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Monetary policy and its arms of future / D. The appearance of Mohammed Saleh

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Monetary policy and its arms of future

15/07/2012 0:00

D. The appearance of Mohammed Saleh

To hide that the monetary policy adopted by the Central Bank of Iraq Foreign Adhiraa less important as their instruments of Interior in meeting the objectives of that policy in maintaining economic stability and reducing inflation and the deepening of financial stability, which is in the interest of economic development of the country.

On this basis, the opening up of Central Bank of Iraq to the international financial system and integration into one of the most important challenges faced by the monetary policy since 2003 after the lifting of economic blockade of direct and edit the Iraqi assets frozen in the banking world, to begin rebuilding the reserves of the Central Bank of the Iraqi currency foreign currency to cover a national and a source of stability through the Iraqi dinar exchange rate stability and build external equilibrium value of the dinar.

Based on the foregoing, and the fact that the Iraqi Central Bank State Bank and the financial adviser and trustee of public funds as provided for in its law No. 56 of 2004, has managed the Iraqi Central Bank to manage the country's resources of oil and other sources of foreign currency through the administration of the Development Fund for Iraq as the one established Under Security Council Resolution 1483 in May 2003 and in particular since it took over the sovereignty of Iraq after 28 / June / 2004.

Where associated with managing such a fund is closely linked to the budget of the Federal to the country of the fact that oil is a supplier of President of the budget and by more than 90 percent as well as to spend the country's foreign currency comes from the fund, and the rate may increase to 95 percent of the inflows and oil as is well known is about two thirds of the gross domestic total for the country.

And that this administration has taken another phase after entry into force of Security Council Resolution 1956 to the year 2010 and the end of the international protection money to the Development Fund for Iraq on 30 / June / 2011. On this basis, resources promised to the Development Fund for Iraq linked to the balance sheet of the Central Bank of Iraq and two-way monetary policy: -

I: within the terms of the balance sheet of the Central Bank

As The Central Bank replaced the liabilities represented by the Iraqi dinar to meet the foreign currency received from the fund to finance the expenses of the government of the Interior, where represents the accumulation of such foreign currency reserves, Iraq's international or the cover of the national currency which is used in part as a means to intervene in the money market to control the levels of liquidity and surplus demand generated by the general budget expenditures through the public-funded Iraqi dinar source within the policy of sterilization to provide a balance between supply and demand in the money market and maintain the stability of the Iraqi dinar exchange rate.

The second off-balance sheet items of the Central Bank

And represents management in all cases, the CBI of public money in foreign currency, especially for being a guardian of the funds entrusted to the government and the State Administration of public money.

And as much as it came to slit the first / items within the budget of the Central Bank of Iraq, especially foreign assets, they represent today as we cover the national currency supportive of stability and represents hedges to counter the forces of exchange additional potential generated by the market at every moment of daily activities and expectations produced by that market. As well that this cover is one of the components of the Cash Basis of any central bank money and represent the means of retaining the strength of the Iraqi dinar source, rising foreign reserves of the Central Bank (cover currency) from (a few billion) in 2004 to about (63) billion dollars, is currently the highest in the Economic history of the country three decades ago. However, to Erie, the central bank such amounts sufficient to protect the national economy because of the weakness of its diversity as it does not pose agriculture in today's contribution to the gross domestic product of more than (3-5) percent and industry for not more than only to 1.5 percent, slightly, which means that the economy in its current exception oil production is a service economy, a weak correlation overall production, which requires careful and with great anticipation in the formation of sufficient reserves absorb twice the diversity and balance of payment exposure to the dangers of extreme volatility because of the pressure of aggregate demand or total spending.
Have been able to CBI for being a central bank independent of diversifying its reserves of foreign outside the protection of UN Security Council resolutions and it's U.S. presidential executive in the protection of bank money and the government in the area of ​​jurisdiction of the U.S., which provided that independence brought by its law, in addition to the site of Iraq Muqtadir in the international community, internal protection under which the monetary authority has been able to diversify more than 65 percent of those reserves to areas of another jurisdiction in the European Union and other currency of the euro and the pound sterling since 2008, particularly in the sober central banks in those areas of law. This was the internal protection for central bank money, which represents the country's reserves are a source of respect and appreciation of the fact that these funds contribute to the financial stability of Iraq, which is an important part of the components of international financial stability, and that these funds are not for commercial purposes is earn Iraq a financial power and legal in dealing with institutions international financial and building close relations with central banks in the industrialized world first.

UN Security Council Resolution 1483 in May 2003 may form the starting point for re-Iraq's relations with international financial and in particular multilateral financial organizations, which singled out of them (the IMF and World Bank), which resulted in the birth of the Paris Club countries in November 2004, which led the International Monetary Fund the role of and influential in Iraq to get a discount in foreign debts, which increased to $ 120 billion and by 80 percent discount is the only country in the world of middle-income countries that have received this discount higher foreign debt. This is because the matter to the two entrances are important Adahma fund the first to make a loan to Iraq under the loan agreement the countries of post-conflict EPCA where the Fund has been able to persuade the Paris Club countries that Iraq despite being a middle-income countries, but it falls within the countries emerging from conflict and that the infrastructure and economic status requires a deduction of at least 80 percent of the total debt and the other hypothesis assigning tables to provide financial and economic analysis provided by the Fund for the Iraqi economy to the secretariat of the Paris Club

Which is called the debt sustainability analysis and DSA showed that the other is the weak capacity of the Iraqi economy to pay its debts unless there is a high discount, which culminated in that Convention, where rescheduled debt discounted by 80 percent until the year 2028.

The Maittalaa him the Iraqi Central Bank of the future plans are summarized the development of management of the country's resources and diversification of foreign through the formation and the creation of sovereign wealth fund different standards a little bit about standards of management of foreign reserves International (cover currency) that prevail return and veneration on the issue of liquidity that are inherent to the status of international reserves of the banks usually central to cope with emergency situations. And diversification of sovereign wealth fund various financial instruments stems from the facts that the first oil resources that are difficult to be absorbed through real diversification should diversify financially. And the other returns the sovereign wealth fund that has to be in the interest of development and capacity building material and human resources of the country in a line parallel with the ability to diversify the real sectors of the national economy all. Which represents one of the strategies the central bank.

The strategy of other, generally blog in the reform of management system of the national currency through raising project three zeros added by the inflation and the deterioration of the former reduced the efficiency of the system of cash payments current and increased the difficulties of cash transactions, and ease of Altobeiran the numeric value of transactions of different, making it more difficult and Aktherabia. Therefore, the project re-structuring of currency comes to shorten the money supply of a large number of nearly 34 trillion dinars to about 30 billion dinars is about 4 trillion paper in circulation to 1.18 billion paper, which will facilitate the work of the system of cash payments and reduces the cost of payment transactions cash between citizens and the banking system and the banking system itself and reduces the problems of the multiplication of numbers, or deal with digital Bakiem very high expression of transactions.

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