Foreign Reserves Syndrome and the Financing of Foreign Trade in Iraq / Part III (Saleh)

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Foreign Reserves Syndrome and the Financing of Foreign Trade in Iraq / Part III The 
Appearance of Muhammad Saleh 

II: An Indirect Trend:

  Some transfers from resident or non-resident entities to non-resident entities have left some imprint on foreign exchange inflows in the domestic market, resulting from some military expenditures US before its withdrawal at the end of 2011 and various other foreign interfaces. Based on the separation of foreign currency reserves into two parts, the first concerns the government and finances the government trade from the DFI account or the current alternative account and the second reserves of the central bank, which in one of its functions finance the foreign trade of the private sector by meeting the requests of banks through the currency window Hotfile. Ie, the window in which the central bank exercises the function of open market operations in the exchange of the dollar in dinar, but the fact is not only to finance the foreign trade of the private sector and its needs of foreign exchange, but as a monetary policy to intervene to stabilize the exchange rate and control the levels of local liquidity and contain the strength of government expenditures generated by the budget the public. Public expenditure generates a very diverse domestic demand force on external goods and services in the face of the fragility of local economic diversification and the increase in individual expenditure derived from the public spending power of the public budget, which represents the inflation caused by demand pressures or total expenditure unless met. And that the disappearance of the impact mentioned can not directly provide high efficiency in the financing of foreign trade to the private sector only through the payment or direct Cash in Advance as an alternative to the means of financing foreign trade through commercial credit or credits LCs that Iraq has a credit risk Credit Risk and the country or (Until very recently) are considered reliable in the international financial system in order to transfer trade finance from cash payments through direct foreign exchange to payment through the aforementioned trade finance credit instruments such as letters of credit LCs or collection of documents Documentary collections and other means of regulating foreign trade financing.
 
3. Conclusions:
  If the public budget through its fiscal policy has failed to achieve a strong economic growth base and has fallen heavily into current spending due to the weakness of the national production base, such an approach intersects with the basic principles of monetary policy and its objectives of achieving stability by addressing spending or generating a supply of inadequate supply By restricting the foreign exchange auction to serious shortcomings in diversifying domestic supply and development policy failures can only lead to a disaster in the economy by striking elements of stability in it. The policy of monetary policy on its goals in the largest public budget of 100 trillion Iraqi dinars in 2017. In order to change the philosophy of monetary policy in the implementation of some of its tools such as foreign currency auction, it should begin to change the philosophy of financial policy and make it a policy of development and expansion of supply and local production base and maximize efficiency and reduce the levels of unemployment, which still exceed 20% of the total workforce. Which requires an assessment of the package of economic policies away from any selective trends in the evaluation of some policies, but not others.
 
4 RECOMMENDATION: To see the development of a private sector financing bank 

  In light of the above, it is necessary to expand the financing of private sector trade by returning to the external trade finance assets by opening documentary credits by setting up or establishing a syndicate bank The private sector is owned by government and commercial banks. Its funds are linked to the central bank's window for the sale of foreign currency. Commercial banks, the Central Agency for Standardization, Quality Control and the Customs Administration are monitored commercially, in addition to the Central Bank. In terms of the quantity and quality of external financing of trade (as outflows) of the real inflow of incoming goods and services, which is highly conducive to the demand for foreign exchange to bring benefits to the national economy without negative capital outflows that do not add value to the national economy.
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