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    Iraq: Letter of Intent, Memorandum of Economic and Financial Policies, and Technical Memorandum of Understanding

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    sandyf
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    Posts : 259
    Join date : 2013-01-29

    Iraq: Letter of Intent, Memorandum of Economic and Financial Policies, and Technical Memorandum of Understanding

    Post  sandyf on Wed 13 Jan 2016, 21:29

    Iraq: Letter of Intent, Memorandum of Economic and Financial
    Policies, and Technical Memorandum of Understanding

    C. Foreign Exchange Policy

    18. The government will maintain the peg with the U.S. dollar. The peg provides a key nominal anchor in a highly uncertain environment with policy capacity weakened by the conflict with ISIS.

    19. The government will gradually remove remaining exchange restrictions and multiple currency practice (MCP) with a view to eliminating exchange rate distortions. Such a move towards acceptance of the obligations under Article VIII of the IMF’s Articles of Agreement will send a positive signal to the investment community that Iraq is committed to maintain an exchange system that is free of restrictions and MCPs for current international transactions and thus facilitate creation of a favorable business climate. As a first step, the government will, by end-February 2016, amend the Investment Law, or issue clarifying implementing regulations, to remove the limitation on transfer of investment proceeds that gives rise to an exchange restriction, as recommended by a recent technical assistance mission of the IMF.

    20. The government will implement reforms on anti-money laundering and combating the financing of terrorism (AML/CFT). This will improve the integration of the domestic financial system into the global economy and lower transaction costs, improve governance, and reduce the size of the informal sector. As a first step, the government will, by end-February 2016, draft, with the help of IMF technical assistance, and adopt a by-law to set up a mechanism to comply with the relevant United Nations Security Council resolutions related to terrorism financing and Recommendation 6 of the Financial Action Task Force on Money Laundering (FATF).
    http://www.imf.org/external/np/loi/2015/irq/122215.pdf
    ---------------------------------------

    There it is in black and white from the IMF. It is very unlikely that we will see Iraq accept the obligations of Art VIII before March. At the moment they use Art XIV to allow the exchange restrictions that are in place, once they relinquish Art XIV there is no going back.

    Full acceptance of Art VIII is the key to an internationally recognised currency, note the term 'recognised' and not 'tradeable', two separate issues which seem to confuse many.

    There is nothing to stop you walking into a bank with an Art XIV currency but there is every chance that the bank will refuse to accept it, Art VIII is the guarantee that the currency will be redeemed by the central bank.

    There are 3 Art XIV currencies, Myanmar, Laos and Cambodia, bought and sold over here. It is much easier to sell than buy, even the VND has normally to be ordered. mainly the majors that are readily available.

      Current date/time is Mon 23 Oct 2017, 18:34