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Perils in Iraqi dinars
Nabil Jaafar Abdul Redha
Tuesday 0.8 September 2015
Iraq is suffering today from the precision and complexity of security and political conditions, economic and social as it occupies Daash about a third of the country's large military operations destructive to weigh on the daily landscape of Iraq, who also suffers from the result of the rampant corruption that took gnaws fiercely in the body of the Iraqi state was accompanied by a steady decline enormous economic problems in crude oil prices, which represent President supplier of public budgets and all economic activities in the country in light of a mass claims and large-scale not seen her race and strongly calls for an alternative reform after taking corruption affects and deducted from the summit citizen of Iraq. In the midst of these complex conditions continue monetary policy in Iraq squandering Iraq's revenues from foreign currencies under the banner of the Iraqi dinar exchange installed in the face of the US dollar price levels and large support made of the dinar denominated in Iraq more than its true value. Although we have warned in previous articles of the risks of this policy several years ago, but that the article, published in the newspaper «Bloomberg» British, on Wednesday 26/8/2015, and said that the foreign currency reserves at the Central Bank of Iraq had fallen to $ 59 billion since twenty-third of the month of July, usually the Iraqi dinar and one of the most currency risk in the Middle East, the newspaper said in a report, said that «the currency crisis in any country be of dire consequences for the economy, and that the threat posed by the decline in the value of the Iraqi dinar due to lower reserves foreign currency in Iraq and the fall in oil prices may cause by making the fight against al-Daash more difficult. » The report emphasized, that «the second largest oil producer in OPEC after Saudi Arabia, depends only on oil revenues to finance military operations and try to suppress unrest related to the Iraqi economy». He pointed out that «in the first 25 days of August, the current central bank sold $ 4.6 billion of currency to keep the dinar at a constant rate, which means that the daily flow rate of the dollar stood at $ 184 million.» He added that «the Iraqi dinar is one of the most vulnerable currencies in the Middle East, although it is likely the stability of the exchange rate at the moment», adding that «the collapse of the value of the dinar could
Cause the cost of living up to the Iraqis who are protesting at the moment against government corruption, power cuts and water shortages. » The report said that «Iraq will be able to finance the shortfall in 2015, but in the event of continuing the battle against al-Daash and low oil prices, Iraq Vsastdm wall». For his part, said economic analyst and author of the book «The Political Economy of Iraq» Frank Gunther, said that «the continuation of this storm in its current form means the continuation of the loss of Iraq to its reserves, forcing the Iraqi government to reduce the value of the dinar», indicating that «the Iraqi currency has weakened by 20% during the year next ». Figures published by the Central Bank of Iraq on its website that the quantity sold to banks (27 bank) and (4) of remittance companies from the date of 01.04.2015 until 08.27.2015 has reached (28.467) billion dollars at a fixed exchange rate of 1166 dinars / USD this figure up to $ 30 billion at the end of August. While the current Iraqi oil sales abroad reached during the first seven months of 2015, about 5 to 31 billion dollars. If Maadva about 5 and $ 3 billion, which represents Iraq's oil sales for the month of August now, the oil revenues of Iraq from January up to August will reach $ 35 billion. This means that the Iraqi currency practiced by the Iraqi Central Bank auction has drained about 86 percent of Iraq's oil money. If Maakhzna into consideration Iraq's payments to foreign oil companies that operate in the framework of licensing rounds, amounting to $ 9 billion received by those companies for entitlements for the year
2014 as well as the amounts required Iraq to pay foreign companies for their investments for 2015, amounting to about $ 18 billion Added to this Esters Iraqi Alhovernmh, particularly the military imports, it indicates to us the large size of the dangers posed to the Iraqi economy and the Iraqi currency. Because continue to support the Iraqi currency It will lead later to drain cash reserves limited the Central Bank of Iraq and then his inability to continue this policy, which will be presented Iraq and its economy and secure the significant risk that continue to use the Central Bank of Iraq to one of the traditional means to maintain the dinar exchange in the foreign exchange market rate. This means the daily auctions is that the Iraqi Central Bank which sells about $ 200 million a day. Although this method has been successful in achieving the critical goal of President of maintaining the stability of the dinar, but they may have produced the other hand some of the negative and harmful to the Iraqi economy results, including: 1. The use of the Central Bank of Iraq is an important part of the foreign assets for the purpose of installing the dinar lead with
Continuity to drain the cash reserves of the Central Bank of Iraq and then the central bank loses over time its ability to maintain the parity value of the Iraqi dinar, especially since the amounts used by the Central Bank of the dollar, is very large and more than $ 60 billion a year if the central bank continued to sell These large quantities of the US dollar. It is known that the Iraqi Central Bank sales several years ago did not exceed $ 30 million a day.
2. The stability of the dinar exchange rate as the ultimate goal of monetary policy did not lead to the stability of goods and services that the tendency towards a continuous soaring prices, which means twice the rate of the dinar to install effective in reducing the rates of inflation in Iraq policy. 3. The installation of the dinar cash only lead procedures (which is what is actually happening in Iraq) to assess the Iraqi currency more than their real value. This means that there is an exaggeration in the Iraqi dinar exchange rate relative to other currencies. This is one important reason for the flight of capital because of low dollar value in the face of the dinar, and the possibility of reducing the rate of the dinar for any reason can lead to people shifting from domestic assets to foreign assets and this is the same justification currency any replacement of the local currency currencies replaced Foreign order to avoid a potential loss. 4. The current turbulent situation militarily and politically in the region and the low oust Iraqi exports of oil proceeds due to the large drop in oil prices in the global market and then shocking decline in oil fiscal revenues, which contribute about 90% of the Abradat Iraqi budget for 2015, requires the preservation of the reserve cash from the Central Bank through its reliance on a flexible policy that takes into consideration the political and economic conditions emerging in the light of the above can be argued that monetary policy in Iraq in order to be effective should be part of an efficient economic policy. As long as the process of the dinar, maintaining the stability requires, first and foremost hard work on the development of the Iraqi economy by raising the performance efficiency in the various economic sectors and broaden the base of commodity supply of gross domestic product, and this will lead later to raise the purchasing power of the dinar and then improve price cashed in relation to other currencies. So it becomes appropriate effective economic policy reduce the prohibitive costs of installing the dinar to a minimum by reducing operating expenses and in particular the adoption of the reduction of salaries of special grades and the abolition of privileges that the financial strain the state budget in the country. The adoption of a fixed exchange rate system is similar to the development of the economy in a specific template, and this requires tight fiscal policy does not allow abuses.
If governments lavished in spending or internal and external deficit rose, this gown becomes narrow and cracks begin to appear, which calls for it to take corrective measures and the placement of the economy and financial discipline. The withdrawal of foreign reserves to support the currency is not enough to maintain a fixed exchange rate, but if faced corrective policy of fiscal and monetary, as well as to be put greater flexibility of the exchange rate or Sagvin highest and lowest of the exchange rate is moving through them freely instead of stalemate the process of change.
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Nabil Jaafar Abdul Redha
Tuesday 0.8 September 2015
Iraq is suffering today from the precision and complexity of security and political conditions, economic and social as it occupies Daash about a third of the country's large military operations destructive to weigh on the daily landscape of Iraq, who also suffers from the result of the rampant corruption that took gnaws fiercely in the body of the Iraqi state was accompanied by a steady decline enormous economic problems in crude oil prices, which represent President supplier of public budgets and all economic activities in the country in light of a mass claims and large-scale not seen her race and strongly calls for an alternative reform after taking corruption affects and deducted from the summit citizen of Iraq. In the midst of these complex conditions continue monetary policy in Iraq squandering Iraq's revenues from foreign currencies under the banner of the Iraqi dinar exchange installed in the face of the US dollar price levels and large support made of the dinar denominated in Iraq more than its true value. Although we have warned in previous articles of the risks of this policy several years ago, but that the article, published in the newspaper «Bloomberg» British, on Wednesday 26/8/2015, and said that the foreign currency reserves at the Central Bank of Iraq had fallen to $ 59 billion since twenty-third of the month of July, usually the Iraqi dinar and one of the most currency risk in the Middle East, the newspaper said in a report, said that «the currency crisis in any country be of dire consequences for the economy, and that the threat posed by the decline in the value of the Iraqi dinar due to lower reserves foreign currency in Iraq and the fall in oil prices may cause by making the fight against al-Daash more difficult. » The report emphasized, that «the second largest oil producer in OPEC after Saudi Arabia, depends only on oil revenues to finance military operations and try to suppress unrest related to the Iraqi economy». He pointed out that «in the first 25 days of August, the current central bank sold $ 4.6 billion of currency to keep the dinar at a constant rate, which means that the daily flow rate of the dollar stood at $ 184 million.» He added that «the Iraqi dinar is one of the most vulnerable currencies in the Middle East, although it is likely the stability of the exchange rate at the moment», adding that «the collapse of the value of the dinar could
Cause the cost of living up to the Iraqis who are protesting at the moment against government corruption, power cuts and water shortages. » The report said that «Iraq will be able to finance the shortfall in 2015, but in the event of continuing the battle against al-Daash and low oil prices, Iraq Vsastdm wall». For his part, said economic analyst and author of the book «The Political Economy of Iraq» Frank Gunther, said that «the continuation of this storm in its current form means the continuation of the loss of Iraq to its reserves, forcing the Iraqi government to reduce the value of the dinar», indicating that «the Iraqi currency has weakened by 20% during the year next ». Figures published by the Central Bank of Iraq on its website that the quantity sold to banks (27 bank) and (4) of remittance companies from the date of 01.04.2015 until 08.27.2015 has reached (28.467) billion dollars at a fixed exchange rate of 1166 dinars / USD this figure up to $ 30 billion at the end of August. While the current Iraqi oil sales abroad reached during the first seven months of 2015, about 5 to 31 billion dollars. If Maadva about 5 and $ 3 billion, which represents Iraq's oil sales for the month of August now, the oil revenues of Iraq from January up to August will reach $ 35 billion. This means that the Iraqi currency practiced by the Iraqi Central Bank auction has drained about 86 percent of Iraq's oil money. If Maakhzna into consideration Iraq's payments to foreign oil companies that operate in the framework of licensing rounds, amounting to $ 9 billion received by those companies for entitlements for the year
2014 as well as the amounts required Iraq to pay foreign companies for their investments for 2015, amounting to about $ 18 billion Added to this Esters Iraqi Alhovernmh, particularly the military imports, it indicates to us the large size of the dangers posed to the Iraqi economy and the Iraqi currency. Because continue to support the Iraqi currency It will lead later to drain cash reserves limited the Central Bank of Iraq and then his inability to continue this policy, which will be presented Iraq and its economy and secure the significant risk that continue to use the Central Bank of Iraq to one of the traditional means to maintain the dinar exchange in the foreign exchange market rate. This means the daily auctions is that the Iraqi Central Bank which sells about $ 200 million a day. Although this method has been successful in achieving the critical goal of President of maintaining the stability of the dinar, but they may have produced the other hand some of the negative and harmful to the Iraqi economy results, including: 1. The use of the Central Bank of Iraq is an important part of the foreign assets for the purpose of installing the dinar lead with
Continuity to drain the cash reserves of the Central Bank of Iraq and then the central bank loses over time its ability to maintain the parity value of the Iraqi dinar, especially since the amounts used by the Central Bank of the dollar, is very large and more than $ 60 billion a year if the central bank continued to sell These large quantities of the US dollar. It is known that the Iraqi Central Bank sales several years ago did not exceed $ 30 million a day.
2. The stability of the dinar exchange rate as the ultimate goal of monetary policy did not lead to the stability of goods and services that the tendency towards a continuous soaring prices, which means twice the rate of the dinar to install effective in reducing the rates of inflation in Iraq policy. 3. The installation of the dinar cash only lead procedures (which is what is actually happening in Iraq) to assess the Iraqi currency more than their real value. This means that there is an exaggeration in the Iraqi dinar exchange rate relative to other currencies. This is one important reason for the flight of capital because of low dollar value in the face of the dinar, and the possibility of reducing the rate of the dinar for any reason can lead to people shifting from domestic assets to foreign assets and this is the same justification currency any replacement of the local currency currencies replaced Foreign order to avoid a potential loss. 4. The current turbulent situation militarily and politically in the region and the low oust Iraqi exports of oil proceeds due to the large drop in oil prices in the global market and then shocking decline in oil fiscal revenues, which contribute about 90% of the Abradat Iraqi budget for 2015, requires the preservation of the reserve cash from the Central Bank through its reliance on a flexible policy that takes into consideration the political and economic conditions emerging in the light of the above can be argued that monetary policy in Iraq in order to be effective should be part of an efficient economic policy. As long as the process of the dinar, maintaining the stability requires, first and foremost hard work on the development of the Iraqi economy by raising the performance efficiency in the various economic sectors and broaden the base of commodity supply of gross domestic product, and this will lead later to raise the purchasing power of the dinar and then improve price cashed in relation to other currencies. So it becomes appropriate effective economic policy reduce the prohibitive costs of installing the dinar to a minimum by reducing operating expenses and in particular the adoption of the reduction of salaries of special grades and the abolition of privileges that the financial strain the state budget in the country. The adoption of a fixed exchange rate system is similar to the development of the economy in a specific template, and this requires tight fiscal policy does not allow abuses.
If governments lavished in spending or internal and external deficit rose, this gown becomes narrow and cracks begin to appear, which calls for it to take corrective measures and the placement of the economy and financial discipline. The withdrawal of foreign reserves to support the currency is not enough to maintain a fixed exchange rate, but if faced corrective policy of fiscal and monetary, as well as to be put greater flexibility of the exchange rate or Sagvin highest and lowest of the exchange rate is moving through them freely instead of stalemate the process of change.
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