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The independence of the monetary institution and monetary stability in Iraq
4.14.2015
may be more controversial issues, and a multiplicity of economic views in the various countries of the world, including Iraq, is the question of autonomy enjoyed by the representative of the Central Bank of the government's monetary authorities. Ie removal of the effects of government or for monetary policy decisions interventions. I have made the nature of the rentier the Iraqi economy, particularly through the oil production and oil revenue, the money supply and growth linked automatically financial position of the government and its policies spending power. It also resulted because monetary policy is to keep pace with the financial policy of expansion, became quite inflationary, which is compounded by inflationary pressures, especially in the nineties of the last century, right where the economic blockade significant damage to monetary policy, and kept up with work to deepen fiscal policy that have come to rely on deficit financing through the new version of cash. Under these tense circumstances, and after the invasion of Iraq in 2003, released the Iraqi Central Bank Law No. (56) of 2004, the central bank, giving a high degree of autonomy. Monetary policy has been taken under the said law framework was designed to cash in accordance with the objectives that have been adopted to stabilize domestic prices (ie reducing inflation) and to maintain stable financial system that promotes economic growth and stability. As the form of the principle of the independence of the installed Iraqi Central Bank said in a quantum leap in the economic system of the country and the new law is a familiar phenomenon in the region as well. It came after a bitter experiences of the hyperinflation and the collapse of the Iraqi dinar and the loss of entire generations fortunes highlighted titles. began CBI problems with the government since 2009, has these problems represented in the government specifically requested money from bank reserves, which was rejected by the bank. Was between the bank to the government that the existence of this reserve, or what is known as a cover currency basis is something to preserve the value of the dinar and not slumping. Exacerbated the central bank crisis with the government when the Federal Supreme Court issued a decision in January 18 of 2011 provides for attachment to the independent bodies referred to in the Iraqi Constitution, the prime minister directly, and not under the chairmanship of the House of Representatives, and the decision came following a request by the Office of the Prime Minister to the Federal Court 2 in December of 2010, to illustrate the point of the link. And returns the core of the dispute in the case of the Central Bank of Iraq from the perspective of a number of specialists to the imbalance in the Iraqi Constitution, in Article (110 / III) has become within the competence of the central government "Drawing fiscal policy and customs, and issuing currency, organizing trade policy among regions and provinces in Iraq, and the development of the state budget, and formulating monetary policy and the establishment of the Central Bank and his administration. " While Paragraph (1) of Article 103 of the Constitution on the independence of the central bank, and that the latter questioning just in front of the House of Representatives as provided in paragraph (2) of the same article. On the other hand, granting the Central Bank Law No. (56) 2004 Bank of the freedom and independence in the conduct of monetary policy in the context of the general economic policy of the country, as stated in paragraph (2) of the second article in the law, which states that "the enjoyment of the Iraqi Central Bank independence while on his efforts in order to achieve its objectives and carry out its tasks, nor CBI receives instructions from any person or entity, including government agencies. " Central bank - as is the case in most countries of the world - is linked to Parliament and not the government. Position has been held between the central bank and the government when issued in late 2012, an arrest warrant for Central Bank Governor Sinan al-Shabibi, located then outside the country to attend an international economic conference in Japan, to be pulled his hand from the central bank's management decision of the Council of Ministers and entrusted the task of managing the President of the Court of control Finance Abdul Basit Turki. general budget for the 2015 law, came to restore the debate about the independence of the Central Bank of Iraq from the government, has committed the said CBI law, in the paragraph of (50) will identify the sales of foreign currency (dollar) in daily auction ceiling does not more than 75 million dinars, with the exercise of justice in the sale, and claim the participant in the auction bank providing goods enter documents and statements of tax settling accounts and savings Alkmarki within 30 days from the date of purchase of the amount, and otherwise apply to it the penalties stipulated in the Central Bank Act or regulations issued from it, and use the tools other banking to keep the strength of the dinar against the dollar. In this context, it is noteworthy that the foreign currency sales in the first half of 2014 from the central bank window has reached almost $ 25 billion, according to data published in the bank site, and for the full year compared to the first half of an estimated Sales of $ 50 billion has been identified budget sales ceiling law $ 75 million a day, and when the implementation of this article literally, taking into account the work days and is without a 250 days per year, the annual sales ceiling under the law, may not exceed $ 18 billion, and thus sales the window is less than half of the estimated 2015 demand. The sales shrink the window does not mean reducing the demand for foreign currency, but to restrict the supply of government source. And will face a clear contradiction between the officially fixed exchange rate and the amount of sales that the decision of the budget law in advance. The cap on 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 Most dealers in the market Sevsrha that fiscal and monetary policies but remain committed to serious to maintain a stable level prices and securing a stable level for the price 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 by more than needs justified by the level of income and production (demand normal). This leads - among other results - to speculation and destabilize balance in the foreign exchange market. Economic history has proven in Iraq -as in other countries- that expectations significant impact in the economic, financial and monetary developments, positively or negatively. He 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 official exchange rate and the exchange rate market, and this is what actually happened, it was the difference between the official price and the market price of 2% up, and this was the difference in the universally accepted standards, while the current difference is up to 10%, which is a big difference means that we have become about the two prices, the official price ( 1166) and the price of the black market. The dollar exchange rate has recently risen gradually from 1200 dinars for up to 1,300 dinars, its highest rate in years. It is expected that the volatility will continue in the exchange rates, especially with the continued deterioration in global oil prices and capping the sales of the Central Bank of Iraq. To limit the continuing deterioration of the price of the Iraqi dinar exchange rate, it is necessary to avoid the imposition of the ceiling on dollar sales in the currency auction to reduce the activity of speculators and reassure markets Local and reduce the difference between the official price of the dollar and the parallel price, 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 should also tighten control on the banks of the dollars received from the auction currency to secure their commitment to financing imports set out in the documents submitted. * Researcher at the center of the Euphrates Development and Strategic Studies
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4.14.2015
may be more controversial issues, and a multiplicity of economic views in the various countries of the world, including Iraq, is the question of autonomy enjoyed by the representative of the Central Bank of the government's monetary authorities. Ie removal of the effects of government or for monetary policy decisions interventions. I have made the nature of the rentier the Iraqi economy, particularly through the oil production and oil revenue, the money supply and growth linked automatically financial position of the government and its policies spending power. It also resulted because monetary policy is to keep pace with the financial policy of expansion, became quite inflationary, which is compounded by inflationary pressures, especially in the nineties of the last century, right where the economic blockade significant damage to monetary policy, and kept up with work to deepen fiscal policy that have come to rely on deficit financing through the new version of cash. Under these tense circumstances, and after the invasion of Iraq in 2003, released the Iraqi Central Bank Law No. (56) of 2004, the central bank, giving a high degree of autonomy. Monetary policy has been taken under the said law framework was designed to cash in accordance with the objectives that have been adopted to stabilize domestic prices (ie reducing inflation) and to maintain stable financial system that promotes economic growth and stability. As the form of the principle of the independence of the installed Iraqi Central Bank said in a quantum leap in the economic system of the country and the new law is a familiar phenomenon in the region as well. It came after a bitter experiences of the hyperinflation and the collapse of the Iraqi dinar and the loss of entire generations fortunes highlighted titles. began CBI problems with the government since 2009, has these problems represented in the government specifically requested money from bank reserves, which was rejected by the bank. Was between the bank to the government that the existence of this reserve, or what is known as a cover currency basis is something to preserve the value of the dinar and not slumping. Exacerbated the central bank crisis with the government when the Federal Supreme Court issued a decision in January 18 of 2011 provides for attachment to the independent bodies referred to in the Iraqi Constitution, the prime minister directly, and not under the chairmanship of the House of Representatives, and the decision came following a request by the Office of the Prime Minister to the Federal Court 2 in December of 2010, to illustrate the point of the link. And returns the core of the dispute in the case of the Central Bank of Iraq from the perspective of a number of specialists to the imbalance in the Iraqi Constitution, in Article (110 / III) has become within the competence of the central government "Drawing fiscal policy and customs, and issuing currency, organizing trade policy among regions and provinces in Iraq, and the development of the state budget, and formulating monetary policy and the establishment of the Central Bank and his administration. " While Paragraph (1) of Article 103 of the Constitution on the independence of the central bank, and that the latter questioning just in front of the House of Representatives as provided in paragraph (2) of the same article. On the other hand, granting the Central Bank Law No. (56) 2004 Bank of the freedom and independence in the conduct of monetary policy in the context of the general economic policy of the country, as stated in paragraph (2) of the second article in the law, which states that "the enjoyment of the Iraqi Central Bank independence while on his efforts in order to achieve its objectives and carry out its tasks, nor CBI receives instructions from any person or entity, including government agencies. " Central bank - as is the case in most countries of the world - is linked to Parliament and not the government. Position has been held between the central bank and the government when issued in late 2012, an arrest warrant for Central Bank Governor Sinan al-Shabibi, located then outside the country to attend an international economic conference in Japan, to be pulled his hand from the central bank's management decision of the Council of Ministers and entrusted the task of managing the President of the Court of control Finance Abdul Basit Turki. general budget for the 2015 law, came to restore the debate about the independence of the Central Bank of Iraq from the government, has committed the said CBI law, in the paragraph of (50) will identify the sales of foreign currency (dollar) in daily auction ceiling does not more than 75 million dinars, with the exercise of justice in the sale, and claim the participant in the auction bank providing goods enter documents and statements of tax settling accounts and savings Alkmarki within 30 days from the date of purchase of the amount, and otherwise apply to it the penalties stipulated in the Central Bank Act or regulations issued from it, and use the tools other banking to keep the strength of the dinar against the dollar. In this context, it is noteworthy that the foreign currency sales in the first half of 2014 from the central bank window has reached almost $ 25 billion, according to data published in the bank site, and for the full year compared to the first half of an estimated Sales of $ 50 billion has been identified budget sales ceiling law $ 75 million a day, and when the implementation of this article literally, taking into account the work days and is without a 250 days per year, the annual sales ceiling under the law, may not exceed $ 18 billion, and thus sales the window is less than half of the estimated 2015 demand. The sales shrink the window does not mean reducing the demand for foreign currency, but to restrict the supply of government source. And will face a clear contradiction between the officially fixed exchange rate and the amount of sales that the decision of the budget law in advance. The cap on 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 Most dealers in the market Sevsrha that fiscal and monetary policies but remain committed to serious to maintain a stable level prices and securing a stable level for the price 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 by more than needs justified by the level of income and production (demand normal). This leads - among other results - to speculation and destabilize balance in the foreign exchange market. Economic history has proven in Iraq -as in other countries- that expectations significant impact in the economic, financial and monetary developments, positively or negatively. He 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 official exchange rate and the exchange rate market, and this is what actually happened, it was the difference between the official price and the market price of 2% up, and this was the difference in the universally accepted standards, while the current difference is up to 10%, which is a big difference means that we have become about the two prices, the official price ( 1166) and the price of the black market. The dollar exchange rate has recently risen gradually from 1200 dinars for up to 1,300 dinars, its highest rate in years. It is expected that the volatility will continue in the exchange rates, especially with the continued deterioration in global oil prices and capping the sales of the Central Bank of Iraq. To limit the continuing deterioration of the price of the Iraqi dinar exchange rate, it is necessary to avoid the imposition of the ceiling on dollar sales in the currency auction to reduce the activity of speculators and reassure markets Local and reduce the difference between the official price of the dollar and the parallel price, 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 should also tighten control on the banks of the dollars received from the auction currency to secure their commitment to financing imports set out in the documents submitted. * Researcher at the center of the Euphrates Development and Strategic Studies
[You must be registered and logged in to see this link.]
