Home
Billion, the central bank: reserves necessary funds or frozen?
Central Bank of Iraq has succeeded after the re-founded in 2004 in a substantial increase in foreign cash reserves, which exceeded the recent barrier sixty billion dollars. It seems like a large amount of Iraqi standards, especially as the burden of Iraq was burdened with even a few years ago foreign debt of more than $ 100 billion. But he remains modest even compared with some countries in the region such as Saudi Arabia, Algeria, United Arab Emirates, not to mention China and Japan. However, this amount enough to shed the saliva of certain forces within the government and that dream of seizing him and spend it in an appropriate manner. The professor asked Maytham Laibi page editor of the world economic newspaper on March 8 / March 2012 a number of questions about the functions of these reserves and the optimal size required to maintain the stability of the economy and situations that justify the resort to them. It should be important aspects Balaguetsadaan Iraqis fight a wide debate around it. Before answering questions Maytham and coffee must first be discussed briefly to the emergence of these sources of official reserves and its constituent elements. Known as the official cash reserves and liquid foreign assets that appear on the assets side in the budget of the Central Bank. Consists primarily of foreign currency balances (mainly the dollar and the euro and the pound sterling), as well as stocks of gold and other precious metals, as well as special drawing rights and other quasi-money convertible. Because of sharp fluctuations in exchange rates turn the Iraqi Central Bank to keep the bulk of the cash reserves divided equally between the dollar and the euro. The increase in these assets primarily to the surplus in the balance of payments, specifically in the trade balance caused by the surge in oil prices since 2003. In theory can contribute to tourism and other services and remittances from abroad to raise the balance of foreign currency.
Despite the recovery of religious tourism, it is unlikely that it played an important role in this area in Iraq. There is a third factor in the movement of capital across borders, which could result in foreign direct investment to pump liquidity in foreign currency to the domestic market. However, most of these investments are spent on the purchase of imports from abroad, which means that their impact is limited to official reserves in the country. Can also be the policy of the Central Bank of the same affect on the size of foreign reserves. In some countries, including China, for example the central bank resorted to offering local currency and buy foreign currency in order to keep the low rate of exchange for local currency in a deliberate move aimed at encouraging Chinese exports. Which is unlikely in Iraq, where the policy is virtually the opposite. In addition to the above factors there is a special factor is linked to the Iraqi situation and difficult to quantify and is the current expenditures of U.S. forces and entities associated with them until the end of 2011. Was the U.S. Army and U.S. Development Agency and others during the past years, regardless of hundreds of millions on contractors, contractors and local officials and employees of the Awakening and the tribal leaders in different regions and under many names. Has also devoted a lot of money to promote the local economy and small and medium enterprises and to support non-governmental organizations and others. Regardless of the feasibility of these projects has certainly contributed to improve the presentation of foreign currency in the domestic market because the payment was in dollars. According to the above must be emphasized that the first sixty billion owned by the central bank is not directly related to the state budget did not accumulate as a result of government policy or because of the financial surplus money in its budget. Foreign Valahtiattiyat is purely a monetary phenomenon may not be mixed with the financial aspects of the call for recruitment to fill the fiscal deficit of the government. It also must be said that such calls are totally contradicts with the Central Bank Law, which prohibits a bank to provide any credit directly or indirectly to the government or one of its institutions. And the existence of such a red line is very important so as not to come back again to the mistakes of the past, where monetary policy has been just added to the fiscal policy and serves mainly short-term goals of the government without regard to the disastrous long-term effects on development. It should be noted here that the success of the Central Bank in the management of official reserves and their development is a practical response to the accusations launched against him and sometimes bear responsibility for what is described as a "drain" the wealth of Iraq and "smuggling" money raised through foreign currency in the weekly auctions. It is also proof of the error calls for a return to impose unjustified restrictions on foreign exchange dealings in Iraq. However, the granting of recognition of the central bank the sole right to dispose of foreign reserves does not prevent discussion and question about determining the optimal size required of them and ways to handle it and invested for the benefit of the Central Bank and the national economy. In all cases, must be the size of foreign reserves sufficient to maintain the stability of the national currency and to meet any emergency in the balance of payments. The main basic functions of cash reserves to secure financing for imports for a period of time in ensuring country's creditworthiness and ability to repay its financial obligations, as well as granting the central bank could intervene in currency markets to maintain a stable exchange rate of national currency, in addition to providing a source of income additional to the Central Bank itself. Certainly the performance requirements of these functions vary from one country to another. And generally do not typically found a relationship between the country's economic power on the one hand and between the size of its reserves of cash on the other hand, noting that industrialized countries need relatively lower reserves of emerging and developing countries. With the exception of Japan does not maintain the developed countries, particularly the United States, Germany, Britain and the rest of the EU countries large foreign reserves, as is the case in China, Russia, Taiwan, Saudi Arabia and others. Due to the fact that the first group have the coins in circulation in the global money markets and companies can resort to the financial markets without any hindrance. This applies in particular to the United States that reap great benefits from the role of the dollar as the currency and global head of acceptable means of payment in all parts of the world and a haven for investment. If the general rule says that the volume of cash reserves in the industrialized countries should be enough to finance imports of at least three months, this rate is increasing in developing countries, including Iraq because the local currency is limited trading in the world. On the other hand there is no certain proportion between the size of foreign reserves with the central bank and the amount of money circulating in the country concerned. Such a cover has become a practical thing of the past decades is no longer commensurate with the nature of the credit monetary system. It is true that there is a direct correlation between the size of these reserves and the confidence in the national currency, but this trust depends ultimately on the performance of the national economy and stability in the long term. With other functions of official reserves into account could be argued that the current size of these reserves in Iraq than the actual need and projected them. This is because according to my conservative policy adopted by the Central Bank of Iraq, which is based on giving priority to the principle of prudence and caution. However the importance of this principle, but there is no legal impediment or economic prevents the central bank from the investment of these reserves or part of the way that the maximum profit it and contribute in strengthening the capital of the Central Bank and its role as a lender of last resort, in addition to supplement the budget with additional resources. There is also no strong justification for the continuation of the policy of the extensive use of these reserves in foreign currency auctions in order to raise the exchange rate of the dinar, in particular that this policy has served its purpose and even succeeded in achieving a significant increase in the value of the national currency. And any further increase could result in negative consequences. Regardless of the size of foreign reserves and how it fits with the needs of the Iraqi economy must confirm the independence of the Central Bank as the only body authorized by law to maintain and manage the official reserves. Does not infringe open field here in front of any other practices under the pretext of emergency and other conditions. It must be said that adherence to such a policy has proved its usefulness in other countries. Fbalaratbat sovereign debt crisis in the euro zone some European officials raised the idea of using reserves, the European Central Bank and national branches in the Member States to expand the umbrella of the so-called rescue (European Fund for the euro). However, this idea was met with officials categorically reject the monetary authorities, especially in Germany where the central bank governor said the German, "Jens Vaidman," that these reserves are non-prejudice.
[You must be registered and logged in to see this link.]
Central Bank of Iraq has succeeded after the re-founded in 2004 in a substantial increase in foreign cash reserves, which exceeded the recent barrier sixty billion dollars. It seems like a large amount of Iraqi standards, especially as the burden of Iraq was burdened with even a few years ago foreign debt of more than $ 100 billion. But he remains modest even compared with some countries in the region such as Saudi Arabia, Algeria, United Arab Emirates, not to mention China and Japan. However, this amount enough to shed the saliva of certain forces within the government and that dream of seizing him and spend it in an appropriate manner. The professor asked Maytham Laibi page editor of the world economic newspaper on March 8 / March 2012 a number of questions about the functions of these reserves and the optimal size required to maintain the stability of the economy and situations that justify the resort to them. It should be important aspects Balaguetsadaan Iraqis fight a wide debate around it. Before answering questions Maytham and coffee must first be discussed briefly to the emergence of these sources of official reserves and its constituent elements. Known as the official cash reserves and liquid foreign assets that appear on the assets side in the budget of the Central Bank. Consists primarily of foreign currency balances (mainly the dollar and the euro and the pound sterling), as well as stocks of gold and other precious metals, as well as special drawing rights and other quasi-money convertible. Because of sharp fluctuations in exchange rates turn the Iraqi Central Bank to keep the bulk of the cash reserves divided equally between the dollar and the euro. The increase in these assets primarily to the surplus in the balance of payments, specifically in the trade balance caused by the surge in oil prices since 2003. In theory can contribute to tourism and other services and remittances from abroad to raise the balance of foreign currency.
Despite the recovery of religious tourism, it is unlikely that it played an important role in this area in Iraq. There is a third factor in the movement of capital across borders, which could result in foreign direct investment to pump liquidity in foreign currency to the domestic market. However, most of these investments are spent on the purchase of imports from abroad, which means that their impact is limited to official reserves in the country. Can also be the policy of the Central Bank of the same affect on the size of foreign reserves. In some countries, including China, for example the central bank resorted to offering local currency and buy foreign currency in order to keep the low rate of exchange for local currency in a deliberate move aimed at encouraging Chinese exports. Which is unlikely in Iraq, where the policy is virtually the opposite. In addition to the above factors there is a special factor is linked to the Iraqi situation and difficult to quantify and is the current expenditures of U.S. forces and entities associated with them until the end of 2011. Was the U.S. Army and U.S. Development Agency and others during the past years, regardless of hundreds of millions on contractors, contractors and local officials and employees of the Awakening and the tribal leaders in different regions and under many names. Has also devoted a lot of money to promote the local economy and small and medium enterprises and to support non-governmental organizations and others. Regardless of the feasibility of these projects has certainly contributed to improve the presentation of foreign currency in the domestic market because the payment was in dollars. According to the above must be emphasized that the first sixty billion owned by the central bank is not directly related to the state budget did not accumulate as a result of government policy or because of the financial surplus money in its budget. Foreign Valahtiattiyat is purely a monetary phenomenon may not be mixed with the financial aspects of the call for recruitment to fill the fiscal deficit of the government. It also must be said that such calls are totally contradicts with the Central Bank Law, which prohibits a bank to provide any credit directly or indirectly to the government or one of its institutions. And the existence of such a red line is very important so as not to come back again to the mistakes of the past, where monetary policy has been just added to the fiscal policy and serves mainly short-term goals of the government without regard to the disastrous long-term effects on development. It should be noted here that the success of the Central Bank in the management of official reserves and their development is a practical response to the accusations launched against him and sometimes bear responsibility for what is described as a "drain" the wealth of Iraq and "smuggling" money raised through foreign currency in the weekly auctions. It is also proof of the error calls for a return to impose unjustified restrictions on foreign exchange dealings in Iraq. However, the granting of recognition of the central bank the sole right to dispose of foreign reserves does not prevent discussion and question about determining the optimal size required of them and ways to handle it and invested for the benefit of the Central Bank and the national economy. In all cases, must be the size of foreign reserves sufficient to maintain the stability of the national currency and to meet any emergency in the balance of payments. The main basic functions of cash reserves to secure financing for imports for a period of time in ensuring country's creditworthiness and ability to repay its financial obligations, as well as granting the central bank could intervene in currency markets to maintain a stable exchange rate of national currency, in addition to providing a source of income additional to the Central Bank itself. Certainly the performance requirements of these functions vary from one country to another. And generally do not typically found a relationship between the country's economic power on the one hand and between the size of its reserves of cash on the other hand, noting that industrialized countries need relatively lower reserves of emerging and developing countries. With the exception of Japan does not maintain the developed countries, particularly the United States, Germany, Britain and the rest of the EU countries large foreign reserves, as is the case in China, Russia, Taiwan, Saudi Arabia and others. Due to the fact that the first group have the coins in circulation in the global money markets and companies can resort to the financial markets without any hindrance. This applies in particular to the United States that reap great benefits from the role of the dollar as the currency and global head of acceptable means of payment in all parts of the world and a haven for investment. If the general rule says that the volume of cash reserves in the industrialized countries should be enough to finance imports of at least three months, this rate is increasing in developing countries, including Iraq because the local currency is limited trading in the world. On the other hand there is no certain proportion between the size of foreign reserves with the central bank and the amount of money circulating in the country concerned. Such a cover has become a practical thing of the past decades is no longer commensurate with the nature of the credit monetary system. It is true that there is a direct correlation between the size of these reserves and the confidence in the national currency, but this trust depends ultimately on the performance of the national economy and stability in the long term. With other functions of official reserves into account could be argued that the current size of these reserves in Iraq than the actual need and projected them. This is because according to my conservative policy adopted by the Central Bank of Iraq, which is based on giving priority to the principle of prudence and caution. However the importance of this principle, but there is no legal impediment or economic prevents the central bank from the investment of these reserves or part of the way that the maximum profit it and contribute in strengthening the capital of the Central Bank and its role as a lender of last resort, in addition to supplement the budget with additional resources. There is also no strong justification for the continuation of the policy of the extensive use of these reserves in foreign currency auctions in order to raise the exchange rate of the dinar, in particular that this policy has served its purpose and even succeeded in achieving a significant increase in the value of the national currency. And any further increase could result in negative consequences. Regardless of the size of foreign reserves and how it fits with the needs of the Iraqi economy must confirm the independence of the Central Bank as the only body authorized by law to maintain and manage the official reserves. Does not infringe open field here in front of any other practices under the pretext of emergency and other conditions. It must be said that adherence to such a policy has proved its usefulness in other countries. Fbalaratbat sovereign debt crisis in the euro zone some European officials raised the idea of using reserves, the European Central Bank and national branches in the Member States to expand the umbrella of the so-called rescue (European Fund for the euro). However, this idea was met with officials categorically reject the monetary authorities, especially in Germany where the central bank governor said the German, "Jens Vaidman," that these reserves are non-prejudice.
[You must be registered and logged in to see this link.]
