Monetary policy and its consequences on the Iraqi dinar
Dr. Roh Naji Al-Hamadani
and fiscal policy has seen since 2003 a significant shift in the
banking sector and the Iraqi Government has taken some necessary
measures as the abolition of foreign exchange control and the lifting of
restrictions on trade and movement of capital and the support and
encouragement of private companies in
the banking sector to move from Exchange control system to an open
market system as one of the requirements of a market economy.
And the Central Bank of Iraq as Iraqi State Bank which sets monetary policy, dealing with this policy. Under
the capital open on West oriented, monetary policy assume float Iraqi
currency and subject to the law of demand and supply and
non-interference in the interactive value of the Iraqi dinar against
foreign currencies, including the dollar.
The currency market also shows any other goods which leads to monetary instability. The demand and supply is determined by the value of the currency. Accordingly,
it is expected that the Iraqi currency to further pressure due to the
volatile political crisis and insecurity that leads to confuse the
markets and higher prices for goods and services and the trend towards
the accumulation of huge cash balances of the Central Bank of Iraq,
which constitute a solid cover of Iraqi currency Iraqi dinar would be
subjected to severe pressure. Monetary
value fell recently from 1170 to 1320 dinars to the dollar, and the
currency has not lived up to the level of competitiveness. The
relative stability of the dinar in some years it has been at the
expense of non-quantities of drain reserves and not thanks to the
efficiency and correct monetary policy Central Bank transferred to ATM.
confirmed by the Iraqi Central Bank, the monetary reserves amounted in
2012 some 70 billion dollars and 5.5 tons of gold under this huge stocks
it is assumed that the Iraqi dinar has significant competitive
capabilities in the foreign exchange market and exceeding cash dollar. The question here is why stoop dinar towards greater deterioration with this deluge of precautions?
transition towards a market economy and opening up to the West of the
capital imposed on Central Bank keep pace with this shift, a policy
independent of the directive and the shift towards indirect monetary
tools to achieve monetary stability and tackle inflation and stimulate
economic growth and other goals that aim to achieve.
altalca in the work of the Central Bank in achieving these objectives
as implemented monetary policies are governed by the guidelines and
policies of international financial institutions, it lost the ability to
take measures to stop the leakage and cash estimated at more than $ 260
million a day, according to the daily bulletin that declared by the Central Bank. And
we must realize that hundreds of millions of dollars leaking to the
outside part of the oil imports that should invest in the development of
the national economy and to enhance the value of our national currency
and preserved from degradation and collapse.
Central Bank is required to intervene to maintain cash reserves and
halt the decline of the Iraqi dinar value interactive versus their peers
from foreign exchange, commensurate with the enormous stocks must
ensure that Iraqi currency stability and confidence as base currency in
assurances by senior officials of the Central Bank of Iraq on the
strength of the Iraqi dinar because of protection with a strong foreign
exchange market indicators, however, refuted these allegations and
affirms that the dollar's rise and the value of the dinar to decline.
policy for the Central Bank aimed at achieving economic stability
through access to a fixed exchange rate and stable dinar through
accumulation of cash reserves of hard currency and convert to the
corresponding dinar to the dollar and that this trend has not achieved
the desired economic stability in a country like Iraq which suffers from structural imbalances in the productive sectors and massive unemployment. The
stability of the national currency exchange rate is linked to many
factors including the strength of productive activity in the sectors of
agricultural and industrial goods and service sectors of electricity,
water, housing and sanitation, education and health that generate cash
incomes commensurate with outputs which lead to balance.
exchange rate fluctuations that represents value for money and no
stability in the domestic market recently led to negative consequences
in terms of higher prices for goods and services and discredit the Iraqi
currency and eat into the poor as a result of high prices and the
dollarization of the Ecuadorian economy. It also led to increased demand for foreign currencies boosted the dollar in the market place. The
scarce supply of import-related commodity and its inability to meet the
total demand of the Iraqi market to increase inflation. Bringing imported inflation and inflation linked to high costs and declining GDP.
Central Bank is required to enhance the value of the Iraqi currency,
not to provide justifications for the deterioration in the value of the
is a monetary and fiscal policy to Iraq with international capital
financial institutions raises the question about the feasibility of this
policy and its ability to enhance the value of the national currency
and monetary stability. The
consequences of opening up to the capitalist system transmission all
diseases of the capitalist system and financial woes, and cash to the
Iraqi economy and the plight of the Iraqi is not my parents made in
isolation from the consequences of the monetary and financial crisis
affecting the international capitalist system.
Central Bank can resort to the use of its available cash as a discount
rate, reserves and other tools available to stop cracking in the
national currency and its repercussions on the living conditions of the
poor and downtrodden and low-income people by controlling the money supply
and take quick steps to enhance the value of our national currency and
in foreign currency tightened pumped and sold in accordance with legal
requirements require an association to obtain foreign currency for the
import of commodities and products essential to support economic
activity as a means of production and raw materials are not available in the market The Iraqi intervention in industrial and agricultural production.
of millions of dollars that flow authoritatively abroad not only offset
by poor and depressed commodity imports in the markets of neighbouring
countries as a means to cover up the smuggling of large amounts of hard
currency, which goes into the pockets of the market Division and thieves
with staple food of the people. A
planned and premeditated activity by some regional and international
powers to weaken the Iraqi currency and the destruction of the national
economy and sustaining existing crises.
with a sharp escalation in the current political crisis, the Iraqi
dinar is expected to further volatility in the exchange rate against the
dollar will be reflected in the rise of consumer prices and rental
housing, shops and service businesses and will lead to deterioration in
the purchasing power of the poor that are the basis of many living pressures.
Government is required to adopt rational fiscal policy able to create
internal and external balance to support monetary policy. The
Iraqi economy is still economical cash its oil revenues constitute 98%
of its national income, and that the strong economy is measured by the
extent of State ownership of billions of cash balances, but the strength
of the economy and ensure the stability and consistency of market prices is determined by the strength and vitality of its industrial and agricultural productivity and self-sufficiency.
foreign reserves management efficiently requires a sophisticated
banking system and capable of mobilizing and allocating financial
resources to the high efficiency of the productive and developmental
purposes and address fiscal and monetary crises. The
monetary policy in Iraq face significant challenges such as inflation
and price volatility and lack of coordination between monetary and
fiscal policy and the phenomenon of dollarization of the economy.
rehabilitation of Iraqi factories and laboratories and restarted and
the establishment of industrial and agricultural complexes and provide
broad investment climate attractive to domestic and foreign private
sector and pursue independent monetary and fiscal policy on external
intervention will lead to the creation of economic cycle contribute to
increased demand for the currency and the rise of the Iraqi dinar against foreign currencies. The stability of the currency value and competitiveness one of basic indicators on the effectiveness of and to monetary policy.