Where Now For Iraqi Inflation?

Iraq’s core inflation continued to slow in July, dropping to an annual rate of 1.7 percent from 2.7 percent in June, a central bank official said on Monday, according to a report from Reuters.

The bank gave no immediate explanation for the fall in core inflation, which excludes expenditures on fuel.

To spur investment and economic growth outside of the oil sector, which accounts for 95% of government revenues, the central bank has relaxed monetary policy and tried to encourage banks to lend.

As we reported last week, the central bank last week said that from Sept 1 it will cut commercial banks’ reserve requirements to 15 percent from 20 percent. In April it cut its key interest rate by 100 basis points to 6 percent due to subdued inflation.

Meanwhile, an Iraqi economist says the country’s inflation rate might “continue to grow” as the government has set a program of granting loans to citizens, especially public servants, until 2015.

Speaking to AKnews, Amer Hamad Jaberi said the government does not have a mechanism to control inflation.

“The instability in oil prices is also a significant problem which causes inflation rate in Iraq to increase,” said Jaberi.

He criticized the Iraqi government for relying heavily on oil revenues and overlooking other major areas like industry and agriculture.

(Sources: Reuters, AKnews)

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