Government advisor clarifies exchange rate adjustment dimensions to ensure financial stability

The Prime Minister's Advisor for Financial Affairs, Mazhar Muhammad Saleh, confirmed on Wednesday that the exchange rate adjustment comes within the framework of prior hedging and protecting economic and financial stability, while pointing out that foreign trade financing is proceeding regularly and stably. Saleh said in a statement to the official agency that the exchange rate of the Iraqi dinar against the dollar and other foreign currencies represents the external value of the dinar, and therefore its stability is closely linked to the availability of foreign currency and the economy's ability to finance foreign trade needs, indicating that in light of the repercussions of regional and international crises facing Iraq, especially the effects of war and unrest that may affect the movement of oil exports through the Strait of Hormuz, their potential repercussions on oil revenues, the general budget, and foreign exchange flows require dealing with them in a precautionary and studied manner. He added that the measures being taken do not mean an imbalance in the economic situation, but rather come within the framework of prior hedging and protecting economic, financial and monetary stability, in anticipation of any developments that may affect the state's foreign currency resources or its ability to finance foreign trade and public spending, pointing out that monetary policy works to manage the exchange market and maintain the smoothness of providing foreign currency, ensuring the continuation of foreign trade financing regularly and stably, while fiscal policy acts as an equivalent to stability to absorb part of the potential effects of external shocks through the balanced management of public spending, revenues, fees, taxes and government support. He stated that customs and tax measures come within this precautionary system, to be used in a studied manner that does not aim to increase burdens on the citizen or cause unjustified price increases, but rather to organize the import movement, enhance public revenues and rationalize the use of foreign currency, taking into account that the financial impact of these measures is not transferred completely to the consumer. He stressed that the general budget possesses important tools to protect internal stability through the continuation of spending on food, medicine, fuel and basic services, making fiscal policy a line of defense against the transmission of external shocks to the living standard, pointing out that government support in these circumstances not only performs a social function, but also represents an economic tool to absorb the shock and maintain the stability of prices and local demand. He affirmed that the financial, customs and tax measures associated with the current phase should be viewed as precautionary and protective measures for the economy, aimed at enhancing the state's ability to face any potential decline in oil revenues or foreign exchange flows, and maintaining the general budget's ability to meet its obligations, while protecting the stability of the domestic market, explaining that these measures do not target a sudden change in the exchange rate or burdening society with the cost of the crisis, but rather target hedging and building a financial and monetary safety margin that enables the Iraqi economy to deal with exceptional circumstances, while continuing to provide basic goods and services and maintaining purchasing power and internal stability. He stressed that the strength of the economy in such circumstances is not measured only by the size of its resources, but also by its ability to manage shocks before their full effects occur, pointing out that integration between monetary policy and fiscal policy, and between exchange, customs, tax, spending and support procedures, represents at this stage a protection and stability equation aimed at securing the Iraqi economy and the citizen from the repercussions of any external disturbance in oil markets or international trade.