Group: Research and Studies
D. Sinan Shabibi, Mohammad Reza *
The central bank faced some problems at the beginning of 2012 represented an increase of demand for the dollar as a result of exit of U.S. forces and increasing regional demand, especially by Syria and Iran. Has such a great sense of economic shock led to increased demand for the dollar and thus the high volume of foreign currency auction. The phenomenon of external shocks is not strange in developing countries, but is an essential feature of their properties because of the openness of their economies to the outside. The face of these shocks take a long time, during which fluctuates and is affected by the exchange rate and other economic variables.
The focus of these shocks on the demand for the dollar, and is no stranger to resort to countries that have witnessed some restrictions aimed at regulating demand. And successes vary as a result of these actions. This means that the fluctuation in the exchange rate in 2012 was mainly due to external shocks, and not because of internal policy. It was not restrictive methods effective, but effective treatment, which resulted in great success was through the lifting of all restrictions and the liberalization of the exchange rate and to meet demand for foreign currency as fully described in the statement No. 19 in 1/10/2012 where "the Bank has committed to maintaining the value of Iraqi dinar and stability as part of a policy aimed at the protection and growth of the Iraqi economy, and in this context ensures that the Iraqi Central Bank to meet the demand for foreign currency is fully not intersect with the law of money laundering and money, crime and terrorism No. 93 of 2004, instructions and regulations issued in this regard. "
If the crisis the central bank in the previous period is a result of external shock violent, the volatility that took place at the time of the current administration was the result of its policies, and the treatment that we have seen recently was not the result of the policy of this administration cash, but as a result of the initiatives of the banks that was to reduce the exchange rate offered by dealers end by reducing their profits. I have been restricting the supply of foreign currency, starting (in the tenth month of 2012). This continued restraint so as not to desire the new administration to meet demand fully believing that it avoids the wastage of public money, was not this administration is aware that the main objective of the central bank, according to its law is the stability of the exchange rate, and so it is very necessary to be an interview every demand except So which involves banking irregularities and significant administrative or one that involves the operations of money laundering and terrorist financing.
So the price has continued to rise up and become the 1280 dinars to the dollar at the end of the fifth month of 2013. Do not know how to be in front of a waste of public money and we we meet a demand for the dollar and keep the currency Iraqi suit and the resulting stability in the exchange rate. The current administration is now selling amounts beyond what was sold by the previous administration in recent duration why there was waste in the past - as has been said - and there is no waste now!?
We have adopted a new management treatment is not consistent with the principles of monetary policy. This treatment represents that the banks cut the price of the dollar, which means that the procedure was the same on the exchange rate and not on the fundamentals of the exchange rate (supply and demand of foreign currency). The target price has directly ignores the fundamentals of price and therefore, it is merely an administrative procedure and by. But relying on the basics of price means the use of the reserve to meet demand, which will lead to reducing the price of the dollar, and this market issue and not an administrative issue, and if the reserve was reduced as a delimiter key to the basics of price, baptize to increase the price of the dollar. So it was on the monetary authority to reduce the exchange rate of the dollar by pumping the money supply through the reserve and not by the banking sector downwardly directly. In other words, the treatment must be within the monetary policy mainly.
The treatment through the reserve will be more stable and enduring. Change the price or reduction in this case must be due to the effect of monetary policy, especially the money supply and exchange rate policy.
Should not be reduced because of this reduction in banks' profits it is not characterized by stability and permanence of the hand, as it is not within the means of monetary policy on the other hand. This has resulted in a method (by banks)to lower the exchange rate of 1280 dinars to 1225 dinars, a price[size=33] is still high. [/size]
On the other hand, the treatment of cash through banks will impose some restrictions on the central bank, and would increase the bargaining power of banks, especially when they asked the central bank to apply some procedures, such as development banks to increase capital or to ask them to activate brokerage to regulate the banking reality.
the exchange rate policy is the policy of the total area while you are working with banks is a partial sphere.Determine the exchange rate and the basic function of the functions of the central bank, which is certainly not the tasks of the banks, especially since the central bank has a large reserve in which [size=33]you can meet all the demand levels. [/size]It is possible to get to the same result, any reduction in the price of the dollar, through the reserve and thus be in front of monetary policy to maintain the stability of the exchange rate, led by the central bank.
[size=33]The trading with the banks on the issue of the exchange rate is needed, but that this trade must go out to the government and the parliamentary and the private sector as well, and can cover the trading of other elements of monetary policy.[/size]
* [size=33]Governor of the Central Bank of the former Iraqi [/size]