By John Lee.
At a webinar hosted by the Iraq Britain Business Council (IBBC) yesterday, a team of experts presented and discussed their insights on the Iraqi government's recent White Paper, and on the challenges and opportunities facing the country.
On the subject of the Iraqi currency, Frank Gunter, Professor of Economics at Lehigh University, commented:
"As the international reserves of Iraq decrease ... this is going to put pressure for a depreciation or loss of value of the dinar ... and that might be a good thing.
"The dinar was deliberately appreciated, increased in value, by almost 20 percent. It has made exports from Iraq uncompetitive; it has led to a huge amount of imports into Iraq because the foreign products are so cheap.
"Maybe a possible reaction to the fiscal constraint is to devalue the dinar, so that every dollar of oil sales will buy more dinar, which will allow payment of the salaries and pensions and the infrastructure."
While agreeing that the dinar was overvalued, Hadi Al Damirji, of MIT's Sloan School of Management, urged some caution, in case a devaluation would lead to a further run on the dinar:
"I totally agree with the philosophy of keeping the dinar lower, but when is the right time to move it?"
Suggesting a conrolled devaluation, in combination with incentives to reduce public sector salary commitments, Shwan Aziz, former Chief of staff to the Iraqi Deputy Prime Minister, said:
"[We must] protect those groups that have dinars in the banks, or those contractors who have not been paid for so many years ... [but] controlled devaluation, it seems, is unavoidable."