The Central Bank has released its monetary policy indicators for the fourth semester of 2024, indicating a notable decrease in the annual inflation rate to 2.8%, with the core inflation rate falling to 2.5%. This represents a decline from 4% and 4.5%, respectively, recorded in the same period in 2023.
This achievement aligns with the monetary policy objectives that the Central Bank has been pursuing since 2023. A primary focus remains on controlling the overall price level, a fundamental goal of monetary policy aimed at ensuring stability and promoting economic growth. Despite facing complex economic, security, and political challenges in 2024, which are compounded by both direct and indirect influences from the global landscape and our region, the Central Bank continues its steadfast commitment to its objectives.
The country has wrestled with these challenging conditions for decades, particularly due to a rentier economic structure where 93% of the general budget relies on oil revenues, accounting for around 60% of the gross domestic product (GDP). In contrast, productive economic sectors, such as agriculture and industry, contribute only 3% and 2% to GDP, respectively, according to official data from the Ministry of Planning. Although growth in these sectors is anticipated in 2024, there remains an urgent need to support and activate the real economy to address local production deficiencies and adequately meet citizen demand for essential goods.
Consequently, the country has become heavily reliant on imports within the commercial sector, with insufficient regulation of internal trade and foreign commerce. Moreover, inadequate control over illegal trade and informal border crossings has exacerbated the situation, leading to significant fluctuations in the monetary and commercial markets. Exchange rates and the prices of imported goods surged dramatically during 2021 and 2022, establishing inflation as a central challenge for monetary policy and undermining exchange rate stability. In response, the Central Bank implemented several measures in collaboration with the government throughout 2023 and 2024 aimed at regulating foreign trade financing and enhancing compliance with international financial standards.
Notably, the Central Bank has made strides to secure external transfers directly with international correspondent banks, encompassing 20 Iraqi banks and eight foreign currencies, including the US dollar, Euro, Chinese yuan, UAE dirham, Indian rupee, Turkish lira, Jordanian dinar, and Saudi riyal. An analysis of general and core inflation indicators highlights the progress made compared to inflation rates in other countries within the region.
Official data reveals that many countries with unstable economies experience exceptionally high inflation rates; for instance, Turkey at 80.2%, Sudan at 11.4%, and Iran at 40%. In comparison, countries like Tunisia, Algeria, and Morocco, which maintain relative economic stability, report inflation rates of 9.3%, 9%, and 5%, respectively. Meanwhile, Egypt has an inflation rate of 37.4%, and the Gulf countries display much lower rates between 2.4% and 4.8%. This data substantiates the efficacy of the Central Bank’s strategies and actions in lowering inflation and stabilizing prices in the current economic climate.
The Central Bank remains focused on achieving further objectives, including ensuring exchange rate stability and preserving foreign cash reserves that adequately back domestic currency for trade and imports, as well as increasing gold reserves and reducing reliance on local currency. Economic indicators from 2024 affirm that the measures instituted by the Central Bank are pivotal in establishing monetary system stability—a crucial step toward attaining additional monetary policy goals.
For additional insights, subscribe to our channel on Telegram
