Coronavirus and twin deficits in the Iraqi economy

Coronavirus and the oil price war had a very large impact on resources from oil rents. A loss of one dollar per barrel exported during 2020 Iraq will lose one billion dollars annually, that such an economic shock generated a double deficit on both the balance of payments and the deficit of the public budget that depends on oil revenues by 93%, and the balance of payments deficit led to a state of fluctuation in the price of The Iraqi dinar exchange against the dollar, at a rate that exceeded 2% in the past days and this fluctuation in the Iraqi dinar the exchange rate is due to the pessimistic forecast factor caused by the Coronavirus and the decline in oil prices.

It also generated a demand among individuals and institutions on the money market, represented by the increasing demand for the dollar. All this demand led to the generation of the so-called (dollar liquidity trap) due to the phenomenon of cash hedging practiced by consumers and traders and the reason for the cash hedge phenomenon is due to two behavioral factors represented by indecency and shortage feedback to information, nor the exchange rate balance can be restored in the short term, except by signs of reassurance sent by the monetary policy, by interfering in the dollar market and expanding the dollar selling window for individuals and companies.