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D. Ali Mirza *: 2015 budget and determined to cap the dollar sales in the auction currency of the potential application of consequences
- Published in 02/01/2015
First: a cap on dollar sales in the auction currency . [1]
In addition to finance military operations costs faced 2015 federal budget preparation and implementation will face uncertain financial conditions as a result of the low / current recession in oil prices and a formal perspective is uncertain, but it reflected the hope of an implied upside during the year. In light of the expected quantity for export for the year 2015 (3.3 million bpd), the level of oil prices will determine the levels of the main and backup financing sources, which are as follows:
(A) oil revenues.
(B) the balance of the Ministry of Finance of budget surpluses accumulated from previous years. This balance has decreased (in Iraq's development fund DFI) of more than $ 18 billion at the beginning of 2013 to $ 6.5 billion at the beginning of 2014 to $ 4 billion in the November 2014 end, IMF (2014).
(C) reserves of gold and foreign currency balance at the Central Bank. After the balance reached about $ 76 billion at the end of 2013 (or the equivalent of 15.5 mm / Import measuring imports in 2013 of goods and services) from, as shown by the Central Bank data [2] , it fell to $ 67 billion in the November / November end 2014 (approximately 13.7 mm / Import measuring imports in 2013), as stated in the IMF (2014). We believe that continued to decline during the past two months.
In these circumstances, the Ministry of Finance has prepared the budget in 2015 and forwarded a draft law to the Iraqi Council of Representatives in late December / December 2014. The Council has endorsed the draft law on 01.29.2015 after making some adjustments and add a number of substances were not found in the draft see the House of Representatives (2014.2015). The amendments focused mainly on the reduction of oil revenue estimate for 2015 of 84.3 trillion dinars to 78.7 trillion In contrast, reducing the total expenditure by the same amount of 125.2 trillion dinars to 119.6 trillion. As a result, the survival of oil revenues remained unchanged, "the planned deficit" at the same level (about 25.4 trillion dinars). [3]
Among the additional material in the approved version of the budget law, the matter is the subject of this article on the paper currency auction of the Central Bank, is Article 50, which identified where the ceiling of the daily sales of dollars at auction. It has stated in this article: "The Central Bank is committed to identifying sales of foreign currency (dollar) in its daily auction ceiling does not exceed $ 75 million a day with the exercise of justice in the sales process, and calls for participating in the auction the bank providing the introduction of cargo documents and statements of tax settling accounts and input Alkmarki within 30 days from the date purchased and the amount otherwise apply to the bank penalties stipulated in the Central Bank Act or regulations issued it, and use other banking tools to maintain the strength of the dinar against the dollar, "the House of Representatives (2015).
Perhaps the decline was referred to in the balance of foreign exchange reserves and specifically the fear of "drained" and then the desire to take action to reduce this decline is expected in this balance or slow down the rate of decline incentive to add Article 50 in the approved version. With the potential to understand this motivation, regardless of the fact that this article inconsistent with the independence of the Central Bank (Article 2 of the Bank of the 2004 Act) and the responsibility for foreign exchange reserves management (Article 27 of the Bank Act), the application of the provisions of Article 50, any the central bank's commitment to the specified ceiling, will lead a high degree of probability, to serious negative consequences. Therefore, we will show the most important consequences of this in the next paragraph.
Second, the potential consequences for the application of dollar sales ceiling in currency auction
(1) has the central bank maintained a stable exchange rate, generally, during 2014 and the first month of 2015, where the gap averaged between the official exchange rate and the market exchange rate of about 4.1% (from the official price) during 2014. In spite of mounting this rate to 4.7 % in December 2015 a second could be argued that the market continued to equilibrium during this month. Knowing that the daily sales rate of $ 204 million in 2014, but dropped to $ 170 million in December / December 2014 and to $ 157 million in December a second / January 2015 (see Table 1, below).
(2) The determination of the roof of dollar sales in the auction currency (US $ 75 million a day, which is equal to about one-third of the daily average in 2014) with the central bank's commitment to this ceiling, called signal Sevsrha most of the traders in the market that the fiscal and monetary policies is committed seriously to maintain stable level of prices and secure a stable level for the exchange rate of the dinar against the dollar. And it will affect negatively in their expectations and pushes them to resort to hedge by increasing demand for the dollar needs more than justified by the level of income and production (normal demand). This leads, among other things, speculation and destabilize the balance in the foreign exchange market. Economic history in Iraq, as in other countries has shown that expectations significant impact on the economic, financial and monetary developments, positively or negatively.
(3) will lead the demand normal and demand resulting from the expectation / speculation under a restricted display interaction (ceiling) of dollars to the parallel market expansion in the currency effectively and return to the management style of the exchange asymptotic to that which prevailed before 2003, and lead it to the result of an increasing expansion of the gap between the exchange rate The official and market exchange rate.
(4) will be the outcome of the growing black market currency growing connected in parallel market for the pricing of imported goods. And will be the use of the official exchange rate limited to the transactions and the "markets" or government official in the deal, while the family and the private sectors at market exchange. But the communication between these two markets would be strengthened over time. Which will increase the parallel market for the currency and the parallel markets for goods and services impact on the pricing of the economy as a whole. Applies part of this effect on the official market, too, but indirectly. It will be through increased leakage goods from the official market to the parallel market and scarcity in the discharge of official channels. On the other hand, in light of duplication in the official / parallel pricing practices escalate Alastrabah rent seeking. Because the outcome of these factors the rate of inflation will rise sharply. As a result, the central bank will restrict the ability of (economic policies in general, including fiscal policy) on the completion of one of the most fundamental objectives which contribute to stabilize the prices of goods and services (Article 3 of the Central Bank Act) and to secure a stable exchange rate of the dinar value.
(5) The most important way to maintain the stability of the dinar exchange rate of the Central Bank, in addition to the tools of monetary policy, is to satisfy the demand for foreign currency at the exchange rate (which is defended by the Bank). In light of the fact that monetary policy tools are still limited effectiveness in Iraq, to satisfy the demand for foreign currency is the means by relying primarily to maintain the stability of the dinar exchange rate and to contribute to the stabilization of prices of imported goods. It is clear that the application of Article 50 of the 2015 budget law will limit the effectiveness of this method in earnest.
(6) which complicates the matter, in light of the commitment ceiling dollar sales, participating in the auction to grant authority to dispose of the amounts sold banks in exchange for documents to import proven facts easily made available, whether authentic or fabricated. Perhaps this is what happened in 2012, in the wake of the US military withdrawal in late 2011, the case worthy of analysis. Since early 2012, resulted in an increased demand for the dollar in the face of the display has not matched the increase is due to the widening gap between the official exchange rate and the market exchange until the rate has reached more than 8% in April / April 2012, with the knowledge that there was no roof advertiser sales of Dollar. With the decline after that, the gap continued high rate. The foreign exchange market has seen, then, many cases take advantage of a number of banks in this situation is to sell the dollar to customers at a price much higher than the margin set by the central bank, which may have contributed to the widening gap between the two rates. Therefore, put a cap on sales will lead to exploitation and clear through Alastrabah away from the goal of financing imports set by Article 50 of the Budget Law.
(7) In the run-down system for the distribution of ration, the consumer will suffer from the decline in value of the dinar (through reduced purchasing power of their income) and the spread of the parallel market for goods and services over the pricing and the impact to the official market. It is appropriate to recall that the ration continued before 2003 despite the collapse of the dinar exchange rate, on the one hand, and severe decline in income and wealth, on the other hand, was relatively effective in securing a minimum of food for many classes of society.
Third, the economic policy in the light of the decrease of financial resources and the continuation of military operations dilemma
If the imposition of a cap on sales of central bank leads to an imbalance in the market and the escalation of the inflation rate and the cost of economic transactions and increasing corruption (Alastrabah) but, in contrast, it is not possible to launch the foreign currency sale in the auction currency without monitor the status of the balance of foreign currency reserves and the possibility of deterioration in the level and then exposing the economic position of the country (ie its ability to import and interview other external obligations) and efforts in the fight against terrorism, at risk. So it should work to ensure maintaining a minimum level of foreign currency reserves and the assignment of the military effort, on the one hand, and secure the greatest possible stability in the prices of goods and services in the dinar exchange rate, on the other hand.
In order to reach an appropriate settlement in this area can be proposed as follows:
(A) avoid imposing ceiling on dollar sales in the currency auction with the announcement of the central bank is ready to satisfy the demand for the dollar as far as demand commitment to basic needs being identified as a highly professional manner and on a regular basis, as needed. To take into account the quantity offered for sale in the dollar every day the balance of foreign exchange reserves level report, up and down. It is worth to mention that the expected lack of full implementation of the spending power allocations contained in the budget may lead to the same demand determine the normal (non-speculative) on foreign currency.
(B) in the case of the continuing decline in reserves and the balance coming from a critical threshold and is a short period (for example, the financing needs of three months of imports) may be resorting to reduce the exchange rate of the dinar against the dollar as a last resort. However, efforts should be made to avoid the dinar exchange rate reduction as this from the consequences of a negative impact on the confidence of the Iraqi economy, on the one hand, the inflationary consequences of harmful consumer outlook negative for the future of the economic deal, on the other hand, these harmful consequences may be less than that result from the imposition of the ceiling (low) dollar sales. As well as similar consequences involving a formal reduction of the dinar exchange rate, as mentioned above, the rule of separation in the market, which leads to the imposition of the ceiling, increase the cost of the economic process as a result of Astrabah in the currency markets, commodities and consequently check inflation more acute. This separation also lead to the isolation of the Iraqi economy for the economies and financial systems / global cash.
(C) received the banks control of dollars of currency auction to secure their commitment to financing imports set out in the documents submitted. This is done by regulatory authorities concerned, especially the Ministry of Commerce and other regulatory devices. After the end of the insurgency and defeat terrorism and stabilize the level of foreign exchange reserves and the stability of oil prices should be reconsidered Bmasseh, functions and even the feasibility of continuing the auction towards a more transparent and effective system to manage the exchange.
--
Today's pizza..Canadian bacon, sausage, onions, green peppers.
February 1, 2015 at 12:40 PM Flag Quote & Reply
kaperoni
Moderator
Posts: 22078
(D) the improvement of institutional care and basic infrastructure and logistics for the distribution of ration and management and the elimination of corruption.
(E) The formation of a cabinet economic policy teams and the membership of professionals, experts and representatives from the financial, trade and transport of oil and the Central Bank and other concerned ministries in Baghdad and zonal teams in the provinces linked to the central difference Ministries. These teams are coordinated to monitor markets and trends demand and supply of goods and services and the dollar and the stock status of essential goods and institutional structures for transport, storage and ports on an ongoing basis and propose economic solutions efficient decode the bottlenecks and the fight against corruption and Alastrabah order to maintain the proper flow of foreign currency and the supply of goods and services offer less scarcity possible .
Merza Budget 2015 Table 1
[You must be registered and logged in to see this link.]
- Published in 02/01/2015
First: a cap on dollar sales in the auction currency . [1]
In addition to finance military operations costs faced 2015 federal budget preparation and implementation will face uncertain financial conditions as a result of the low / current recession in oil prices and a formal perspective is uncertain, but it reflected the hope of an implied upside during the year. In light of the expected quantity for export for the year 2015 (3.3 million bpd), the level of oil prices will determine the levels of the main and backup financing sources, which are as follows:
(A) oil revenues.
(B) the balance of the Ministry of Finance of budget surpluses accumulated from previous years. This balance has decreased (in Iraq's development fund DFI) of more than $ 18 billion at the beginning of 2013 to $ 6.5 billion at the beginning of 2014 to $ 4 billion in the November 2014 end, IMF (2014).
(C) reserves of gold and foreign currency balance at the Central Bank. After the balance reached about $ 76 billion at the end of 2013 (or the equivalent of 15.5 mm / Import measuring imports in 2013 of goods and services) from, as shown by the Central Bank data [2] , it fell to $ 67 billion in the November / November end 2014 (approximately 13.7 mm / Import measuring imports in 2013), as stated in the IMF (2014). We believe that continued to decline during the past two months.
In these circumstances, the Ministry of Finance has prepared the budget in 2015 and forwarded a draft law to the Iraqi Council of Representatives in late December / December 2014. The Council has endorsed the draft law on 01.29.2015 after making some adjustments and add a number of substances were not found in the draft see the House of Representatives (2014.2015). The amendments focused mainly on the reduction of oil revenue estimate for 2015 of 84.3 trillion dinars to 78.7 trillion In contrast, reducing the total expenditure by the same amount of 125.2 trillion dinars to 119.6 trillion. As a result, the survival of oil revenues remained unchanged, "the planned deficit" at the same level (about 25.4 trillion dinars). [3]
Among the additional material in the approved version of the budget law, the matter is the subject of this article on the paper currency auction of the Central Bank, is Article 50, which identified where the ceiling of the daily sales of dollars at auction. It has stated in this article: "The Central Bank is committed to identifying sales of foreign currency (dollar) in its daily auction ceiling does not exceed $ 75 million a day with the exercise of justice in the sales process, and calls for participating in the auction the bank providing the introduction of cargo documents and statements of tax settling accounts and input Alkmarki within 30 days from the date purchased and the amount otherwise apply to the bank penalties stipulated in the Central Bank Act or regulations issued it, and use other banking tools to maintain the strength of the dinar against the dollar, "the House of Representatives (2015).
Perhaps the decline was referred to in the balance of foreign exchange reserves and specifically the fear of "drained" and then the desire to take action to reduce this decline is expected in this balance or slow down the rate of decline incentive to add Article 50 in the approved version. With the potential to understand this motivation, regardless of the fact that this article inconsistent with the independence of the Central Bank (Article 2 of the Bank of the 2004 Act) and the responsibility for foreign exchange reserves management (Article 27 of the Bank Act), the application of the provisions of Article 50, any the central bank's commitment to the specified ceiling, will lead a high degree of probability, to serious negative consequences. Therefore, we will show the most important consequences of this in the next paragraph.
Second, the potential consequences for the application of dollar sales ceiling in currency auction
(1) has the central bank maintained a stable exchange rate, generally, during 2014 and the first month of 2015, where the gap averaged between the official exchange rate and the market exchange rate of about 4.1% (from the official price) during 2014. In spite of mounting this rate to 4.7 % in December 2015 a second could be argued that the market continued to equilibrium during this month. Knowing that the daily sales rate of $ 204 million in 2014, but dropped to $ 170 million in December / December 2014 and to $ 157 million in December a second / January 2015 (see Table 1, below).
(2) The determination of the roof of dollar sales in the auction currency (US $ 75 million a day, which is equal to about one-third of the daily average in 2014) with the central bank's commitment to this ceiling, called signal Sevsrha most of the traders in the market that the fiscal and monetary policies is committed seriously to maintain stable level of prices and secure a stable level for the exchange rate of the dinar against the dollar. And it will affect negatively in their expectations and pushes them to resort to hedge by increasing demand for the dollar needs more than justified by the level of income and production (normal demand). This leads, among other things, speculation and destabilize the balance in the foreign exchange market. Economic history in Iraq, as in other countries has shown that expectations significant impact on the economic, financial and monetary developments, positively or negatively.
(3) will lead the demand normal and demand resulting from the expectation / speculation under a restricted display interaction (ceiling) of dollars to the parallel market expansion in the currency effectively and return to the management style of the exchange asymptotic to that which prevailed before 2003, and lead it to the result of an increasing expansion of the gap between the exchange rate The official and market exchange rate.
(4) will be the outcome of the growing black market currency growing connected in parallel market for the pricing of imported goods. And will be the use of the official exchange rate limited to the transactions and the "markets" or government official in the deal, while the family and the private sectors at market exchange. But the communication between these two markets would be strengthened over time. Which will increase the parallel market for the currency and the parallel markets for goods and services impact on the pricing of the economy as a whole. Applies part of this effect on the official market, too, but indirectly. It will be through increased leakage goods from the official market to the parallel market and scarcity in the discharge of official channels. On the other hand, in light of duplication in the official / parallel pricing practices escalate Alastrabah rent seeking. Because the outcome of these factors the rate of inflation will rise sharply. As a result, the central bank will restrict the ability of (economic policies in general, including fiscal policy) on the completion of one of the most fundamental objectives which contribute to stabilize the prices of goods and services (Article 3 of the Central Bank Act) and to secure a stable exchange rate of the dinar value.
(5) The most important way to maintain the stability of the dinar exchange rate of the Central Bank, in addition to the tools of monetary policy, is to satisfy the demand for foreign currency at the exchange rate (which is defended by the Bank). In light of the fact that monetary policy tools are still limited effectiveness in Iraq, to satisfy the demand for foreign currency is the means by relying primarily to maintain the stability of the dinar exchange rate and to contribute to the stabilization of prices of imported goods. It is clear that the application of Article 50 of the 2015 budget law will limit the effectiveness of this method in earnest.
(6) which complicates the matter, in light of the commitment ceiling dollar sales, participating in the auction to grant authority to dispose of the amounts sold banks in exchange for documents to import proven facts easily made available, whether authentic or fabricated. Perhaps this is what happened in 2012, in the wake of the US military withdrawal in late 2011, the case worthy of analysis. Since early 2012, resulted in an increased demand for the dollar in the face of the display has not matched the increase is due to the widening gap between the official exchange rate and the market exchange until the rate has reached more than 8% in April / April 2012, with the knowledge that there was no roof advertiser sales of Dollar. With the decline after that, the gap continued high rate. The foreign exchange market has seen, then, many cases take advantage of a number of banks in this situation is to sell the dollar to customers at a price much higher than the margin set by the central bank, which may have contributed to the widening gap between the two rates. Therefore, put a cap on sales will lead to exploitation and clear through Alastrabah away from the goal of financing imports set by Article 50 of the Budget Law.
(7) In the run-down system for the distribution of ration, the consumer will suffer from the decline in value of the dinar (through reduced purchasing power of their income) and the spread of the parallel market for goods and services over the pricing and the impact to the official market. It is appropriate to recall that the ration continued before 2003 despite the collapse of the dinar exchange rate, on the one hand, and severe decline in income and wealth, on the other hand, was relatively effective in securing a minimum of food for many classes of society.
Third, the economic policy in the light of the decrease of financial resources and the continuation of military operations dilemma
If the imposition of a cap on sales of central bank leads to an imbalance in the market and the escalation of the inflation rate and the cost of economic transactions and increasing corruption (Alastrabah) but, in contrast, it is not possible to launch the foreign currency sale in the auction currency without monitor the status of the balance of foreign currency reserves and the possibility of deterioration in the level and then exposing the economic position of the country (ie its ability to import and interview other external obligations) and efforts in the fight against terrorism, at risk. So it should work to ensure maintaining a minimum level of foreign currency reserves and the assignment of the military effort, on the one hand, and secure the greatest possible stability in the prices of goods and services in the dinar exchange rate, on the other hand.
In order to reach an appropriate settlement in this area can be proposed as follows:
(A) avoid imposing ceiling on dollar sales in the currency auction with the announcement of the central bank is ready to satisfy the demand for the dollar as far as demand commitment to basic needs being identified as a highly professional manner and on a regular basis, as needed. To take into account the quantity offered for sale in the dollar every day the balance of foreign exchange reserves level report, up and down. It is worth to mention that the expected lack of full implementation of the spending power allocations contained in the budget may lead to the same demand determine the normal (non-speculative) on foreign currency.
(B) in the case of the continuing decline in reserves and the balance coming from a critical threshold and is a short period (for example, the financing needs of three months of imports) may be resorting to reduce the exchange rate of the dinar against the dollar as a last resort. However, efforts should be made to avoid the dinar exchange rate reduction as this from the consequences of a negative impact on the confidence of the Iraqi economy, on the one hand, the inflationary consequences of harmful consumer outlook negative for the future of the economic deal, on the other hand, these harmful consequences may be less than that result from the imposition of the ceiling (low) dollar sales. As well as similar consequences involving a formal reduction of the dinar exchange rate, as mentioned above, the rule of separation in the market, which leads to the imposition of the ceiling, increase the cost of the economic process as a result of Astrabah in the currency markets, commodities and consequently check inflation more acute. This separation also lead to the isolation of the Iraqi economy for the economies and financial systems / global cash.
(C) received the banks control of dollars of currency auction to secure their commitment to financing imports set out in the documents submitted. This is done by regulatory authorities concerned, especially the Ministry of Commerce and other regulatory devices. After the end of the insurgency and defeat terrorism and stabilize the level of foreign exchange reserves and the stability of oil prices should be reconsidered Bmasseh, functions and even the feasibility of continuing the auction towards a more transparent and effective system to manage the exchange.
--
Today's pizza..Canadian bacon, sausage, onions, green peppers.
February 1, 2015 at 12:40 PM Flag Quote & Reply
kaperoni
Moderator
Posts: 22078
(D) the improvement of institutional care and basic infrastructure and logistics for the distribution of ration and management and the elimination of corruption.
(E) The formation of a cabinet economic policy teams and the membership of professionals, experts and representatives from the financial, trade and transport of oil and the Central Bank and other concerned ministries in Baghdad and zonal teams in the provinces linked to the central difference Ministries. These teams are coordinated to monitor markets and trends demand and supply of goods and services and the dollar and the stock status of essential goods and institutional structures for transport, storage and ports on an ongoing basis and propose economic solutions efficient decode the bottlenecks and the fight against corruption and Alastrabah order to maintain the proper flow of foreign currency and the supply of goods and services offer less scarcity possible .
Merza Budget 2015 Table 1
[You must be registered and logged in to see this link.]
