cash borrowing are displayed demographic vehicle and urban in Ann one. It's a phenomenon specific to the communities in which enjoys donation demographic (The high proportion of young people or young people in the composition of the labor force in urban or cities). Because they have the professional work force longer in the age of the generation of income Edjara find less and more spending towards consumer goods and services. It is unlike the residents of rural areas where the propensity to save the youth labor force is relatively larger because of the uncertainty caused by a tight community and contraction historic rural residence. However, Friedman sees the approach of the labor force to the middle of the professional building them, will follow a strong attitude towards savings to prepare for retirement stage and thinking seriously limited income or generate additional income.
The Iraqi economy, which leads to the so-called demographic donation is estimated that the proportion of young people under the age of 30 years in the composition of the labor force (during the next decade) by about more than 60% of that workforce, the virtue of savings you will find steeper and take back down to the individual level nor inevitable that increasing numbers of city dwellers in the context of demographic gift to Iraq over the next decade will be a net consumer strength in general, and with savings and borrowed tendencies weak, at the low preparation of the rural population powers known Bmeulha savings. So do not expect the growing savings as a behavior community made in a few days, what requires attention to the danger of the growing phenomenon of imbalance savings in our country rentier oil severe tendency towards rising consumer spending in the weak tendencies savings servo.
4. If the total savings sources are from the source of crude oil returns , which should devote real productive investment and diversify the local economy as a source of extra income servo to close the internal gap, or even to find savings sovereign fund invests its resources through external financial diversification (due to lack of capacity and financial resources of surplus toward real domestic investment) as supportive Central Provident Fund is mentioned returns when necessary in the closure of the external gap, it nevertheless was one of the options available to the national economy over the last ten years. In spite of the large surpluses generated by the current account of the balance of payments of the Iraqi general budget together during the prosperous financial abundance rentier but it did not achieve anything in the economy and its development and make it less unilateral and which can be called (contract lost development).
5. Finally, it is not an option for Iraqi state today (the people and the government and parliament), but the path of reform and teamwork to protect the national economy from waste and corruption and build the foundations of modern economic state based on the competitive social market development and the achievement of the welfare state provided the foundations sufficiently productivity and the principles of justice in the distribution of income and wealth.
(*) economic adviser to Iraqi Prime Minister
[You must be registered and logged in to see this link.]
07/11/2015
1. When entering the country in crisis, the payments go to the fingers of suspicion that there is a constant fiscal deficit (internal deficit) or there is a deficit in the current account of the balance of payments (the external deficit). [...]
1. When entering the country in crisis, the payments go to the fingers of suspicion that there is a constant fiscal deficit (internal deficit) or there is a deficit in the current account of the balance of payments (the external deficit). Is correct that the main objective of economic policy in growth, balance and stability imbalances. In spite of the savings that the imbalance remains the foundation of the most difficult factor in economic policy and its equivalent in providing quick and easy solutions to cope with the double savings deficit above. As the flow of savings is tantamount to a surplus income after excluding consumption during a certain period, the savings could be confounded by himself and also referred to the amount of assets or assets held. Therefore, the stock of savings is an accumulation of savings inflows previous periods. Economies which suffer from low levels of national savings in the structure will inevitably dependent on inflows of external capital flows in order to promote investment and growth levels in the gross domestic product.
2. about what progress, Iraq has suffered since mid-2014 and up to the minute to violent jolt in the current account of its balance of payments due to the deterioration of the country's oil export prices and lower proceeds of oil revenues to more than 55% compared to the years of booming oil revenues, particularly the year 2013 as the current deficit in the current account of the balance of payments of Iraq in 2015, the proportion is estimated to gross domestic product estimated at more than (minus 8%). It is noted that the internal gap between desired savings and investment desired ratio to GDP is still more than the other to (minus 8%) cursor deficit Edjaraa internally similar to the external savings deficit, which confirms the unilateral intensity of the economy and focused overall economic activity on the export of crude oil returns . At a time when real GDP to shrink (minus 2.3%) in the year of economic tremor in 2014, the real growth of the gross domestic product is no more than (one-half of a percent) in the year 2015. In the face of the aspiration to external borrowing and the various flows Foreign risk waiting achieved in bridging internal and external twin deficits, the economy will gradually entity dependent on external flows but for the price prohibitively may lose an independent economic decision.
Also, falling domestic savings level not only strengthens the consumer the ability over time. And foreign currency inflows are also not only strengthen domestic demand to meet the needs of the total consumption and then lead to the erosion of savings and opportunities to deteriorate more and more. Vaanaattiyat Central Bank of Iraq, which is a form of savings sovereign servo for indoor and outdoor Astqrrarin are the other did not rise, despite the inflows of foreign currency from crude oil revenues during the past two years, but exposed to the relative decline because of growing consumerism import of the country. It was the same situation that hit him, other countries such as Brazil and Turkey over the last decade.
It is no secret that the savings deficit and the state of imbalance college (private and government sectors) have generated so-called deficit duo, any deficit in the current account of the balance of payments, due to the superiority of emerging on the cash flows of cash flows Dakhla (the external deficit) versus (internal deficit) is in the low desired savings and the weakness of its ability to meet the investment spending desired by the superiority of consumer spending, which is what happens in our country today.
In this sovereign debt accumulated rate recorded both domestic debt of or foreign relatively increase and not At least 59% of gross domestic product, up from 39% in the two fiscal couple of years. And the nation is still looking for additional opportunities for local borrowing and external which indicates the potential for a rise in the total sovereign debt to GDP to nearly 70%, which may flow funding from foreign markets or foreign sources because of low domestic capital market capabilities and limited leverage in financing the sovereign fiscal deficit. Federal Public The budget for 2016, for example, which is a total expenditure where 50% of the gross domestic product, according to the project, did not disturb the other is estimated at about 22% of the roof of the total spending in the deficit (of 106 trillion dinars) It increases 11% of the gross domestic product of Iraq. At a time when oil and some other important sovereign revenues revenues allocated in the budget to paragraph operational expenditures (consumer), we find that the investment budget expenditures are constrained by public financial ability to provide opportunities to borrow and finance the deficit, both internal loans available in the domestic capital market (weak financial leverage) or resort to external capital markets (Broaf high cost). The country is facing financial hardship and the plight of funding under the influence of ballasts or double bilateral deficit gap. Taking into account the difficulties of spending, while Iraq is still in the midst of a fierce war against local external sources of terrorism, who are a number of towns and cities. On the other hand, finance the budget deficit and under the influence of the exceptional financial circumstances may be exposed to growing operational spending and strengthen the domestic consumer demand, which reduces the savings opportunities and strengthens the savings imbalances Mtlahma with borrowings internal private sector or foreign, which leads to the strengthening of imports of high consumerism, and deepen again its effects backlash deficit in the current account of the balance of payments. Savings rates are slow to be to dock with low income levels and degrees of falling productivity and in particular small economic activities and income-generating activities, which can accommodate network horizontally. So what did you get those small activities extended horizontally on credits or sufficient cash loans, it will increase the degree of the worsening deterioration in productivity and operational capabilities, being a private economic activities providing for jobs for more than 4 million Iraqi man in the private sector, causing at the same time a decline in the income levels productivity due to faster deterioration and erosion in savings opportunities. As it offsets by a decline in the capacity of the banking system in the cash granting of credit, which is still only covers 11% of the needs of the public credit for the student. Cash credit, but did not quite live up to the achievement of a low percentage represents only 5% of the gross domestic product of the country which is at least globally. And such economic paralysis is that the Central Bank of Iraq has led to rectify the double gap and imbalances savings problems when it launched a credit program and a wide range of $ 6 trillion dinars for the development of savings capacity to market forces the product starting from microfinance and the end of large projects.
3. away from the school debate about demographic or population structure and accompanies it with saving issue, however, Milton Friedman, leader of the Chicago Alncodeh School, is the first to realize this dilemma when exposed to the Permanent Income Theory, where he found that the growing consumer spending and low savings opportunities and the growing cash borrowing are displayed demographic vehicle and urban in Ann one. It's a phenomenon specific to the communities in which enjoys donation demographic (The high proportion of young people or young people in the composition of the labor force in urban or cities). Because they have the professional work force longer in the age of the generation of income Edjara find less and more spending towards consumer goods and services. It is unlike the residents of rural areas where the propensity to save the youth labor force is relatively larger because of the uncertainty caused by a tight community and contraction historic rural residence. However, Friedman sees the approach of the labor force to the middle of the professional building them, will follow a strong attitude towards savings to prepare for retirement stage and thinking seriously limited income or generate additional income.
The Iraqi economy, which leads to the so-called demographic donation is estimated that the proportion of young people under the age of 30 years in the composition of the labor force (during the next decade) by about more than 60% of that workforce, the virtue of savings you will find steeper and take back down to the individual level nor inevitable that increasing numbers of city dwellers in the context of demographic gift to Iraq over the next decade will be a net consumer strength in general, and with savings and borrowed tendencies weak, at the low preparation of the rural population powers known Bmeulha savings. So do not expect the growing savings as a behavior community made in a few days, what requires attention to the danger of the growing phenomenon of imbalance savings in our country rentier oil severe tendency towards rising consumer spending in the weak tendencies savings servo.
4. If the total savings sources are from the source of crude oil returns , which should devote real productive investment and diversify the local economy as a source of extra income servo to close the internal gap, or even to find savings sovereign fund invests its resources through external financial diversification (due to lack of capacity and financial resources of surplus toward real domestic investment) as supportive Central Provident Fund is mentioned returns when necessary in the closure of the external gap, it nevertheless was one of the options available to the national economy over the last ten years. In spite of the large surpluses generated by the current account of the balance of payments of the Iraqi general budget together during the prosperous financial abundance rentier but it did not achieve anything in the economy and its development and make it less unilateral and which can be called (contract lost development).
5. Finally, it is not an option for Iraqi state today (the people and the government and parliament), but the path of reform and teamwork to protect the national economy from waste and corruption and build the foundations of modern economic state based on the competitive social market development and the achievement of the welfare state provided the foundations sufficiently productivity and the principles of justice in the distribution of income and wealth.
(*) economic adviser to Iraqi Prime Minister
[You must be registered and logged in to see this link.]
