Capital flight is a burden on the balance of payments

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Capital flight is a burden on the balance of payments

Post  Admin on Sun May 14, 2017 9:49 am

14/5/2017 12:00 am

Baghdad / Emad Al-Amara

The financial crises are causing major negative effects on the economy, as they are reflected in the value of the currency, which causes imbalance in the system of local payments. The banking crises occur due to misallocation of resources, weak exploitation and the occurrence of a certain degree of corruption. .Economic Academy d. Qusay al-Jabri said that the pressure exerted on the currency during the period of the financial crisis is a burden on the banking system in general, adding that the ability of the banking system to bear depends mainly on the degree of support for foreign reserves of domestic banking obligations, the government may be forced to make a formal reduction In the currency value, which causes a decline
In stock prices

To his regime of interest rate changes

Leading to a decline in foreign investors.

Al-Jabri pointed out that the interest rate begins to rise until it peaks before the crisis.

The increase in the interest rate could be a reflection of the monetary policy of the monetary authorities to limit credit policies as well as to stop the conversion of local currency into foreign currency. The abandonment of securities in their possession and deposit in commercial banks to benefit from the attractive interest rate, which will lead to imbalance in the financial market in a recession in which often precedes the occurrence of the banking crisis may push the recession of the financial market for investors to transfer money n Other assets.

In many cases, the stock market crash was accompanied by corrections in asset markets.

Al-Jabri stressed that the flight of capital abroad will be a great burden
On the balance of payments, in particular

If the owner so double rates

Economic growth declined

Exports, pointing out that its impact on the balance of trade will reflect negative effects on the balance of payments.

He hinted that with the emergence of the banking crisis, the growth of deposits and credit declined

The decline in deposits is more pronounced in countries where the contribution of foreign banks is low with government-owned banks.

Academic Economic d. In his turn, Falah Hassan Thwaini told Al-Sabah that economic openness, in the context of globalization and accompanying financial liberalization, is not a precaution after long closure, weak administrative and banking expertise that deals with the new variables and the lack of evaluation

Credit management, weak supervision and banking supervision lead to short-term external loans in consumer or real estate (as in the 1997 Southeast Asian crisis).

He said that the banking crises are the result of macroeconomic turmoil, adding that the shock caused by deteriorating terms of trade in addition to fluctuations in inflation rates and the supremacy of the macroeconomic recession affect the economic and banking situation in particular.

The economic instability is leading to the uncertainty that disturbs borrowers' perception of the degree to which banks are safe. Depositors will then expect all banks to be in a state of panic.

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