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Central Bank of Iraq and the statements related to monetary policy

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Rocky


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Central Bank of Iraq and the statements related to monetary policy





November 10th, 2015

On the Keywords *

It was noted recently by some of the non-professionals, has launched remarks on monetary policy and the work of the Central Bank of Iraq, has been characterized by the majority of those statements fallacies and pessimism and Althbit, either because of the absence of an accurate understanding, intent is the objective, which stems from different motives linked to the political reality and harassment and interests.

The central bank's policy established are distancing Baidaan debates and reactions to the statements, but that the volume of inaccuracies and confusion reached a level detrimental to general stability and Astaqraralsouk and damaging the reputation of Iraq externally and the consequent raised serious on Iraq and financial transactions and monetary and banking, which invites us to clarify some things, as follows:

1. The central bank is working on the application of parallel policy to maintain the overall stability of prices and curb inflation as a goal basically and the task of President under the law of this bank, at the same time working to maintain its reserves prevailing dinar and high coverage in spite of the prevailing and known to everybody economic conditions, a so the whole maintained and preserves the purchasing power of the Iraqi dinar.

The waste of concerns about the value of the dinar and international reserves refer to the following facts:

(a) that with the decline of dollar resources, due to lower oil prices, the reserves are still enough level, but much higher and according to international criteria namely: the standard of the local currency cover the equivalent of foreign currency, and the reserve capacity to cover imports for a period of 6 months.

(b) International Monetary Fund forecast at the beginning of 2015 and the arrival of the reserve to $ 40 billion at the end of the year, we have explained at the time that the Reserve it will be up to $ 60 billion at the end of that year and months after the beginning of the year the fund amended its forecast

and Qdralaanaati $ 50 billion, and still we had expected, according to the data and the actual indicators we have the reserve - as we expected - it will be up to the $ 60 billion.

(c) amounted to the difference between our purchases of the dollar (from the Ministry of Finance) and sales of the dollar for the period from 01/01/2015 up to 09/30/2015, the difference amounted to about $ 600 million a month, and the central bank to cover this difference to balance the balance of payments and to maintain price exchange and therefore the general level of prices, and it is clear that even with the continued decline in oil prices and thus lower revenues from the dollar, the reserve can continue coverage enough adequate presence of about $ 60 billion of reserves.

(d) that what is happening from the low and high in reserves is frequent occurrence In countries that depend on exports of oil, it has happened in the year of 2009, when oil prices fell, then stood at the bank sales rate of the dollar to its purchases of dollar 148% and then returned to accumulate new reserves after prices returned to their rates the highest.

- The mistakes common link low or high reserve of the Central Bank, since this reserve is governed by the nature of the composition and the nature of the use of outside control or control and the central bank is in:

1. That contained the dollar is doomed exports of crude oil: the quantity and price, and other sources virtually non-existent (remittances from abroad, whether from living abroad or foreign investment, or non-oil exports).

2. The state budget expenses represent the main source of aggregate demand for goods and services, which are mostly imported, due to the absence of al-Qaeda and local productivity.

3. Constitute the migration of money from Iraq phenomenon evident because of the situation experienced by the country.

4 for sale. The continuing shortfall in the state budget and covered loans, bonds, money orders, and this means an increase in money supply which is not offset by revenue dollarised, this creates additional demand for goods and services imported more than it received by the Central Bank of the dollar, which exchanged usually the Ministry of Finance in Iraqi dinars through the bank.

Thus, the factors which Configure backup, control is outside the central bank's control, and that the reserves under what passed consists of the difference between the dollar sales through the bank window and purchases of Bank of the dollar from the Ministry of Finance if sales were less than what is received by rising up and if more sales declining reserves.

And here arises a question about the possibility of central bank control the amount of sales through the restrictions put on the sale and conversion processes, we say that restrict the sale of dollar operations lead to the following phenomena results:

First, contrary to the guidelines of the International Monetary Fund approved and committed to by the member states (including Iraq).

Second: intersects restriction with the Central Bank, which provided in Article 28 thereof on the (procurement law or simple unconditional sale «cash or futures» of foreign currency).

Third, create a large deviation between the official rate and the market rate and achieve the obscene gains for speculators, brokers, and lead to a general rise prices and harm the purchasing power of the Iraqi dinar.

Fourth: the practice of cheating, forgery and fraud and corruption in order to get the amounts of the dollar.

From the point of the Central Bank of view, if I want to maintain on the reserve requires, processors structural and structural macroeconomic and financial policies (revenues, expenses , taxes ...) including:

• stimulate national production and diversify the local productive base to reduce the demand for imports and thus on the dollar. The central bank initiative to allocate loans of $ 6 trillion dinars initiative pour into this trend.

• reduce the budget deficit to less extent possible, to prevent the cash that is not offset by the dollar resources for expansion, thus increasing the demand for goods and services that are mostly imported.

• provide stability factors political, economic and security to reduce the flow of money abroad, and to increase investment and savings within Iraq.

• application deactivated to protect local product laws (Customs Tariff Act, the Consumer Protection Act, Product Protection Act, the anti-dumping law).

• the performance of the relevant state institutions Balastairadat roles , in the granting of licenses in the supervision and control and obtaining fees and charges and the provision of national databases.

- The role of the Central Bank in accordance with the law and the law against money-laundering is forcing banks and financial institutions to apply the principle «know your customer« to verify the sources of funds that enter the process of buying the dollar, and in this regard The Bank has taken a number of important measures and steps (preventive and deterrent), and will be posted on the central bank's website, where there is no room here to explain the details.

2. Is contained in some of the statements call the central bank to the expertise and advice of specialized international institutions, and here we refer to the following:

(a) that the bank founding member of the International Monetary Fund and the World Bank, in addition to the Arab financial organizations and territory and international, and the World Bank in communication and consultation and understanding with those organizations , but that the rules work in the joints of his control the foundation are the principles, rules and recommendations and agreements issued by these organizations, for example, the foreign currency sale at the central bank, and management of international reserves are governed by the guidelines of the International Monetary Fund window, and applied by the member states agreed on by including Iraq, and so in the rest of respects exercised by the Bank in accordance with the best international standards and practices.

The Central Bank has consulting contracts with the best Arab and international consultancy firms and institutions of international auditing and review, continuous and the World Bank to expand counseling channels, in addition to the support received by the Bank from organizations and banks international, Arab and Islamic central and benefit from its services free by virtue of Iraq's membership in or by virtue of bilateral relations and memorandums of understanding.

(c) where the systems and the electronic programs have become a framework and a way to organize business and practices, and through them can attract the best practices reached by the developed world, the central bank Toruwaytor Information Technology with the help of global companies with the latest software and techniques, and can be found on the infrastructure currently have in the bank, and say proudly as the best among all state institutions, and models of those systems, the payments system and the clearing and settlement, which is currently applied by the bank and is one of the most systems developed in the region and the world, and which also provides day base

for the application and development of electronic payment systems in all its forms through the National divider, which came into work now, and that this bank was going to start a project the overall banking system Core Banking System, the largest electronics, software in the world Banks, which represents a historic shift in the Bank's work.

(d) that the human resources at the central bank - as opposed to state institutions Alakhary- represent stable resources of this institution did not leave despite what Iraq has passed through the conditions, and therefore resources has accumulated experience and tender, and enjoy this Resources special support from organizations and banks, international, regional and Arab financial institutions, and perhaps the number of workshops, training courses which contribute to Bank staff are the highest among the state institutions.

As we have strengthened cadre Bank has appointed top universities and graduates of Graduate Studies, as well as the appointment of graduates from outside Iraq (from educational initiative) the terms of reference regarding the work of the bank.

This, as well as the Centre for Banking Studies (one of the formations of this bank) of training and rehabilitation programs throughout the year.

3. The bank will soon launch its strategy for the years 2016 - 2020, was built on the latest global developments in the banking and financial sector, the latest trends and tasks arising from developments in financial and monetary crises, which was born and developed from the functions and roles of central banks, the first strategy in the history of the central bank in the method of construction and in the content and direction, and the principles and criteria of total quality in the numbers, with the introduction of a special form shall follow-up and evaluation.

Finally, the Maordnah is some which invites us all to pride in this important institution, and the responsibility of us all to look at them a professional look objective to serve the interest both locally and internationally, and that this Bank fully prepared to inform the interested ordered the bank, inform them of the field and documentaries, the policies, procedures and plans, and our doors are open for this purpose.

* Governor of the Central Bank


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