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    Conscious / strategy for the country's monetary climate stability and economic development / the third and final part

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    Conscious / strategy for the country's monetary climate stability and economic development / the third and final part

    Post  Seck on Tue 29 Jan 2013, 17:39

    Third: monetary policy and the movement of financial flows

    The Central Bank of Iraq and to the extent that monitors the movement of financial flows entering the country and out of, it finds where the economic phenomena natural that help keep the financial system stable is based on competition in the market and generates at the same time integrated desirable in the international financial market, open and wide in banking transactions with the world. Despite that, those funds and flows should to اتعفي deepen surveillance and detection that moves Money Are legitimate legal nor violate the law against money laundering and money, crime and terrorism, or even evade forms other obligations towards government authorities Kolajhzh tax and financial or contravention of instructions and regulations regulatory issued by the Central Bank of Iraq, which determines the other, for example, amounts Astosmaralmassarv for its money abroad, which represents a form other forms of local capital flow abroad.

    But the trend towards restricting foreign exchange Aotguenin flow of money outside of the citizens , Is the direction To اينسجم and improve Alastthmaaro climate but are invitations regrettably اتساعد Allaudh To narrow horizons in the suppression of the country's economic freedom and freedom of ownership and disposition legitimate economic rights to segments of society and return to really dark economic times that left Iraq, particularly restrict the freedom of foreign exchange and isolate Iraq from the international financial environment, and luring him to the Nkol agreements Almalahatah And in particular the application of the provisions of Article VIII of the Convention on International Monetary Fund (IMF), which obliges Member States to adopt freedom of foreign exchange and the lifting of restrictions to the movement of money citizens with little or no restrictions except Maitalq legal irregularities arising from money laundering and as mentioned beforehand



    So we find , That any such ban or restrict outflows does not help only to generate parallel exchange market Osoda illegal as is the case in the current North Korean model and encourages At the same time Phenomenon of capital flight abroad, but through illegal channels And other channels mysterious non-bank., Something reduces in case all of the oversight capacity of direct and over at the same time the cost and burden of audits indirect. As well as generating financial environment negative weaken the capacity of the foreign investment climate in Iraq and encourage the flow of capital foreign to the home and at least intersect with the principles that came out Investment Law No. 13 of 2006.



    We would also like to note that the severe external economic problems suffered by package Southeast Asian countries during the years 1997-1999 (for example), have been caused primarily by the phenomenon of flight of foreign capital that was endemic and widely in those Albadan then, which was concentrated more Foreign investment Indirect particularly In investment portfolios كالسندات financial and deposits and various debt instruments of high liquidity with weak international reserves available to the monetary authorities in those countries which show balance of payments to a deficit unprecedented result Escape sudden capital short-term foreign, where reflected in the collapse of the currency exchange rates Asian.

    Despite that, however, such concerns are still limited impact on the level of Iraq, so as to double the flow of foreign capital inflows so far. However seeking monetary policy of the Central Bank of Iraq to create sufficient reserves currency Alajnah, focused primarily foundation To meet any contingencies may be exposed to it external balance of the national economy due to the potential for speculative currency and capital flight abroad Unexpectedly, as well as sensitivity to any other harmful surprises may be exposed to it the national economy caused by strong shocks Because external financial moves spam.



    In light of the foregoing, I do not see that the current monetary policy of the country is of the style that supports restricting the movement of cash flows to and from outside the country as long as there is Taatqtaa With controls And regulations and instructions window Almhdjahllaguetsad Aharola inconsistent at the same time and conditions of foreign exchange, particularly the anti-money laundering law and money, crime and terrorism.

    And I find that the Iraqi Central Bank as a financial entity is responsible for the economic stability of the country, encourages communication and consultation shown by the competent organs and control devices Other in order to deepen the surveillance on the movements of illegal money And the fight against economic crime and prosecution of a common national responsibility lies with everyone.





    Fourth: Monetary policy in the face of contradiction

    Between the state and monetary stability



    The dollarization and one of the most important challenges facing policy makers in developing countries in general and Iraq in particular, which means the use of the U.S. dollar or any foreign currency have the capacity for the replacement of the national currency in transactions and contracts internal financial promise a store of value at the same time.

    Despite that financial dollarization, composed mostly of local loans granted in foreign currency over a long period, and that of up In some Latin American countries to about 70% of the total loans granted locally, but Central Bank of Iraq, supports one of the concepts of international financial institutions amended, to express the phenomenon of dollarization in Iraq. The prevailing concept of the International Monetary Fund (IMF) regarding partial dollarization partial Dollarization The greatest expression of the reality of the phenomenon of dollarization and sovereignty of the Iraqi economy. If they were bank deposits to money supply in the broad sense of more than 30%, the country lived phenomenon of partial dollarization. But if we take into account the installation of the money supply, which is dominated by the character of currency in circulation and sometimes up to 80% of the total money supply, we find that the United States dollar is still aware as a parallel currency in circulation outside the banking system Parallel Currency In the settlement of transactions and internal cash payments Promise a good store of value It can be said that the phenomenon of partial dollarization is still prevalent and exceeding 30% in the settlement movement of cash transactions in the local economy.

    Despite the progress, the monetary policy adopted by the Central Bank of Iraq in the framework ستراتيجيته efforts to achieve the goal of stability, has shown that the financial system Almdolr taking moving towards gradual decline and dollarization phenomenon partial and rooted are today less than before, due to launch freedom of foreign exchange and adoption monetary policy is working to strengthen the external value of the Iraqi dinar, which rose during the last five years to over 40%.

    I took rational expectations to the public poured all around to keep the Iraqi dinar because of the gradual improvement in the value of the Iraqi dinar and the high exchange rate against the U.S. dollar, after embarked monetary policy, the establishment of an effective framework works towards strengthening confidence in Iraqi dinars, helping confidence in local currency to create conditions strong and deep in the stability of the financial system. And this has become a phenomenon Alladolrh de-dollarization One of the main objectives of monetary policy in our country in the face of Partial dollarization. And addressing the dollarization gives central banks much Great to reformulate its monetary policy and in accordance with the targets set in the stability in the general level of prices and building the required growth and accelerate development opportunities and push forward the process operating in the country, also strengthens at the same time the link between domestic interest rates and changing the aggregate expenditure or domestic demand, and supports the effectiveness of movements exchange rates, all designed to improve the mechanical moving cash, any transfer effect of operational objectives for monetary policy to achieve the intermediate goals of monetary policy itself. Stating in this regard, that the power to address the dollarisation, is a measure of the effectiveness of monetary policy in the provision of reference moving to make the Iraqi dinar more attractive and that is usually reflected the stability function demand cash or low speed handling money, stability and so by the impact of stoplights exchange rate and the interest rate that promise variables actors mentors the stability of the cash demand and strengthen the critical mechanical moving at the same time.

    And Ivotna, that Alladolrh policy, is one of the sources of revenue generating strong cash fee Released Seignorage Arising from the growing demand for the local currency, which reflected positively on the income statement within the annual financial statements of the central banks and strengthen the center of the net wealth of the balance sheet in such banks or central banks.

    Despite this, strategy seeks monetary policy in the construction path of stability in this transitional phase through which Iraq to provide a stable climate to attract economic growth and prosperity starting Baktall cash becomes today a strong and firm, and in this context is an auction of foreign currency means monetary policy is direct influence on a cash basis for the country in order to control aggregate demand through the levels of liquidity generated by mainly government spending and counter inflationary pressures resulting, where lead auction mentioned achieve three goals:

    1 - Intervention as a tool to achieve stability in the value of the Iraqi dinar by defending the equilibrium exchange rate, which reflected positively on the general level of prices, especially imported goods final production inputs and strengthens the export base.

    2 - The way to apply the tools of indirect monetary policy in the management of the economy and liquidity control Mnasebha, and is a case of the application of open market operations required on an ongoing basis to achieve balance in the money market and strengthen the opportunities for financial stability.

    3 - Main source of financing private sector trade of goods and services needed by the Iraqi market and a key financier.



    Thus poured monetary policy adopted by the Central Bank of Iraq In all directions and since the Iraqi Central Bank Law No. 56 of 2004 to provide opportunities for stability and success of the national economy. It is the only policy which is almost unique to such an overall goal In response to inflation and reducing the annual increase in the general level of prices and the strengthening of stability in the financial system at the same time, as The monetary policy Itself a producer of a unique public good in its importance, a commodity to maintain the stability of the purchasing power of the national currency. Especially after being linked to that policy reform Bajrat basic synchronization the goal of strengthening the bonds of the money market and brokerage operations with the necessities of the stability of the foreign exchange market and support the stability of the external value of the Iraqi dinar, as led Twasenhma to achieve two signals Sareeten powerful market signals that Tbnthma monetary policy to achieve its goals mentioned by They signal the interest rate on the Iraqi dinar and the reference exchange rate of the Iraqi dinar over foreign currency.



    Valthrr financial markets witnessed Iraq Over the past five years, Illustrated effectively market national financial through freedom of the banking system and the launch of its ability to determine the interest rates payable and receivable, has, which promised a fundamental pillar of strengthening financial intermediation which is the essence of financial stability, particularly after it was abandoned measures are coercive policies were cash previous adopted Through direct means, and resorting to policies that rely indirect market forces in order to avoid financial and braking phenomenon of placing ceilings on bank credit or select a credit or impose administrative interest rates outside market forces and balances . Where he led the braking fiscal policies prior to deviation financial market and weaken climate mediation where, as well as adoption of a policy Monetary cheap for the purposes of lending the general budget, which has delayed economic development for decades and plunged the country in a wave of hyperinflation and continuous and dissolved speculative price for goods and services shop productive investment and low total savings Which plunged the country into a long recession led to the deterioration of the economic and social development, and reach down to the level of tattered economies, a phenomenon that still live some dark raised so far.

    As the success of the current monetary policy in the face of the country's runaway inflation and use a reference interest rate monetary policy policy rate as part of its dealings with the banking system, have had the greatest impact in the face of the continued state of inflationary expectations and rising which was ridden in Asagraralblad and crush the real investment decisions for the benefit of speculative sectors. And that it has made ​​a reference interest rate Nominal Iraqi dinar For the first time with a hint of the nominal exchange rate strong Astaqraraa momentum, in turn reflected on the stability of transactions in the national economy and helped preserve The real interest rates are positive for the first time in the history of the country (and after more than three decades) than the nominal interest rate on inflation, boosting the ability of the financial system to continue and give the money market opportunity stability and permanence in the most exceptional circumstances experienced by our country in recent years that followed 2003.



    With declining inflation basis of 34% per year three years ago to about 5% annually with the present and into the era ranked decimal per inflation, the reference interest rate adopted by the central bank have fallen are the other with falling inflation of 20% per year to less than 5 %, after having achieved Signal its monetary policy interest in achieving strong returns on the Iraqi dinar and convert it into an attractive currency and bumper strong in the face of inflationary expectations that the country suffered through periods of time long past.

    Despite market liberalization of financial and subdue monetary policy to work according to market mechanisms, as well as giving the financial system in general and the banking system in particular the freedom to determine interest rates Bnevshma without direct intervention from the Central Bank of Iraq (except firing signal interest monetary policy), but the Central Bank of Iraq has noted regrettably that the banking sector civil remained adheres signals high interest on loans granted to the public and rates still exceed inflation, something presents financing for development in this era of stable witnessed macroeconomic to risk economic stagnation and disabling physical and human resources to the private sector And pan-national market.

    It is still interest charged by many private banks for loans extended to the public rapprochement in their annual averages about 17%, but may reach unmet interest In some of them to between 20% - 25% per annum.

    That exercise influence policy or moral persuasion with a different banks and urged them to reduce interest levied on loans and encouraging them to give credit to serve the development of economic activity in the country is probably the initial action, could turn the central bank to adopt additional measures may be whole heartedly Auahaana Legal, enables the monetary policy of reducing points spread between bank interest payable and bank interest City (where has become unfortunately when some banking entities is less what can be on savings deposits and top what can the credit granted to the public) by making points spread at normal levels that are not more than 3 points in accordance with normal banking practices, rather than the current set of 10 points Which is intersects with the goals of financial stability in accordance with standard indicators for banking supervision International, and orientation required to address the imbalance in the structure of bank interest rates, comes to generate a strong and healthy atmosphere in the conduct of financial intermediation, In the midst of the direction of economic policy of the country in general and monetary policy in particular to encourage real investment and strengthen the development opportunities in the private sector through an incubator strong stability provided by monetary policy through the application Programs stability, in the past three years, e.








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