04/19/2016 (00:01 pm)
d. Successful Obeidi
In the fifteenth of October / October 2003, the Iraqi dinar was born again in the true sense of the word. On that day, banks and banking started distributing the new currency and withdrawing dinars Saddam Hussein from circulation, especially that she was in a sorry state.
Not only it is limited to the replacement of the currency, but also extended to the adoption of a new monetary policy based on the principle of the independence of the central bank as a basis for any sustainable development, a qualitatively new and rare twist on the level of the Arab region , where monetary policy is usually a government. Despite security and political conditions extremely complex central bank succeeded in subsequent years to achieve great achievements, most notably raising the value of the dinar against the dollar almost doubled and maintain the stability of Sarabv and the accumulation of large reserves of currencies Alognih reached in 2014 about $ 77 billion, up from $ virtually zero.
This contributed to restore the confidence of citizens in the national currency. However , the Iraqi dinar was soon faced economic and political storms he lost a large part of its luster. Exchange rate between flexibility and consistency of what happened in mid - 2014 did not enter the country only in a severe financial crisis, but monetary policy also put in front of a difficult test, the collapse of oil prices mean record deficits large in the state budget, this is in addition to the increasing burden on the balance of trade and balance of payments. Developments portend a depletion of foreign currency, one of the most important pillars of the stability of the national currency reserves.
Although Iraq 's success in raising oil production at high rates and reliance government in the hope of price recovery, but the reality is clearly says that the country is facing a structural imbalance will not go away soon. Even assuming the success of the government - Abadi in the application package Asalahat declared in the fight against corruption and the rationalization of expenditure, the bypass this imbalance will not be achieved without taking other radical reforms, including a review of where and exchange rate policy and give them greater flexibility.
It is true that the diversification of sources of national income and the elimination of the phenomenon of the rentier state sponsor overcome this imbalance, but this is a long - term goal is not incompatible with the use of instruments of monetary policy. The CBI has observed in mid - 2014 , increasing pressure on the dinar by the widening gap between the official exchange rate of the time (1.116 dinars to the dollar) and the price of the parallel market (1.397) to reach 18%, which opens the door to speculation in the currency. Against the backdrop of these concerns the central bank announced at the end of last year , reducing the value of the dinar against the dollar by about 6% in the first step of its kind since the spring of 2003. Instead of 1.116 dinars Bank has recently started selling the dollar to 1.182 Danara.ovi the same time raising the price of buying the dollar to 1.180 Dinara. The bank hopes behind the reduction of the official exchange rate of the currency (or lift the dollar exchange rate) to reduce the demand for foreign currency on imported goods and the reduction of the decline of the dinar in the parallel market.
Indeed , the gap between the two rates has recently dropped to 7%, the ratio seems acceptable. Another effect is just as important to reduce the dinar exchange rate and is to get the Ministry of Finance on higher revenues. For every dollar of oil exports sold to the Central Bank will get the most dinars. The important question now is: Will this reduction is sufficient to overcome the suffocating crisis?
It is clear that this measure is not enough, given that the structural imbalance requiring the Central Bank to adopt greater flexibility commensurate with the new circumstances surrounding the ethnic economy and to take further steps to reduce the value of national currency. And here it must be taken into consideration that the demand for the dollar witnessed a significant increase, not only for the financing of imported goods and Tveniv investment projects, but also due to other factors that are considered fairly new, including personal remittances abroad. Tens of thousands of Iraqis abroad Kaltalbh, retirees and others livelihoods depend on the funds that prevent them from Iraq. Iraqis also discovered again fun to travel abroad which means extra demand for foreign currency. All of these factors lead inevitably to the withdrawal of foreign reserves and declining balance, and this is what is already happening. Nor can the central bank in such circumstances the adoption of the principle of "Spend what comes to you in the pocket of the unseen!".
Betting on the return of oil prices to normal is risky. And it may not be , of course, as some have sometimes suggested, thinking back to the state monopoly of foreign currency because it is the policy of outdated and represents one of the core aspects of the totalitarian state. Hence can not be the central bank sufficiency administrative procedures to better monitor the currency auction and the fight against money laundering and others, but that the actual developments of the Iraqi economy imposed by taking other steps thought to reduce the dinar exchange rate in order to reduce the demand for hard currency. In addition to the positive effects of such a decision on the balance of payments and the state budget, it can also contribute to improving the competitiveness of local goods versus imported, while acknowledging that this effect will remain limited due to the weakness of the flexibility of domestic production towards the exchange rate policy. However , the central bank does not still swearing by embarking on a further reduction in the exchange rate because of the political and social fallout expected such a decision. Any reduction in the exchange rate of the local currency would lead automatically to raise the price of imported goods, which covers the bulk of the domestic demand , which could trigger social protests. Of course, there is a populist political forces lie in wait, surely they will exploit any popular resentment potential as a card in its power struggle without any regard for the fate of the Iraqi economy.
Here it must be said that the lack of a unified political will is considered one of the key obstacles to the implementation of the necessary economic reforms. A fact known to the central bank also during the controversy sparked by his project to delete several zeros from the Iraqi dinar. Struggle for "zeros" when calculating the value of the dinar against the dollar is currently number appears difficult to understand because it includes a number of zeroes after the comma. This decline is due to the extraordinary collapse in the value of national currency in the era of the tyrant Saddam Hussein.
It is seen on the Iraqi state budget needs to be high abilities in mathematics and arithmetic in order to understand the millions and billions and trillions astronomical numbers it contains. Even the authors of the budget in the wrong unit of measurement is sometimes confuse billion and a trillion. This situation is not uncommon , and also affect the cash trading efficiency and increases costs, as is often forced ordinary citizens to carry their money in large bags, let alone traders. In such circumstances , it is natural (that embarked upon by many countries suffered from hyperinflation) be replaced with new ones currency more valuable.
This is what the leadership of the central bank thought the era of former president Shabibi, when preparing for the high professionalism of the project to delete the three zeroes, with an eye to raising the value of the dinar to become nearly one dollar. A move that would facilitate cash trading and financial accounts process and strengthen confidence in the national currency. It is also not a purely technical step loser nor winner and the only beneficiary is the Iraqi economy. But the project quickly inset in the corridors of political and sectarian conflicts and raised about controversial phenomenon careful interest of the country and inwardly settle personal scores, especially since this period saw the aggravation of the dispute between the central bank and the executive as part of an effort for me arms crowned fabricated the charge of corruption of the leadership of the former Central Bank and the overthrow by way damaged the reputation of Iraq.
Following the appointment of a new leadership of the bank put the current governor and the agency on the Keywords project again pledged to implement it at the beginning of 2017, but there on the ground for what promises this, leadership of the central bank is well know that they are going in a minefield.
After trimming toenails former leadership seems that the bank became finds it difficult to maintain the independence and turned to self - defense and the site is obliged to justify any move offers them. This also reflects the currency during Alnkadihaljdidh put 50 thousand dinars a class late last year. This step is very normal also raised a "political" debate and "economically" dominated by vexatiousness, exaggeration and hype and shuffle the cards.
In the midst of this controversy it seems that some people have forgotten that the new paper does not exceed the value of only $ 40, so the contribution to solving the problems of monetary circulation in Iraq remains limited.
Hence it is necessary to go seriously to revive the project to delete the zeros as a necessary step for the rehabilitation of the Iraqi dinar and the issuance of more valuable banknotes in order to facilitate payment for purchases and sales. But this goal will not be fully achieved without the development of the banking system and reduce the cash payment operations for the benefit of bank transfers and other forms of payment credit. But that requires a first - class citizen persuasion advantages of the banking system, an issue that seems difficult because of the security, political and economic challenges facing the country.