Monetary Policy Research Journal June 22, 2017

CBI: Monetary Policy Research Journal


June 22, 2017


Below is some English content from journal:
The unconventional monetary policy to stimulate Economic growth in Iraq
Ali Muhsin Ismail- The governor of Central Bank of Iraq -2016

Aftermath spark of the financial global crisis, economies witnessed new and creative measures to deal with bad consequences, and correct the economic deviations.
The measures emerged from creation economic policies, especially monetary policy.

So in recent years, central banks in several important countries adopted unconventional monetary policy measures (UMPM) (IMF, 2013), ranging from large scale purchases of public and private debt securities to direct lending to banks, this measures designed for many purposes including: repair the monetary transmission, by ensuring depth and liquidity in financial markets, and provide monetary accommodation at the Zero lower bound of policy interest rate. One distinguishing feature of UMPM, which has also been referred to as quantitative easing (QE), is that central bank actively use its balance sheet to impact market prices and conditions beyond the use of a short-term or ‘’policy’’ interest rate or monetary aggregate (conventional monetary policy). The crucial different between the economic crisis consequences in developing countries and in development countries was:

The problem in 1 st , happen on demand side of the economy, but it strike. The supply side of the economic in the 2nd So for these different central banks in the development countries (as in Iraq) must adopt measures convenience for its crisis consequences. Iraqi economy suffered a lot from the slowdown of global economic growth (after 2014), and before, from financial crisis (After 2009), and both events accumulated to emerge economic problem describe as:
Slowdown growth, liquidity shortage, pessimistic expectations, significant decline in government expenditure (60% at 2015 compare with 2014). Central bank of Iraq (CBI), respond for this circumstances by arrange and declare new initiative at (March 2015), it contain two measures:

1- Lending the private banks (48 banks) with one trillion ID (around 833 million and 333 thousand$) to activate these banks for lend: youth, graduates, unemployed with micro loans or what we call SME. Maximum limit for this loans (50 million ID around 42 thousand $) with easy guarantee and long payback period. The borrowers must use on this fields: (industry, agriculture, retail commerce) moreover these loans must cover all Iraqi regions.
2- lending the Iraqi Specialist banks (Agriculture bank, Industrial bank, Real estate bank, Housing fund) within (5 trillion ID around 4 billion and 2 hundred million$) . Targeted large loans (medium and large projects) on the real sector of Iraqi economy. Upper limit of this loans (20 billion ID around 16 million and 666 thousand$) with small cost and long payback period. At Jan, 2016 all mechanism and regulations and rules of supervision settled from CBI, since this time began the implementation of CBI initiative.

The CBI new measures targeted:

1- Provide the market with new liquidity, to facilitate the transactions and pass the shortage.
2- support the unemployed person to obtain job and expanding labor market.
3- Stimulate the supply side by create addition value add in Iraqi real sector.
4- Enhance the small banks to fund project and diversify their portfolios. 5- Motivate the private sector by large finance, to permit for extra extending in whole Iraqi economy, and upgrade participation of private sector with more share of GDP.

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