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Governor of the Central Bank of Iraq: speculation and political interference in the work of the bank behind the recent crisis dinar
25/7/2015
Qasim Houca
The seminar held by the «Institute of the progress of the policies of development» to discuss monetary difficulties and the position of the central bank towards them during and guest Dr. Ali Keywords Governor of the Central Bank of Iraq controversy and heated discussions about the real reasons behind the significant decline in the value of the dinar during the past few weeks have seen
the participants in the symposium concluded that speculation and intervention in the Bank's policy of the main reasons that led to the crisis mentioned stressing the need to distance the bank from the interventions and the elimination of speculation as well as create a state of compatibility between monetary and fiscal policy .. warning of the possibility of inclusion of Iraq in the international black list in case does not have to take the required reforms for the sector banking.
He praised the MP Dr Mehdi al-Hafez «head of the Institute of progress for policies development« during a speech at the opening of the symposium the swift action taken by the Bank, which contributed to tackle the crisis and the return of well-being of the Iraqi dinar .. pointing out that the Central Bank's exposure in recent years to pressure various distortions, but the steps that taken recently put it in a new and important site for monetary policy desired and its contribution to the development process in the country
and drew Hafiz to that of the first initiatives of the bank is refusing to external interventions, whether hidden government or parliamentary convertibles that were inconsistent with the law .. Indicating that the time limit to sell the dollar by setting (75) million dollars a day was an example of blatant interference in the Bank's policy.
He said Hafiz n of the important initiatives taken by the bank which is carrying out national development project with the support of $ 1 trillion dinars form of loans to set up small and medium enterprises contribute to the process of national development and job creation to prepare a good young and estimated results to reduce the 30 percent unemployment .. and up to loans of approximately number twenty thousand loan is offered through the windows of the domestic banks under the bank guarantees the company cover a provision (250) jobs
and expressed Hafiz hope that The central bank will continue its initiatives constructive to include all areas and sectors of development, particularly support industrial initiative, which is long overdue.
After that, Mr. Governor of the Central Bank of Iraq, Dr. Ali Keywords occur reviewing the circumstances and events that the Iraqi market experienced over the past weeks, which resulted in a decline in the value of the Iraqi dinar .. explaining the reasons behind this crisis .., consequences and solutions desired so .. Indicating «When we talk about the sale of foreign currency in the framework of the so-called sell the dollar and here must be to clarify the concepts in order to are dealing with it about right.
The so-it «window sell the currency« in the Iraqi Central Bank, which through which to sell the US dollar, not a secondary window or marginal, it is a big operation with a direct most important functions of the Central Bank of achieving exchange rate stability and to maintain the general level of prices and curb inflation, and the nature of the Reclining Iraqi economy on oil resources and therefore revenue dollar makes prejudice The relationship between fiscal and monetary policy, including an interactive relationship necessitated by the nature of the revenue and expenditure of the monetization of the dollar. And that the Central Bank of the exercise important roles in this process and in the framework, including:
1. finance current expenditure of the general budget of the state, where to buy central bank dollar from the Ministry of Finance to cover the needs of the Iraqi dinar, according to allocations required in the general budget.
2. finance imports of the commercial sector, as well as other foreign remittances, and to cover travelers and students, treatment and transfers of residents needs, where the central bank is the main source of a dollar coin by virtue of the nature of the state's resources and the weakness of the other - sources and also lists -.
3. The sale of the dollar process means contrast to withdraw dinars from the market, and this process help the central bank to curb money supply and reduce the resort to printing more currency, which will help in reducing inflation and stabilizing the general level of prices.
4. The monopolistic role of the process of dollar selling exercised by the central bank provides him the opportunity to control exchange rates and quantities sold and thus It provides him with an important tool of monetary policy tools in maintaining price stability.
The sales format - in terms of the central bank take it - is followed in countries where monopoly Governments exports and thus foreign currency as is happening in the oil-producing countries.
The other options such as flotation Policy exchange rate - or dollar sale directly by the Ministry of Finance, they Options ascertains - especially in Iraq - stability and control of the exchange rate for reasons related to the nature of the circumstances, institutional, regulatory, market and regulatory environment, and others.
Analysis of demand for the dollar
often Manlahz focus on only one side in the perception and analysis The conclusion to sell the dollar, which is the short side or the display, with the omission of the other side which is the purchase or demand, with that most important aspect of the subject, and stand it and identify its causes and trends lead to important results, but lead to reforms of economic, financial and processors as well as the attention to the demand side observer and analyst away from falling into the failure analysis and conclusion and treatment.
The stand on the motives and factors of demand for the dollar a very important issue, it can be noted here the most prominent of these factors, which is pressing and affect the monetary policy:
1. the nature of government spending and trends in public finance policy:
spending Government-funded oil resources and consumer spending represents the bulk of those resources. This spending turn into a demand for goods, which are often imported, and can accommodate this spending widening oil revenues, spending turned into a demand for imports in foreign currency (dollar) is due to the structure of the economy and his palaces to meet the local need, and this weakens the role of the central bank in the display control Monetary which turns into demand for the dollar, where, for example, the industrial and agricultural sector together does not exceed the proportion of its contribution to the gross domestic product of 5% and adds the phenomenon of spending more than revenue (budget deficit) an additional burden with what is required of an increase in the money supply, and this increase with the deterioration of productivity case stability leads to cash overproduction, and can not be that the central bank of control over the optimal size of money.
2. migration funds (savings and investment outside Iraq):
The fragility of the security situation and the weakness of the overall stability pay money out of Iraq, and has become the investment and purchase of real estate and savings phenomenon in other countries, especially neighboring countries, the phenomenon raises the demand for the dollar.
It's a pity, that all the efforts and the costs borne by the state and the central bank over the past after 2003 to stabilize the exchange rate and public prices and raise the strength of the Iraqi dinar, all of that has not been reflected on increasing investments or domestic savings, but it was the beneficiary of the neighboring countries where he was in charge of those features of Iraq's considerable positive impact on the economies of neighboring countries.
3. The low level of remittances from abroad:
that remittances from abroad is an important source of foreign currency sources, but we note that it does not pose only a very small percentage, because of the weakness of foreign tourism and remittances from residents abroad investments, and even the number of retirees who request conversion of their salaries abroad (the dollar) is increasing significantly.
4. interventions in the work of the central bank:
Although the central bank is generally well-respected and independence by the legislative and executive powers, but there is pressure directly and indirectly, intentionally or unintentionally, including:
• interference in determining the ceiling daily dollar sales, as stated in Article 50 of the General Budget Law, which is Tkpala Central Bank in the exercise of its monetary policy that require permanent flexibility, this article affect the essence of the independence of the Central Bank and the graduation until about the role of responsibility and accountability when Aeetmkn to achieve in charge of the task in maintaining the stability of exchange rates.
The general budget law is the law determines revenues and expenses and not a law that defines or eliminates what exists in other laws, especially when they affect the laws of bodies gave the Constitution and the law autonomy in its decisions and prevent any party or person of influence and prevent it from receiving instructions or recommendations from others, as contained in the central bank law.
It is true that the central bank did not fully adhere to the provisions of identification in the General Budget Law, where the Council of Ministers decided to postpone the application of materials that were not already present in the draft budget law, including Article (50), though the central bank tried to take what was stated in the eyes of mind despite the case with the impact of the loss of flexibility.
• confusing media statements:
that a lot of media statements, which often Matntaleg of deficiencies in the understanding and the surround concepts related to monetary policy, disrupt work Central Bank, and creates psychological pressure of the impact on the Bank's management and its employees.
For example, look at the foreign currency reserves just absolute in the analysis and evaluation of monetary policy as a number, leading to conclusions and attitudes of false and confusing statements.
The reserve as a record devoid of Aaahr to the safety and strength of the reserve without attributed to the local currency exported (Dinar) so it must be seen from this standard, usually Maaattabr Reserve sound and sufficient if it covers the local currency, (ie 1: 1 ratio), so the decline in reserve as a result of buying and selling of the dollar, which means that the local currency in circulation also it decreased and therefore keep the ratio the province at their level, and therefore, some central banks in other countries turned to the Public Treasury (Ministry of Finance) Maevad the ratio mentioned, because that increase is the surplus of the need for the bank.
Another example misconceptions is to look to sell the dollar operations as money laundering and smuggling operations. The presence of such potential operations, as is the case in all countries of the world, but can not be regarded as those operations in general are illegal operations, that the assumptions which runs from the other describes the bulk of sales in the suspicious framework and in amounts up to billions of dollars an assumption leads to wrong analysis where Aastakim logic with this assumption because money laundering is derived from the crimes of money such as corruption and tax evasion, kidnapping and human trafficking, etc., and can not those offenses are sized up to 30 billion dollars a year and the rest (30 or more) is the money is illegal, it is the assumption is far from reality, whether in the estimation of the trade volume, or the size of other operations, where a large proportion of income and profits and gains be transferred to the outside because of the situation, in addition to the passenger expenses, treatment and wages of the study and the salaries of retirees and remittances from non-residents and others.
1. weakness loans available the banking and financial sector:
that the banking sector is suffering from the weakness of the opportunities available, where the weakness of the savings at the national level, the financial crisis that affected deeply the business, which deals with banks, and the activities of letters of credit and letters of guarantee, as well as Maaaatari provide loans of problems, all of that It pays banks to take dollar selling process shelter easy to them.
On the other hand, the number of banking companies granted licenses in recent years reached the limits of 2,000 companies, although the name of these companies legal is to mediate in buying and selling currencies other words, the source of their currencies from the market and through process to mediate, but the limited market because of the lack of tourism or remittances from abroad, these companies rely on the central bank to get on the dollar and sell it, and that's where this is its basis, many of those companies conducting market speculation and fabrication of artificial demand for the lifting of prices and the benefits outrageous.
2. Dollarization:
Despite scored install the exchange rate and the strength of the Iraqi dinar, a significant proportion of transactions in the Iraqi market is done by the dollar instead of the dinar, especially in the province of Kurdistan.
The accompanying state inherited the fear of the conditions of the country in the system former siege paid a lot of hedge what can be exposed dinar, as happened in the nineties. This phenomenon receive the burden of extra on the central bank to increase demand for the dollar.
The stand on these factors is an important issue, not only to analyze and understand what is happening, it is a matter of processors radical leads to reform the economic and financial conditions and provide the best in the business and investment environment and the expansion of the productive base, diversify and protect local product and efficient financial management and tax system effectively and efficiently.
[You must be registered and logged in to see this link.]
25/7/2015
Qasim Houca
The seminar held by the «Institute of the progress of the policies of development» to discuss monetary difficulties and the position of the central bank towards them during and guest Dr. Ali Keywords Governor of the Central Bank of Iraq controversy and heated discussions about the real reasons behind the significant decline in the value of the dinar during the past few weeks have seen
the participants in the symposium concluded that speculation and intervention in the Bank's policy of the main reasons that led to the crisis mentioned stressing the need to distance the bank from the interventions and the elimination of speculation as well as create a state of compatibility between monetary and fiscal policy .. warning of the possibility of inclusion of Iraq in the international black list in case does not have to take the required reforms for the sector banking.
He praised the MP Dr Mehdi al-Hafez «head of the Institute of progress for policies development« during a speech at the opening of the symposium the swift action taken by the Bank, which contributed to tackle the crisis and the return of well-being of the Iraqi dinar .. pointing out that the Central Bank's exposure in recent years to pressure various distortions, but the steps that taken recently put it in a new and important site for monetary policy desired and its contribution to the development process in the country
and drew Hafiz to that of the first initiatives of the bank is refusing to external interventions, whether hidden government or parliamentary convertibles that were inconsistent with the law .. Indicating that the time limit to sell the dollar by setting (75) million dollars a day was an example of blatant interference in the Bank's policy.
He said Hafiz n of the important initiatives taken by the bank which is carrying out national development project with the support of $ 1 trillion dinars form of loans to set up small and medium enterprises contribute to the process of national development and job creation to prepare a good young and estimated results to reduce the 30 percent unemployment .. and up to loans of approximately number twenty thousand loan is offered through the windows of the domestic banks under the bank guarantees the company cover a provision (250) jobs
and expressed Hafiz hope that The central bank will continue its initiatives constructive to include all areas and sectors of development, particularly support industrial initiative, which is long overdue.
After that, Mr. Governor of the Central Bank of Iraq, Dr. Ali Keywords occur reviewing the circumstances and events that the Iraqi market experienced over the past weeks, which resulted in a decline in the value of the Iraqi dinar .. explaining the reasons behind this crisis .., consequences and solutions desired so .. Indicating «When we talk about the sale of foreign currency in the framework of the so-called sell the dollar and here must be to clarify the concepts in order to are dealing with it about right.
The so-it «window sell the currency« in the Iraqi Central Bank, which through which to sell the US dollar, not a secondary window or marginal, it is a big operation with a direct most important functions of the Central Bank of achieving exchange rate stability and to maintain the general level of prices and curb inflation, and the nature of the Reclining Iraqi economy on oil resources and therefore revenue dollar makes prejudice The relationship between fiscal and monetary policy, including an interactive relationship necessitated by the nature of the revenue and expenditure of the monetization of the dollar. And that the Central Bank of the exercise important roles in this process and in the framework, including:
1. finance current expenditure of the general budget of the state, where to buy central bank dollar from the Ministry of Finance to cover the needs of the Iraqi dinar, according to allocations required in the general budget.
2. finance imports of the commercial sector, as well as other foreign remittances, and to cover travelers and students, treatment and transfers of residents needs, where the central bank is the main source of a dollar coin by virtue of the nature of the state's resources and the weakness of the other - sources and also lists -.
3. The sale of the dollar process means contrast to withdraw dinars from the market, and this process help the central bank to curb money supply and reduce the resort to printing more currency, which will help in reducing inflation and stabilizing the general level of prices.
4. The monopolistic role of the process of dollar selling exercised by the central bank provides him the opportunity to control exchange rates and quantities sold and thus It provides him with an important tool of monetary policy tools in maintaining price stability.
The sales format - in terms of the central bank take it - is followed in countries where monopoly Governments exports and thus foreign currency as is happening in the oil-producing countries.
The other options such as flotation Policy exchange rate - or dollar sale directly by the Ministry of Finance, they Options ascertains - especially in Iraq - stability and control of the exchange rate for reasons related to the nature of the circumstances, institutional, regulatory, market and regulatory environment, and others.
Analysis of demand for the dollar
often Manlahz focus on only one side in the perception and analysis The conclusion to sell the dollar, which is the short side or the display, with the omission of the other side which is the purchase or demand, with that most important aspect of the subject, and stand it and identify its causes and trends lead to important results, but lead to reforms of economic, financial and processors as well as the attention to the demand side observer and analyst away from falling into the failure analysis and conclusion and treatment.
The stand on the motives and factors of demand for the dollar a very important issue, it can be noted here the most prominent of these factors, which is pressing and affect the monetary policy:
1. the nature of government spending and trends in public finance policy:
spending Government-funded oil resources and consumer spending represents the bulk of those resources. This spending turn into a demand for goods, which are often imported, and can accommodate this spending widening oil revenues, spending turned into a demand for imports in foreign currency (dollar) is due to the structure of the economy and his palaces to meet the local need, and this weakens the role of the central bank in the display control Monetary which turns into demand for the dollar, where, for example, the industrial and agricultural sector together does not exceed the proportion of its contribution to the gross domestic product of 5% and adds the phenomenon of spending more than revenue (budget deficit) an additional burden with what is required of an increase in the money supply, and this increase with the deterioration of productivity case stability leads to cash overproduction, and can not be that the central bank of control over the optimal size of money.
2. migration funds (savings and investment outside Iraq):
The fragility of the security situation and the weakness of the overall stability pay money out of Iraq, and has become the investment and purchase of real estate and savings phenomenon in other countries, especially neighboring countries, the phenomenon raises the demand for the dollar.
It's a pity, that all the efforts and the costs borne by the state and the central bank over the past after 2003 to stabilize the exchange rate and public prices and raise the strength of the Iraqi dinar, all of that has not been reflected on increasing investments or domestic savings, but it was the beneficiary of the neighboring countries where he was in charge of those features of Iraq's considerable positive impact on the economies of neighboring countries.
3. The low level of remittances from abroad:
that remittances from abroad is an important source of foreign currency sources, but we note that it does not pose only a very small percentage, because of the weakness of foreign tourism and remittances from residents abroad investments, and even the number of retirees who request conversion of their salaries abroad (the dollar) is increasing significantly.
4. interventions in the work of the central bank:
Although the central bank is generally well-respected and independence by the legislative and executive powers, but there is pressure directly and indirectly, intentionally or unintentionally, including:
• interference in determining the ceiling daily dollar sales, as stated in Article 50 of the General Budget Law, which is Tkpala Central Bank in the exercise of its monetary policy that require permanent flexibility, this article affect the essence of the independence of the Central Bank and the graduation until about the role of responsibility and accountability when Aeetmkn to achieve in charge of the task in maintaining the stability of exchange rates.
The general budget law is the law determines revenues and expenses and not a law that defines or eliminates what exists in other laws, especially when they affect the laws of bodies gave the Constitution and the law autonomy in its decisions and prevent any party or person of influence and prevent it from receiving instructions or recommendations from others, as contained in the central bank law.
It is true that the central bank did not fully adhere to the provisions of identification in the General Budget Law, where the Council of Ministers decided to postpone the application of materials that were not already present in the draft budget law, including Article (50), though the central bank tried to take what was stated in the eyes of mind despite the case with the impact of the loss of flexibility.
• confusing media statements:
that a lot of media statements, which often Matntaleg of deficiencies in the understanding and the surround concepts related to monetary policy, disrupt work Central Bank, and creates psychological pressure of the impact on the Bank's management and its employees.
For example, look at the foreign currency reserves just absolute in the analysis and evaluation of monetary policy as a number, leading to conclusions and attitudes of false and confusing statements.
The reserve as a record devoid of Aaahr to the safety and strength of the reserve without attributed to the local currency exported (Dinar) so it must be seen from this standard, usually Maaattabr Reserve sound and sufficient if it covers the local currency, (ie 1: 1 ratio), so the decline in reserve as a result of buying and selling of the dollar, which means that the local currency in circulation also it decreased and therefore keep the ratio the province at their level, and therefore, some central banks in other countries turned to the Public Treasury (Ministry of Finance) Maevad the ratio mentioned, because that increase is the surplus of the need for the bank.
Another example misconceptions is to look to sell the dollar operations as money laundering and smuggling operations. The presence of such potential operations, as is the case in all countries of the world, but can not be regarded as those operations in general are illegal operations, that the assumptions which runs from the other describes the bulk of sales in the suspicious framework and in amounts up to billions of dollars an assumption leads to wrong analysis where Aastakim logic with this assumption because money laundering is derived from the crimes of money such as corruption and tax evasion, kidnapping and human trafficking, etc., and can not those offenses are sized up to 30 billion dollars a year and the rest (30 or more) is the money is illegal, it is the assumption is far from reality, whether in the estimation of the trade volume, or the size of other operations, where a large proportion of income and profits and gains be transferred to the outside because of the situation, in addition to the passenger expenses, treatment and wages of the study and the salaries of retirees and remittances from non-residents and others.
1. weakness loans available the banking and financial sector:
that the banking sector is suffering from the weakness of the opportunities available, where the weakness of the savings at the national level, the financial crisis that affected deeply the business, which deals with banks, and the activities of letters of credit and letters of guarantee, as well as Maaaatari provide loans of problems, all of that It pays banks to take dollar selling process shelter easy to them.
On the other hand, the number of banking companies granted licenses in recent years reached the limits of 2,000 companies, although the name of these companies legal is to mediate in buying and selling currencies other words, the source of their currencies from the market and through process to mediate, but the limited market because of the lack of tourism or remittances from abroad, these companies rely on the central bank to get on the dollar and sell it, and that's where this is its basis, many of those companies conducting market speculation and fabrication of artificial demand for the lifting of prices and the benefits outrageous.
2. Dollarization:
Despite scored install the exchange rate and the strength of the Iraqi dinar, a significant proportion of transactions in the Iraqi market is done by the dollar instead of the dinar, especially in the province of Kurdistan.
The accompanying state inherited the fear of the conditions of the country in the system former siege paid a lot of hedge what can be exposed dinar, as happened in the nineties. This phenomenon receive the burden of extra on the central bank to increase demand for the dollar.
The stand on these factors is an important issue, not only to analyze and understand what is happening, it is a matter of processors radical leads to reform the economic and financial conditions and provide the best in the business and investment environment and the expansion of the productive base, diversify and protect local product and efficient financial management and tax system effectively and efficiently.
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