Keywords: Conversion of the dollar from Iraq to Iran stopped since 2012 and are reluctant to launch the category of 100 thousand dinars
Governor of the Central Bank of Iraq, Ali Alalak
Economy News Baghdad
The governor of the Central Bank, Ali Alalak, on Monday, that the conversion of the dollar from Iraq to Iran has been suspended since 2012, and the Iranians are aware of this, while he pointed out that there is a trinity to put the category of 100 thousand dinars.
"The Central Bank will launch in coordination with the banks an initiative to rehabilitate the bridges of Baghdad along the lines of the initiative of Baghdad, which was launched to rehabilitate the public squares," he said in a press interview with the official newspaper "Al-Sabah".
And so the rest of the dialogue ..
Of the things that are calculated for the central bank is the exchange rate stability, how it is that?
What are your future plans in this direction?
- The stability of the exchange rate is one of the macroeconomic features, and is an important indicator of the stability of the country economically, which makes it a key task of the Central Bank, as stated in the law, because it is directly linked to the purchasing power of citizens,
This means that any disruption in the standard of living of the citizens may increase the challenges faced by the government,
so we have worked hard to stabilize the exchange rate and reduce inflation rates..
We have succeeded in overcoming a very complex and challenging phase, especially when the country's oil revenues have fallen to 70 percent in some months, in light of the war against terrorist gangs by setting a set of balances that have made inflation no more than 2 percent.
Will the value of the Iraqi dinar remain the same or is there an intention to raise it?
- The exchange rate in Iraq follows a monetary policy based on the fixed exchange rate of the dinar and this does not mean absolute stability, may come under some circumstances may increase or reduce it according to various economic data.
We are currently moving towards no change in the value of the dinar, as it is not right to make changes under completely unstable conditions, which may confuse the overall situation.
Why are not there large quantities of small coins, and what is the reason for the absence of metal groups?
- We have small currencies in the appropriate quantities, but the frequent movement and circulation and use and lack of attention to lead to damage quickly, as the Central Bank of Iraq after 2004 to mint coins in large quantities but did not receive acceptance or popularity in the local market, which caused losses, Because the market has been accustomed to paper currency making it difficult to market the coin.
So the central bank recently put in place a plan to compensate for the existing small categories damaged, as next month will be large quantities of them will meet the needs of the market completely.
On the other hand, we receive a lot of damaged banknotes and replace them with new banknotes through an expanded committee that checks them to make sure they are correct. Our doors are open to citizens to receive any amounts of damaged currency.
Where does the central bank print the local currency?
- We print in international companies, possess enough capacity to print banknotes within the advanced security standards in France, England and Germany, the design is by the Central Bank, and the paper used in printing is very high specifications.
The Central Bank is trying to print non-counterfeit paper. We have succeeded in this. The counterfeit quantities are very few and negligible, and we have very advanced equipment in the electronic and electronic detection of counterfeit currency, called comprehensive machines, so we do not rely on human effort Just.
The central bank has recently offered the category of 50,000 dinars, is there an intention to put the category of 100 thousand?
- These ideas are traded by the Central Bank, but at the present time, there is a tendency in some countries to reduce the categories of currencies so as not to be stored or counterfeited, and that the currencies of small groups, may lead the citizen to bid farewell to banks for the difficulty of storage.
But generally the central bank has a future plan to restructure the Iraqi currency, including the deletion of zeros, but that plan needs to deliberate steps, and a stable situation in order not to be exploited in the fraud and other.
How does the dollar sell in the central bank or what is known as the currency auction?
- It is a common mistake now to talk about the currency auction in some media and social networking sites, while this auction has been suspended since 2006, but what is happening now is the process of financing the foreign trade of the dollar, covering the country's needs for import in addition to the requirements of travel and treatment And the transfer of profits resulting from investments and others.
The government gets the dollar through the sale of oil and then replace the dollar with the Iraqi dinar from the central bank, because the balance of the state's financial dinars, and then the central bank to withdraw the local currency from the market and replace them in dollars, to maintain monetary stability.
The process of withdrawing the dinar by meeting the market need of the dollar represents a revaluation of the local currency, and this method does not represent the diligence of the Central Bank, as its law provides for the sale of foreign currency in a simple and unconditional manner, in addition to the existence of an agreement between Iraq and the IMF International approved by the House of Representatives in 2008 provides for this.
The situation in Iraq is different from other countries, because of the lack of diversity in the financial revenues of hard currency other than oil, as the Iraqi private sector is unable to support the local market in dollars through imports, which makes the market depends entirely on trade finance Through the central bank.
How much is the central bank's reserve of foreign currency and what is the size of the local currency's currency?
- The size of the cash reserve of foreign currency is always measured to the size of the currency mass of the local currency in the market, in addition to other international standards, especially as the International Monetary Fund recently developed a new standard, which added the ability of the state to cover trade and debt repayment.
As for the Central Bank of Iraq, it has a reserve of foreign currency is very comfortable within international classifications and is ahead of other countries, compared to the mass of cash offered by the local currency, as the reserve is close to 60 billion dollars, compared to 43 trillion dinars,
which means it covers 170 percent of the size The monetary bloc, especially as the Arab Monetary Fund considers Iraq to be a country that exaggerates the size of reserves of foreign currency.
Are there any bodies that monitor the reserves of foreign currency and can the central bank act in such funds?
- The supervision is subject to several levels, foremost of which is the Internal Control Department of the Central Bank, in addition to an audit committee composed of independent observers who report to the Board of Directors of the Bank.
The Committee also supervises the Internal Audit Department of the Central Bank.
In addition, On the final accounts of the Central Bank, the data of this office are internationally accredited by the international financial institutions, not to mention the ongoing monitoring by the Office of Financial Supervision.
The Central Bank of Iraq is the most institution subject to the multiplicity of regulatory bodies, and can not be disposed of any amount except within the standards provided for in the law and adopted internationally, so the rumored lack of reserve or conversion are all false rumors.
What happened during the past years, from the decline in oil prices sharply, so did not stop the revenues in some months to fill the salaries of employees, made the Central Bank to two options, either the collapse of the situation or intervention to save,
so the government issued treasury transfers worth 20 trillion dinars, And we bought them from the market, which affected the size of the cash reserve at the time,
but we maintained the balance by maintaining the reasonable level of this reserve in exchange for meeting the need for the budget and maintain the exchange rate and inflation rates, this achievement is recorded to the Central Bank and has become highly praised by international organizations.
How do you evaluate your relationship to the country's fiscal policy?
- There is a close relationship, but along the line fiscal policy negatively affects the monetary currency, because the first may take certain trends do not benefit the second, for example when he notes a decline in foreign exchange reserves draws criticism to the central bank, but in fact When the budget law recognizes a financial deficit and provides for the deficit to be met by treasury transfers, it means that such remittances will be financed by the central bank.
Is the number of private banks exaggerated, and how do you evaluate their work?
- When I took responsibility, I found that the number of private banks and transfer and exchange companies outweigh the need of the market, as we did not grant any new license to open a commercial bank or leave a banking company, and we have canceled the financial transfer companies, with an intention to restructure banking companies,
leading to control The biggest is there is a plan to merge some banks.
But granted us licenses to open a number of Islamic banks based on the facilities provided by its law as the Council of Representatives put a paragraph to help establish the reduction of capital required at the establishment.
There are currently 70 banks working in the country, 20 of which are branches of foreign banks, but most of them are newly formed, so did not reach the level of ambition, and these banks worked under exceptional circumstances passed by the country.
The initiatives of private banks to lend to citizens are very limited. Why?
- As you know, the main task of banks is to provide credit through the granting of loans and other services, in return, take the money of depositors and give them a percentage of interest,
but Iraqi banks in general have great difficulty in the practice of this activity, when you grant a loan, often does not meet the borrower to pay on Despite the large guarantees taken by banks and the high interest rate, as borrowers could be up to 20 percent.
The problem is that when the bank starts its actions against the borrower, for example, the property is facing a significant delay in legal proceedings by other parties, in addition to tribal or partisan threats, which makes banks afraid to grant loans.
Recently, there has been talk of replacing the dollar with other currencies in remittances with Iran.
Because of US sanctions, how will this be done?
- The transfer of the dollar from Iraq to Iran has been suspended since 2012, and the Iranians are aware of this, as the conversion in other currencies, because any transfer of dollars will pass the US Federal Reserve, which leads to the suspension of the transfer.
Is there a control of the Central Bank in its branches in Kurdistan?
- There was an abnormal situation in the status of branches of the Central Bank in Erbil and Sulaymaniyah, where it belongs to the Ministry of Finance in Kurdistan and this represents a violation of legal and constitutional, at a time that all the countries of the world have one central bank,
so we moved with the provincial government and agreed with them to close those branches, And the opening of a new, so the Central Bank opened its new branch in Erbil and will open another branch in Sulaymaniyah, as the central bank is currently playing its full role in Kurdistan.
What is the role of the Central Bank in supporting the initiatives and community activities, such as the Baghdad Initiative launched by the Association of Iraqi private banks?
- We are working in the Central Bank to stimulate social contributions and initiatives by the banking sector and other financial institutions.
We have established an optional fund called Tamkeen, in which banks and exchange companies participate in monthly amounts. We have established an internal system for this fund and a board of directors. As well as environmental and youth.
Within this fund, we coordinated with the Ministry of Agriculture to dig artesian wells in some Iraqi provinces to contribute to solving the water scarcity experienced by the country, as we seek to launch the initiative to rehabilitate the bridges of Baghdad in order to appear properly.
Honored by the Union of Arab Banks as the best Arab central bank governor, what are the most important achievements that led to this honor?
- We, as a central bank, have close relations with central banks and international or Arab organizations, and those relations we have worked to deepen in order to benefit from those institutions in the transfer of the central bank from a bank that works with the mechanisms, standards and objectives of the twentieth century to another working in the 21st century,
We have succeeded for a long time in introducing new functions and tasks in the Bank's work related to financial and monetary stability, developing methods of monitoring and abiding by the rules, methods and standards of combating the laundering of illiteracy. Terrorism financing, risk management, overall quality and economic modeling.
The US Treasury Department said that the efforts exerted by the Central Bank in this regard are equal to the effort it has made in its previous history, as Iraq was classified in the financial organization responsible for the classification The countries within the framework of money laundering, within the gray area, and his way to enter the black area, to become a financially isolated area and the Iraq assessment report contains 700 observations.
In the past few months, we have become the normal follow-up region, as we have been in the world, in the face of the great challenge that the country has experienced in terms of security and finances. So we have become very impressed with these financial institutions., Federation of Arab Banks.
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