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    Iraq and the MCP

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

    Iraq and the MCP

    Post  sandyf on Wed 17 Feb 2016, 21:18

    There has been a great deal of misquoted information regarding the Iraq exchange arrangements.
    https://www.imf.org/external/pubs/ft/scr/2015/cr15235.pdf

    This para is from page 71.

    "Iraq’s de jure and de facto exchange rate arrangements have been retroactively reclassified to a conventional peg arrangement, effective January 15, 2012. The Central Bank Law provides the Board of the CBI with power to formulate exchange rate policy, and the Board has maintained its policy to keep the official exchange rate at 1,166 per U.S. dollar since January 15, 2012. The CBI stands ready to provide foreign exchange at the official exchange rate plus commissions for permissible transactions through its daily auctions (allocations), establishing a peg. However, because certain transactions are excluded from the access to the CBI auctions, many transactions take place at parallel market exchange rates. The CBI publishes the daily volume of the auction allocation on its website. "

    This is the basis of the MCP, international transactions, nothing to do with what takes place in Iraq. Some transactions are being conducted at a rate that deviates from the CBI rate by more than two percent. Here they are referring to the parallel market rate.

    Vietnam also has a parallel market rate, but there is a big difference. In Vietnam, by law, all account transactions must be at the SBV rate. If a company acquires currency at a different rate to the SBV, they must show the profit/loss elsewhere in the accounts. Hence the parallel market in Vietnam is not seen as a multi currency practice(MCP).

    PS. For those that like credible sources, my wife was the financial controller for the Vietnam Red Bull franchise from 2004 to 2006.

      Current date/time is Mon 23 Oct 2017, 18:35